Episode Transcript
[00:00:00] Dean Donovan: It's an odd startup because NASA poured.
NASA and other entities have poured over a billion dollars of research into doing this before this company got started. So.
[00:00:12] Intro: Welcome to Hangar X Studios, where former fighter pilot and host John Ramstead takes us on a journey across aerospace as it enters an historic period of innovation and transformation.
Our guests include aviation experts, pilots, financiers, military leaders, and innovators of all time. Buckle up for another episode of Hangar X.
[00:00:42] John Ramstead: Hey, welcome to the Hangar X Studios. I'm John Ramstad, where we're going to explore some of the key players, cutting edge technologies and advancements that are driving aerospace today. Now, to do that, we have a pioneer and I believe, a thought leader in this space, Dean Donovan. Dean, welcome to the podcast.
[00:01:00] Dean Donovan: Thank you very much, John. I'm really looking forward to this.
[00:01:03] John Ramstead: Yeah, me too. I really think you're a true visionary and I was going to try to memorize your bio and I'm like, no, I'm going to read it. So, folks, bear with me here.
Co founder, managing partner at Diamond Stream Partners, you guys specialize in investing in aviation, aerospace technology, including mid mile freight, electric, hybrid, hydraulic electric, hybrid propulsion, unmanned aircraft, fleet management, revenue optimization. You're looking at everything from the technology to the business. I love it. You've also played a pivotal role in guiding companies that we've had even on this podcast, which is great. Jet Zero, Vertigo, Aero Amp, Air Wing Trust, Swiss drones, and Falantio.
But you're also just deemed deeply embedded in the industry. I don't know if people realize this, but you are. You co founded Valeris, which is now Mexico's largest airline. You led Bain and company's aviation practice. You were also the managing director for Bain Africa. And you have roles in analytics, finance, marketing, which I think gives you this really nice, unique and broad perspective on everything we're talking about. Not only the growth in the industry, the technology, what's needed, but then also what does that mean from the business perspective. So we're going to really talk about, I think, the future of aerospace and also the transformations that are not only happening, but need to happen to accelerate that transformation. How's that sound, Dean?
[00:02:29] Dean Donovan: Terrific. Looking forward to it.
[00:02:31] John Ramstead: So here's where I'd like to start. What are the key shifts that you think are either occurring or need to occur in this whole aviation ecosystem that's going to encompass what you just talked about, but also either accelerate or facilitate where things are going in aerospace? Aviation.
[00:02:48] Dean Donovan: Yeah. So I think for traditional aviation, the two kind of key movers are going to be blended wing body aircraft.
And what blended wing body aircraft will do is give the aircraft shape a fundamentally better lift over drag, lighter, so you can carry more payload further for 30 to 50% less fuel compared, compared to what you're comparing it against. That goes a long ways to solving not only the climate problem, but also the efficiency problem. That or the efficiency improvement that commercial aviation needs to improve, you know, and continue to grow.
[00:03:32] John Ramstead: Plus, it looks really cool.
[00:03:34] Dean Donovan: It does look really cool. And if you've ever been in the mock cabins of them, they're just amazing. I mean, it'll be such a much better user experience. Four aisles and the baggage compartments are actually aligned to the seats. The bathrooms don't sit right next to the rows.
It's always terrible to sit in that seat that's right next to the bathroom. All that stuff goes away. You can get on and off the aircraft much faster. The service doesn't block the restrooms, all of that kind of stuff. So much better user experience as well.
And then for smaller aircraft, the big innovation and I think the big driver of success is going to be the propulsion system, which is hybrid electric propulsion. So that kind of system will probably get retrofitted onto existing aircraft and also be the basis of new aircraft like the Trifan and other innovations like Electra that will really open up the smaller aircraft market by making it much closer to cars in terms of cost per seat mile or cost per kilogram mile.
And as soon as you start to push aviation costs down towards the cost of its substitutes, especially under 500 miles, you're going to stimulate a ton of demand. And we can talk about demand stimulation in a minute. So those two things for more traditional aviation, I think are going to be the key drivers. And then under 500 miles, I think there's an additional very significant driver which is autonomy. And most people think of autonomy as substituting for pilots.
I think that is a minor element of autonomy. The real value of autonomy comes from being able to design aircraft that can do missions. We do today with aircraft that are really fundamentally over spec'd for the missions that they're flying.
[00:05:32] John Ramstead: So what's an example of that, Dean?
[00:05:35] Dean Donovan: Yeah, so an example of that would be say doing a pipeline inspection, where today a lot of companies do their inspections with a Cessna Caravan, that's a nine seat aircraft, they'll put a bunch of sensors on it. But that aircraft, if it were, if you had an autonomous aircraft to deliver that payload, you could do it with a 200 pound aircraft, not an aircraft of the gross takeoff Weight of a caravan, which is many, many multiples of.
[00:06:05] John Ramstead: That and also a much lower cost.
[00:06:07] Dean Donovan: Right. You take out 90% of the weight in an aircraft, you take out 90% of the cost, you take out 90% of THE fuel burn and you're substituting in many cases for ground transportation that is far, far more expensive and in many cases more dangerous. So there's many, many benefits towards, you know, from this kind of autonomous navigation. And you know, by autonomous navigation it really means the pilot is sitting someplace else right now. But ultimately you could, you could get to 20, 20 aircraft per pilot or something like that and, and see enormous productivity savings and a huge growth in, in the industry as we substitute for ground vehicles.
[00:06:50] John Ramstead: Well, yeah, I think that whole ecosystem AI is going to play an interesting role. That's how one person can safely operate 20. And I'm curious, so you talked about commercial 500 and above. Then you have this mid range and there's a lot of exciting things here. But 100 miles and less is really kind of the area that we talk about is advanced air mobility. It's a place of electrified or electrification. And there's been some recent news with Airbus, Lilium, Volocopter that are concerning, I think to a lot of us kind of watching the industry. What are some of the implications of or where do you think AAM is heading? What does it look like the next three, five years?
[00:07:33] Dean Donovan: Yeah, so the technologies themselves are just absolutely amazing. I mean the idea that you can get an electric aircraft to take off vertically, fly 40, 50 miles, land vertically, I mean we've had that kind of capability with a helicopter. But EVTOLs will be far safer, far cheaper to run, far easier to maintain over time. And you know, when you cut the cost out and you improve the customer experience, you can grow markets. So that helicopter transportation market isn't that big today, but with EVTOLs, you know, it could grow, it could grow substantially. The I think the challenges those markets are going to face is kind of twofold. One is the aircraft themselves don't have a ton of payload range and that's because they're using all electric propulsion. So the idea that, the idea that you're going to fly 100 or 150 miles in one of those vehicles is much harder to conceive of in a high tempo, aviation grade operation.
And so, you know, right now with their all electric powertrains, they're going to be limited in what they can do. So I think, you know, one thing that we should watch out for in the next five years to see if some of the remaining players in the market pivot towards hybrid, which I expect will happen.
And then, and then I think the second thing that we need to watch closely in that space is how that, how the carrier side of that business builds out. Because it's one thing to build a vehicle that can operate commercially, it's another thing to build a network that has a cost position that's competitive with cars. And so you mentioned before, you know, I was one of the founders at, at Valaris and even before that I worked on this problem long time ago when Greyhound engaged company I worked for to figure out how to compete with Southwest. And the reality is transportation forms are substitutable. So people have more options, especially when you get under 500 miles about how to do their transportation. And they typically choose things for cost and flexibility and so, and sometimes speed, depending on, you know, how urgent the application is. So to the extent that, you know, EVTOLs are competing with cars, they're going to need to find network economics that are, that are more competitive so that they can replace some of those cars. Or, or it's going to be largely a premium product. And those premium products people will pay a lot more for than taxi service or some other kind of ground transportation service. But the market will be more limited. So I think the real thing to watch for kind of from an investment perspective is how effective are these companies going to be in developing that carrier network that can operate and grow and grow the market rapidly. And frankly, my opinion is that will take some time. So it's important that these companies be well capitalized so they can get through that phase. There've been a lot of focus on certification and rightfully so, but that's just the first step. The market building is equally as important.
[00:11:02] John Ramstead: Well, yeah, you have to certify an airplane that not only people want, but that also fits into their business models. There's a lot of considerations when creating an entirely new category of aircraft, isn't there?
[00:11:16] Dean Donovan: That's right. So if you, if you take a look at say one of the hybrid providers that, that we know of that's doing retrofits, you know, the idea there is, there's already an existing fleet, there's already existing demand. What you do is you, you make the way of serving that demand 20 to 40% more efficient. Right. Great. Or if you take the Trifan, you know, there are private aviation markets today. People fly those routes today. Can you give extra convenience and lower cost by having a slightly different kind of aircraft with different propulsion and vertical takeoff and landing capability. Pretty exciting, right? But those markets already exist. In the case of EVTOL markets, those markets are very, very, very nascent versus the kinds of market sizing they're looking for. So that's why it's such a critical factor. There's more market risk in those models than there are in some of these other hybrid models that are really replacing existing aircraft with much better economics.
[00:12:25] John Ramstead: Yeah. And I'm thinking about hybrid electric propulsion. And for people, if you're not familiar with it, think of like either a turbine or a piston engine that's driving a generator, charging batteries, so you're generating electricity on board. And the big advantage is if I have an engine in a transmission out to a propeller or some. Some kind of turbine, there's a lot of weight there. But if I can have a hybrid electric. And now all I have to do is run wires, basically to my motor, which also gives me a lot of flexibility in design. So there's a. There's a lot of thing. It's going to enable a lot of very creative thinking in different products now in that we're kind of at the front end of it. And, you know, as an investor in both Vertigo and ampere, we're great companies.
What are you seeing of both regulatory challenges or technical challenges that need to be overcome where this now becomes more commonplace? Propulsion.
[00:13:22] Dean Donovan: Yeah. So clearly there needs to be an STC in the case of both of those companies, for the propulsion system. Right. That's a Part 33 certification. But STCs typically take much less time than a full type certification for an aircraft. So, you know, historically, two to three years.
You know, this is novel technology, so it could take longer than that. Both of those companies are pretty far down the road. So, you know, that's the first step. And then, you know, how you certify is important. If you. If you certified by putting the electric piece first and making the propulsion system completely dependent on the electric piece, then, you know, you're maybe introducing more certification risk. If the system can operate with mechanical systems that the FAA is familiar with, then it becomes less risky from a certification standpoint. So there are strategies inside how you go out and certify a hybrid system that are important in this process. And I think, in general, the hybrid companies that we've seen have been very thoughtful about that. So they're trying to create an easy pathway for the FAA to certify these technologies.
The hybrid technology should be far more impactful in aircraft than in cars because of the nature of Flight, you use ton of power to get off the ground. And then with a turboprop engine, you'll only use a fraction of the capacity of the power of the engine for level flight and descent. And so batteries love to give you power.
They're not quite as good at long term kind of power delivery at a steady rate. And so if you can put a boost onto your takeoff using a battery and then use the compression engine in the air, what you've really done is you've enabled yourself to downsize that compression engine, take a ton of weight out, and use the battery for what it's best at. And that generates huge amounts of efficiency. Part of that is fuel efficiency, which can be 50 to 70%. But the key driver of engine life is cycles, because taking off is stressful for an engine. So if you use electric power to assist in the takeoff, you're actually extending the life of the engine considerably more than a compression engine would last otherwise. And that reduces the single biggest maintenance cost on an aircraft. So economically, very significant to perfect.
[00:16:21] John Ramstead: So you think that could start reducing TBOs on the engines that are part of a hybrid system? Yeah, so those will be longer. So also means it's more operationally effective because when I go into tbo, I could be out weeks or longer, depending on what they find, right?
[00:16:38] Dean Donovan: That's absolutely right. Yeah. So you, you, you save in that area quite considerably. And it's not just the maintenance cost itself, as you say, it's also the uptime of the aircraft. So you're getting more aircraft utilization back.
So another, another attribute of hybrid systems is you, you can potentially get more range than you would out of a traditional turboprop engine, you know, depending on the system, of course, but, you know, that's what we've seen. So, you know, you're getting, you're getting payload range, you're getting reduced operating costs, you're getting reduced fuel burn. I mean, it's a pretty, it's a pretty big disassociative step for propulsion and small aircraft. And, you know, one of the reasons we're so optimistic about this is that when you reduce the costs of something in aviation, you stimulate demand. Costs in small aircraft are not very competitive with cars right now. They tend to be way above. And just to give you a sense, and this is analysis that we've done of the caravan versus commercial aviation. So commercial aviation turbofans, very reliable, very high utilization. Right. Ten hours, depending on whether you're measuring flight hours or block hours. But 10 hours plus of utilization a day so the capital cost per seat mile of an A320 is about $0.01.
And your capital cost to walk around in your nikes is about 20 cents per mile. So just to give you a sense of how incredibly efficient commercial aviation is, if you look at the caravan market, on average the aircraft are used an hour a day globally. And you know, the cost of the aircraft is much smaller, but the capacity is much smaller. The average capital cost is 45 cents. So if you can take the propulsion part of the capital cost down and then you can get higher reliability on propulsion and drive utilization up and then stimulate demand which also creates deeper networks, drives utilization up. Now you're getting a real virtuous signal out of that aircraft because you'll be driving that aircraft's capital cost down per mile. And once you get below about 65 cents for overall cost, now you're out competing cars on a fully costed basis. And that's I think a huge inflection point at which we're going to.
[00:19:10] John Ramstead: So 65 cents is where you're competing with traditional transportation on the ground.
[00:19:16] Dean Donovan: That's, well that's, I mean that's the IRS average cost to operate a car, which is, you know, well considered number depends on exactly what you're competing with. But you can see how if, if most, if most very small aircraft, you know, below 50 seat aircraft are above that 65 cents and you, and they're going to places where cars can easily compete, you know, three, 400 miles.
Once you push down below that, you can open up a lot more destinations and that means that there's less transfer at the end of every trip, if you will, or more places that people could actually substitute air for cars. And you're making it more economical. Right.
And you're making it more convenient because they fly into smaller airports. You could see a lot of growth in smaller aircraft demand for smaller aircraft and services supported by smaller aircraft.
[00:20:20] John Ramstead: It's exciting. Yeah, it is. So as you're looking at the business models and the economics and what's on the table from the EVTOL space to maybe VTOLs that are longer range with more traditional propulsion currently until things matured a little bit more, how does what you're just talking about that cost per seat mile compare to either helicopters or maybe some other other smaller fixed wings like where are they now and what do you think the timelines are to get to where they actually are economically viable as an alternative?
[00:20:58] Dean Donovan: Yeah, so they're viable today. It just depends on the use case. Right. So it's not about whether they're viable or not, it's about how big the markets are. Right. And so commercial aviation is a huge market because they're going long distances and typically the cost per seat mile is below 10 cents. It depends on the airline. So you're talking about something that, you know, the cost is 1/6 or less of a car all in.
That's not the cost you get charged as a consumer, but the cost to produce that transportation and the time savings is massive. So when you get to under 500 miles, you know, I think caravans might operate at a total cost of 85 or 90 cents a seat mile.
And so if you push that down to 45 cents, you know, you, you can project, be imperfect because it's been done for commercial aviation, but you could project what kind of stimulation you'd get out. And for unstimulated markets in aviation, for every 1% decline in price, you know, you might get 3, 4, 5% stimulation and demand. So you know, if you cut, if you cut the costs in half, you could, you could double, triple the size of the regional aviation market.
[00:22:23] John Ramstead: Yeah. Now on the other, yeah, you can. And on the other side there's some really interesting developments and what I would call mid mile cargo drones that are coming out. We're seeing some really exciting things happen right now.
How does that compare to ground transportation right now? And it seems to me like they current, I can see they're a really good use case for those really urgent, you know, high value, got to have it there now type items. But love to get your perspective on the industry and what it might look like down the road.
[00:22:57] Dean Donovan: Yeah. So we actually have two cargo plays in our portfolio. The biggest is Elroy air, which is £300, 3, 400 miles autonomous aircraft, containerized.
[00:23:13] John Ramstead: It's a brilliant solution.
[00:23:15] Dean Donovan: Yeah, containerized, absolutely. And then Swiss drones, which is more like a 50 pound payload of Switzerland, they do inspection and freight. So both of those things, the freight markets, you know, it's kind of, it's kind of the question I always ask about this is what's the value of a piece of toilet paper? Well, if you've got 50 rolls in your house, not very much. But if you don't have any, if.
[00:23:44] John Ramstead: I'm hiking in the woods, I don't have any.
[00:23:49] Dean Donovan: It becomes pretty valuable. So I don't want to get it too deeply into that analogy, but if you think about a billion dollar factory that's missing, you know, a few hundred screws that are worth a dollar, you know, you're shutting down a massive asset to, because you have a shortage of parts. So timely deliveries is, is super important for certain kinds of goods. And that extends in all kinds of different use cases like fresh flowers, getting them out of the field and into an aircraft and flying them to the United States. Well, if you did that via air instead of via trucks, would the spoilage be much less peaches going from Central Washington to Japan, you know, so there's all of these different use cases and of course the biggest one is FedEx, UPS, etc. DHL, et cetera. And they have, you know, fast cargo delivery. The use case there is very interesting because what they do is they take everything and they send it to Memphis in the case of FedEx and then they send it back. I mean back, back in the day I remember people FedExing things to people on different floors in an office building I was working in. And I was ridiculous, right? So FedEx loved it. I'm sure that doesn't, sure that doesn't happen anymore.
But the idea is those hubs become choke points and if you could disintermediate the hubs using regional freight, that might be a really attractive thing to do for certain kinds of freight. So then the question is how much does it cost and what would you be disintermediating? And I haven't looked at that use case by use case. But there's tons of freight for example, that's cross docked. It's called less than truckload freight because you can't move it in entire truckloads. So what do you do? You have a pickup and delivery van that goes around to lots of different people and it picks that up and then you bring it to a facility and then you cross dock it and you put it on a truckload and then you drive it 300, 400 miles and, and then you cross dock it again onto delivery vehicles and send it out.
[00:26:09] John Ramstead: So that I gotta tell you that I did some consulting with one of the companies that's the biggest provider of that service in la, the less than truckload. So picking up all the pieces, bring it into one place so that they can send it out. The margins on the actual service were 1 to 2% and that's the best they could get them. The only place they made money is that when I had to bring it in, let's say store your stuff for three or four days till I had a truckload and I was charging on the storage. So I mean it is a very, I mean it's a, it's a critical need, especially in an urban area, very, very inefficient and hard to make money at. And so you're actually now talking about something that could be an entire new solution because there's. The demand is not going to go away.
[00:26:57] Dean Donovan: Yeah, that's right. And if you could skim off the premium piece of that freight, which is the time sensitive stuff, and then containerize it to reduce the cost of loading and unloading it, you know, the Elroy containers can drive themselves right into the warehouse. You've eliminated tons of labor and tons of costs. So it's, you know, I think there's a lot of opportunity there. A lot of people don't realize this, but containerization and shipping is actually a less efficient way, or it has been in the past, at least a less efficient way to use ships than the way that they used to do it, which is they used to pack the ship.
But the problem was that most of the cost of shipping something was actually in packing and unpacking the ship, not in actually transporting the goods. And so the containerization, every kind of shipping has that problem. The containerization really helps to address that labor issue.
[00:28:03] John Ramstead: Well, we just had Bristow helicopters on and they're actually experimenting, they're doing a pilot right now with Elroy on some of those last minute key deliveries out to pipeline platforms where the helicopter trip would be very expensive.
So they're actually looking like, hey, can we improve our service model to our clients and do it more effectively and quicker? So it's going to be, we're going to have them back on in about six months to actually share what they've learned with a couple different platforms that they're looking at bringing into their company. So that's going to be interesting to learn. And you know, I wanted to ask you, there's so many wonderful things in your portfolio at diamondstream. Is there one thing for you that just stands out and goes, you know what, that, that is exciting. That one could be the one that tips the dominoes.
[00:28:52] Dean Donovan: Yeah. Well, we're excited about all the companies, obviously.
[00:28:56] John Ramstead: Do you got a favorite kid, Dean? That's what I'm asking.
[00:29:01] Dean Donovan: So I think I love Jet Zero the most. It's just very, very interesting and it, you know, there's not many times in your life where you can disrupt a multi trillion dollar market. And so if you, you know, if you think about the impact of, you know, potentially changing an entire, you know, a multi, multi trillion dollar industry, which is the aerospace industry, the order book over the next 2030 years and really changing the aircraft type. That is an amazing disruption opportunity. Really, really exciting. And, you know, the amount of value at stake across the ecosystem is enormous. You know, it might be a million dollars in aircraft a month of increased profits. So over the life of an aircraft, 20 years, say you're talking $250 million of improved profit per aircraft, and you start multiplying that by, you know, 35, 40,000 commercial aircraft by the mid-2030s.
I mean, the value creation that's across the ecosystem is in the trillions of dollars. So that is a really exciting.
[00:30:20] John Ramstead: That is exciting project. So, Dean, you know, I want to throw this out for you. I would love for you to have either the CEO or somebody from the team at Jet Zero come on and talk about the blended wing body, the design of this, talk about what they're doing, because I know our audience would love to hear the story because it's a fascinating story.
[00:30:40] Dean Donovan: Yeah, I'd be delighted to arrange it. I mean, it's a crazy thing. The guy, you know, one of the two co founders of the company, has been at this for 30 years. He's been working on this. And finally they've been in a position to start a company that would do this in commercial aviation. And NASA, it's an odd startup because NASA poured, NASA and other entities have poured over a billion dollars of research into doing this before this company got started. So you're really standing on the soldier, on the. On the shoulders of giants.
It's an exciting project.
[00:31:18] John Ramstead: You know, a lot of this stuff's been in works a long time. We just interviewed Dr. Jason Hill from Hill Helicopters in the UK and this idea when he started working on this deal was 25 years ago. And we were kind of joking. I said, hey, it took you 25 years to be an overnight success. He's like, yeah, that's about.
[00:31:35] Dean Donovan: Always seems easier than it is. That's all I can say, John. It always seems easier than it is.
[00:31:41] John Ramstead: Yeah. You know, so question for you, especially with your background in Volaris and some of the largest pre orders XTI has gotten for the Tri fan are from the airline industry. And where do you see the overlap, the partnership, the synergy between traditional commercial airlines and what's happening in the EVTOL and the VTOL space and what does that do for their business model?
[00:32:09] Dean Donovan: Yeah, so it's an interesting and complicated question. So there's a number of interrelationships. One interrelationship is the corporate CVCs.
You know, Alaska Airlines would be a great Example of that have really been very innovative in pushing forward technologies that will move the industry forward in everything from blended wing body aircraft, hybrid hybrid electric propulsion, new forms of software and network analysis, and just all kinds of stuff that benefits people who operate smaller aircraft as well. So those are all, those are all very valuable contributions from the existing carriers. Also in SAF that the business model relationships are more complex. So EVTOLs could be a premium service. And I think that's the basis of United and Deltas and other investments in EVTOls tied to getting people out of increasingly congested hub airports and getting them to where they actually want to go. So, you know, a great example would be if you fly from France to California, you're going to be having some pretty significant challenges getting from SFO to Napa. It's just not that easy, especially if traffic's bad. So any VTOL could get you up to an airport in Napa or Sonoma very, very quickly after your flight. And that might be a premium experience. Somebody would want, you see similar experience going from JFK into New York City, that kind of thing. So I think that is, I think that is relatively small, but nonetheless quite valuable.
[00:34:00] John Ramstead: Can I ask you about the other direction? I have a question about maybe the other direction of that. Because you understand the economics in an airline, my guess would be a small percentage of passengers or a large majority of my revenue. And as people move away from the city, if I had a service that allowed, let's say I now live an hour, two, two and a half hours away from a major airport to commute and I got to drive, I got to find a way to get there, to take my flight to wherever I'm going. Is there also a business case to be made to bring people in as a premium service so it's more convenient. Would an airline be interested in that as part of a certain level of, you know, membership or things like that?
[00:34:42] Dean Donovan: Yeah, sure, I think so. Bringing people in would be, would be valuable. You know, obviously right now the Evtols have an effective range of 50 miles. I mean, they, they have a longer range than that, but you have to operate them all day to keep the utilization up. So I'd say 50 miles, which is, which is pretty limited, but you're getting on to the next point, which is connectivity. And one of the big challenges that the big airports have is they don't have any slots. But they also are increasingly trying to connect kind of a much larger area.
And congestion on the ground side is making it hard for people and The TSA side is making it hard for people to move through that. So you see services like Landline where they're literally running buses from two, two and a half hours out into the airport, pre checking people through so that they don't have to drive their cars to make those trips. So there is evidence that that kind of service will work on the aviation side. Right now I think the challenge is the operations don't always exist. And they don't exist kind of at the right scale for the right cost. And so you could even do this on a non premium basis. And I would expect it there to be both types of traffic. But you know, you start utilizing tertiary airports to move people to places like SFO or lax.
[00:36:18] John Ramstead: You could even incorporate in your scheduled services even.
[00:36:21] Dean Donovan: Yeah, to utilize schedule services and connect in and get that connectivity. I think the biggest challenge with that is. Well, there's a couple of challenges with that. One is you need the aircraft. That's where it starts. And the aircraft will be lower cost, so that will stimulate some traffic. You'll need to build up the carriers, which I think is less of an issue because they already exist. A lot of the carriers that feed the big, the big, the big mainline carriers like United and Delta already exist. And then you'll need the slots in the airport to land all those additional regional aircraft. So what you'd love to have is you'd love to have, you know, a lot of small aircraft that could serve a lot of places very conveniently at very low cost.
Getting there I think has those impediments. You're going to have limited status slots in the big airports and if somebody can fly a 737 into that airport versus a 19 seat aircraft, they're probably going to want to fly the 737.
[00:37:23] John Ramstead: In and so or even versus four or six place aircraft which a lot of the VTOLs are. The bigger ones right now are that size.
[00:37:32] Dean Donovan: That's right. And we'll probably get into airspace in a second. But you can see the problems with lots of helicopters and lots of commercial aircraft sharing the same space from what we saw last week in Washington D.C. so there's an airspace issue. There's a slots issue in the airport where they have a certain amount of capacity and then there's kind of a sweet spot for the aircraft size where you'd like to stimulate enough traffic. So you could use a 40 or 50 seat aircraft which is going to be more efficient as opposed to a nine seat aircraft which will be more expensive to move people around in and, and you've got to get all those things aligned properly to really see a tremendous growth in what you're doing for connectivity. There's a whole different set of markets that is point to point, like, okay, I want to fly Napa to Long beach. And you know, I, I love flying into Long beach, is that terrific city. Know the mayor there, he's very pro aerospace. Yeah, great guy.
But it, but the travel experience, just much better. It's a small airport. You can get in, get out quickly. And so there's a whole nother set of aircraft models, et cetera, that aren't really concerned with connecting, that are really car substitution plays. And again, they, they'll have fewer slot constraints in airports to manage that. But cost position will be very, very important for those guys because they're competing with people driving around in their cars and cars are cheap.
[00:39:12] John Ramstead: I love that. Well, there's so much more I'd love to ask you. So Dean, we need to have you come on for a part two.
But let me ask, this has been great. Our audience is going to love this. I know it. So if anybody has any comments or feedback, let us know.
All of Dean's contact information will be on the website and we'd also love for you guys to subscribe. You'll get our newsletter. You'll know when the next episode's coming out. We have some great episodes coming up and if you're on audio or itunes, please hit subscribe and we would really appreciate that and tell a friend.
And that said, Dean, as we're kind of landing the plane, so to speak, what are just some final thoughts as you think about the year ahead in your world right now?
[00:40:00] Dean Donovan: Yeah, so I think it's a big year for the EVTOL guys. Hopefully we see some further progress on certification there. I think the hybrid guys are very close to pushing towards certification. So aviation markets are interesting.
When a technology is totally unproven and people don't know what its impact will be, nobody wants to use it until it's totally proven because it's such a competitive market.
If you break your business model by using the wrong technology, you're out of business kind of thing. But then the same competitive pressure causes massively rapid adoption once the concepts are proven. And so I think what I'm really looking for is getting these markets, getting these things into the market and seeing how they, how they prove out.
I think we'll see some progress on the hybrid side this year in terms of new aircraft certification, but big product launches. I Think those are mostly going to be in the drone space. And I think the big, the big narrative for 2025 overall in aviation is going to be beyond visual line of sight flying for drones. And we haven't talked about that very much, but I think this is the year where that really starts to accelerate and it'll be a year of huge transition in the drone business because of DJI's increasing, increasing is being increasingly blocked and being US market. So that's a short, a short primer. Going to take a little longer on the big aircraft space. It'll be a big year for drones.
[00:41:41] John Ramstead: Do you want to come back and talk about drones and BV loss and just some of those aspects? Because I think another interesting topic for a part two would also be the infrastructure that's going to have to advance to support that. Because, you know, from the radars to the comm systems, command control deconfliction, there's a lot of infrastructure and there's a lot of innovation that's happening in a whole layer that doesn't, isn't required today in commercial aviation, but it's required for all of this to be adopted across society, don't you think?
[00:42:14] Dean Donovan: Absolutely. And aerospace is a key piece of that. You know, we got into travel at Reagan because we had too many aircraft that weren't, you know, weren't being controlled well enough. And I'm not blaming the air traffic controllers. I'm just saying if you, if you put too much stuff into the current airspace management system, you create stresses that are difficult to manage. And as drone use goes up, those stresses are going to increase. So there's a lot of things to talk about on the airspace management side there as well. So a lot of exciting stuff happening and a lot of public interest, as we found out in New Jersey this, this last year.
[00:42:57] John Ramstead: That's true. Okay, so everybody stay tuned. We'll have a part two with Dean and he's going to come back with his list of the best companies that you should put your money into right now. No, I'm kidding. You don't have to do that.
[00:43:11] Dean Donovan: I've got my list.
[00:43:12] John Ramstead: I know you've got your list. Yeah, all you have to do is go to diamondstream's portfolio list. You'll see exactly where they're putting their money. So anyway, Dean, great having you on. Thank you so much. Look forward to our next conversation and just keep knocking them alive out there.
[00:43:27] Dean Donovan: Sounds great, John. Thank you so much. Thanks all you guys.
