Delta Air Lines to Invest Up to $200 Million in Electric Flying Taxi Joby

Delta Air Lines has answered its questions on electric air taxis. The lone holdout among major U.S. carriers is investing up to $200 million in Joby Aviation, a developer of electric vertical takeoff and landing (eVTOL) aircraft, to develop new last-mile connections in the Los Angeles and New York markets.

The deal could bring Delta into the urban air mobility market as soon as 2024, though that timeline is suspect given the certification uncertainty of eVTOLs. The segment has heated up in the past two years with airlines in an industry-wide push for low-carbon electric propulsion technology and carriers' desire to expand into travelers' trips to and from airports. AirAsia, American Airlines, United Airlines, and others have ordered hundreds of the aircraft in the hopes of offering local journeys to and from airports.

Delta's deal with Joby, however, is not just equity in exchange for a hundred-plus future aircraft. Instead, Joby has agreed to a five-year exclusivity agreement — beginning at commercial launch — to provide Delta with a "premium" and "seamless" air taxi product in the U.S. and UK. Los Angeles and New York are initial markets with plans to expand beyond them.

"This is a groundbreaking opportunity for Delta to deliver a time-saving, uniquely premium home-to-airport solution for customers in key markets we’ve been investing and innovating in for many years," Delta CEO Ed Bastian said Tuesday. Bastian, as recently as August, held back endorsing the burgeoning eVTOL and other electric aircraft segment, saying the industry had "more questions" than answers.

Raymond James analyst Savanthi Syth in a report Tuesday described the partnership as Joby managing "operations and branding" and Delta "operational and airport expertise."

"Joby and Delta will work together to create a differentiated, premium experience for Delta customers featuring seamless booking, simplified transit, and greater time savings," she wrote. "We expect this partnership is yet another lever in its premium revenue focus."

Syth added that Delta's investment in Joby, given its known rigorous investment standards and involvement with its partners, is likely to "garner additional investor interest" in the eVTOL segment.

Delta will initially invest $60 million in Joby, and potentially raise that to $200 million if certain "milestones" are achieved. The full investment would represent a roughly 2 percent ownership stake, and include a seat on Joby's board, according to Raymond James. And, to the exclusivity agreement, that would apply to the premium service that Joby and Delta will develop, which will be separate from Joby's standard airport air taxi business.

JetBlue Ventures also has an investment in Joby.

One big question that Delta, as well as other airline operators of eVTOLs, faces is how much demand exists for these premium services. Price points, while not yet set, are often compared to those charged by Blade in New York for helicopter flights between Manhattan and New York's JFK airport; flights on Blade begin at $195 one way. In many markets, a $200 one-way fare is several multiples the cost of an airport train or bus, and significantly more than a taxi.

In addition, certification of the actual electric air taxis is only one of the hurdles to carrying paying passengers. Another is how the U.S. Federal Aviation Administration will manage them in already congested airspace over major cities. Air traffic control staffing issues have been widely cited by airlines — including Delta — as contributing to flight delays and cancellations in Florida and the Northeast. In addition, eVTOLs could be blocked from serving the most sought-after destinations in cities if local residents object to the noise or activity.