Lilium faces bankruptcy as air taxi firm struggles to raise cash

German aerospace startup Lilium faces bankruptcy if it does not raise emergency funds from the state government for the southeastern state of Bavaria.

The bankruptcy would mark a dramatic decline for a startup once considered Europe’s best chance to build the 21st century equivalent of “cars” that can fly.

Lilium is one of a series of firms trying to build “eVTOL,” or electric vertical takeoff and landing, vehicles.

Popularly known as flying cars or air taxis, these vehicles are being developed by start-up companies in the United States, Europe and Asia.

Today, however, Lilium is in trouble. The company is desperately trying to raise taxpayer funds in Germany. And so far, it has been unsuccessful.

Lilium has negotiated an emergency capital injection with both the German federal government and the Bavarian state government.

The firm had requested a 50 million euro ($54 million) loan from the federal government. However, her request was rejected by German lawmakers.

In a regulatory filing released last week, Lilium said it had “received indications that the budget committee of the parliament of the Federal Republic of Germany will not approve a €50m guarantee for an anticipated €100m convertible loan”. .

The proposed state aid would have been issued by KfW, the German state development bank.

Lilium “is continuing discussions with the Free State of Bavaria regarding a guarantee of at least 50 million euros,” Lilium added in its filing.

A spokesperson for Lilium told CNBC that the company does not plan to comment further beyond the statement outlined in its 6K filing.

In response to Germany’s decision to deny Lilium state aid, Hubert Aiwanger, Bavaria’s economy minister, criticized the move, saying it was “unfortunate” that the federal government decided not to support the firm.

Danijel Višević, co-founder of the Berlin-based Global Fund of Climate Technology Investors, said that while it was “understandable” that lawmakers denied backing Lilium over concerns about the government supporting one company over another, there was a misconception. among politicians that air taxis are a “millionaire’s toy”. That idea, he said, was “very short-sighted.”

Višević suggested it was unfair that American electric car maker Tesla – which burned through billions of dollars before turning a profit – was once able to get a loan from the US government, but Lilium was not.

“Flying car” is probably not the right term. But what Lilium was ultimately trying to bring to the world was a vertical takeoff and landing aircraft that could fly people from one city to another to ease traffic congestion.

The company originally wanted to launch its own digital “hello” service that would have seen users order rides on its planes from designated areas where it would be possible for the vehicle to take off and land.

Lilium then decided to change its business model.

Rather than develop the entire service on its own, the company chose to team up with airlines and airport operators, who would build the service product and infrastructure needed to power its ambitions.

Lilium jets can cost up to $9 million. The company also had a six-seat version in development, which would set buyers back around $7 million.

Lilium made big deals with people like Lufthansa in Germany and Saudia in Saudi Arabia. It also agreed a tie-up with Groupe ADP, an international airport operator based in Paris.

Founded by four university students in 2015, Lilium quickly gained a reputation as one of the most well-funded air taxi firms in Europe.

The company managed to raise hundreds of millions of dollars from investors including China’s Tencent, Atomico and Earlybird.

In September 2021, Lilium went public on Nasdaq through a merger with a special purpose buyout company called SPAC Qell.

At its peak, Lilium was valued at $3.3 billion. Its shares have fallen to less than 50 cents – a drop of more than 95% since its stock market debut.

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