UberAIR

In April 2017, Jeff Holden, the chief product officer at Uber Technologies Inc. announced a radically new product called UberAir, an on-demand air transportation service: On-demand aviation, has the potential to radically improve urban mobility, giving people back time lost in their daily commutes. . . . Just as skyscrapers allowed cities to use limited land more efficiently, urban air transportation will use three-dimensional airspace to alleviate transportation congestion on the ground. A network of small, electric aircraft that take off and land vertically (called Vertical Take-off and Landing, or VTOL, and pronounced vee-tol), will enable rapid, reliable transportation between suburbs and cities and, ultimately, within cities.a Uber's on-demand ride-sharing service had seriously disrupted traditional taxi and livery, and induced many people to eschew car ownership altogether. However, that service was based on an innovative business model and a software applicationit did not require technological advances in either automobiles or driving infrastructure. UberAIR was almost the opposite: it would leverage Uber's existing business model and software programs, but would require major technological development in air transportation technology, infrastructure for air traffic control, and a network of landing pads. It was an ambitious project, to put it mildly.

Uber's Rise

Uber was founded in 2009 as a taxi-like ride-sharing service. Customers could request a ride using a smartphone application, and the software would notify Uber drivers in the area of the request. When one accepted, it would show the customer the car's approach on a map in real-time. The driver would take the user to their destination, and payment would occur automatically using the customer's credit card information that was stored online. Perhaps the most unique part of the business model was that Uber drivers did not technically work for Uber. Drivers were independent contractors; they needed only a smartphone, a driver's license, a car, insurance, and a clean driving record to qualify to become an Uber driver.b A dynamic pricing model raised prices when demand was high and drivers were few, and the higher prices, in turn, lured more Uber drivers to start accepting ride requests. Over time the company added different classes of services (such as UberPool, Uber X, Uber XL, Uber Select), and different services such as food delivery (Uber Eats), freight service (Uber Freight), and pet transport (Uber Pets). By 2016, Uber was also testing autonomous vehicles in San Francisco. Though the firm had endured numerous early conflicts with taxi unions and some highly public scandals involving one of the company's founders, Travis Kalanick, the service was a huge success. By 2015, it had completed its one billionth ride, making it the second largest ride-sharing service worldwide, after Didi Chuxing in China. By 2018, it was operating in more than 674 cities in 82 countries worldwide. Its net revenue (after paying drivers) in 2017 was $7.4 billion, and though the company was not publicly held, its market valuation was estimated to be $72 billion.

Opportunities and Challenges for UberAIR

In 2018, there were more than seventy companies developing electric VTOLs (eVTOLS), including Karem Aircraft, Embraer, Aurora Flight Sciences, and Bell Helicopter. However, there were a number of obstacles that had to be overcome to make UberAIR a reality. First, an eVTOL used an enormous amount of energy and would be heavily reliant on advances on battery development and charging infrastructure. Second, there would be numerous legal and safety issues to be worked out pertaining to air traffic control, pilot training and licensing, compatibility with city infrastructures, noise, dealing with adverse weather, and more. Last, but not least, was cost. The technology to vertically take off and land already existed in the form of helicopters, but most people have never ridden in one because it is an extremely expensive mode of transportation, estimated to be at least $8.93 per passenger per mile. How would UberAIR be different? First, electric propulsion was expected to be much more fuel efficient and require less maintenance. Second, the much smaller eVTOLs could land at flexible "skyports" rather than the large helipads or airports that helicopters used. Uber estimated that its initial operating costs would be $5.73 per passenger per mile, and with efficient pooling it believed it could get the operating costs down to $1.84 per passenger per mile. As people began to use eVTOLs in large numbers, scale economies would also drive down the cost of producing the eVTOLs themselves. The final major cost-cutting measure would be to eliminate pilots with fully autonomous eVTOLs, saving training costs, salaries, and making room for an additional passenger. Uber estimated that with fully autonomous operation at scale, the long-run operating costs of UberAIR could be as low as 44 cents per passenger mileless than the operating cost of many cars.c Elon Musk, who is known for larger-than-life ambitions such as moving the world's auto fleet to renewable energies and colonizing Mars, was skeptical, noting "it's difficult to imagine the flying car becoming a scalable solution."d Musk also thought that aerial transportation would be too disruptive to people on the ground, tweeting sarcastically, "If you love drones above your house, you'll really love vast numbers of 'cars' flying over your head that are 1000 times bigger and noisier and blow away anything that isn't nailed down when they land."e Musk was betting that a better solution could be achieved underground, with electric pods that zipped through tunnels. Even Uber's CEO, Dara Khosrowshahi was initially doubtful about the project. However, after several rounds of discussion on the economics of it, he began to be persuaded. "For me the 'aha' moment came when I started understanding that Uber isn't just about cars," Khosrowshahi said. "Ultimately where we want to go is about urban mobility and urban transport, and being a solution for the cities in which we operate."f As of June, 2018, the company had plans for testing the service in Dallas and Los Angeles by 2020, and was seeking an international launch city.g It planned to have commercial deployment of the service by 2023.

Battle for the Skies

Uber was not the only company with dreams of revolutionizing personal air travel. Makers of eVTOLs such as eVolo (based in Germany) and EHang (based in China) were also in the process of launching air taxi services, and Terrafugia (based in the United States) was building a vehicle that it believed would be a mass market flying car for personal use. If eVTOLs became widely available and economical, other ride-sharing companies such as Lyft might also be well positioned to target the market. Would Uber's scale in ride sharing enable it to achieve dominance in air ride sharing, and would such a position be sustainable?

1.Safety - Any untoward incident or accident could have a damaging impact on the reputation of the business, potentially killing the business or delaying the mass-market launch of operations

2.High cost - The ecosystem for air taxi manufacturing is still not developed. Hence, procuring parts, streamlining the supply chain, servicing could be very costly