What happened
American Airlines Group (NASDAQ: AAL) remains committed to buying electric planes from Vertical Aerospace(NYSE: EVTL), a huge vote of confidence for the start-up manufacturer. Investors are excited, sending shares of Vertical Aerospace up as much as 50% in Friday trading.
So what
Vertical Aerospace is one of a number of so-called "flying taxi" manufacturers that have burst onto the scene in recent years. The company's flagship VX4 aircraft is designed to transport a pilot and up to four passengers more than 100 miles at speeds exceeding 200 miles per hour. The VX4 is electric powered, and is capable of vertical takeoffs and landings.
American first partnered with Vertical in June 2021, announcing a conditional preliminary order of up to 250 aircraft with an option for an additional 100. On Friday, Vertical said the airline has committed to make pre-delivery payments to reserve the first 50 aircraft that come off the line.
Vertical founder and CEO Stephen Fitzpatrick in a statement called the commitment a "major milestone" in the partnership between the two companies.
"Together, we are making zero-emissions flight a reality for passengers traveling all over the world," Fitzpatrick said. "We look forward to continuing our work with American and seeing the first red, white and blue VX4 come off the production line."
Now what
Vertical also said that FlyingGroup, a European business jet operator, has conditionally pre-ordered up to 50 VX4 aircraft. That order grows Vertical's conditional pre-order backlog to 1,400 airframes with a total value, at list price, of $5.6 billion.
The commitments are certainly a step in the right direction for Vertical Aerospace, but investors need to remain grounded. All American really did was commit to follow through on its order assuming Vertical Aerospace can win regulatory approval to get its plane airborne, and then begin manufacturing. American isn't scrambling to get these planes into its schedule quite yet.
Vertical Aerospace is heading in the right direction, but it is still a long way off from reaching its destination. Investors should proceed with caution when considering buying into what is still a speculative investment.
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
