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Lilium is assembling the first test aircraft at its Oberpfaffenhofen facility.
A look back into its aerospace history could teach Germany some important lessons about both success and failure.
The country was among Airbus’ initial investors. Early public financial support helped turn Airbus into the huge commercial and industrial success it is today. Policymakers may also remember what can happen if no public support comes through in the early development stages of a new aerospace company: In 2003, Fairchild Dornier had to file for bankruptcy and abandon its 728JET program. The lack of public support was not the only element, but it was important.
More than 20 years later, two German aerospace companies, Lilium and Volocopter, are on the brink, in dire need of government funding. Lilium, by coincidence, is using some of the former Fairchild Dornier facilities at Oberpfaffenhofen Airport in Bavaria. The advanced air mobility (AAM) startups are in urgent need of fresh funds and are seeking loan guarantees from the Bavarian state and the federal government—support that would move them closer to major milestones. Both are also at serious risk of becoming victims of German party politics and the highly risk-averse decision-making seen in hardly any other country.
- Volocopter and Lilium urgently need government support
- States Bavaria and Baden-Wuerttemberg reject loan guarantee proposals
- Volocopter warns of insolvency risk
Lilium is developing the Lilium Jet, a six-seat electric air taxi for regional routes up to 175 km (109 mi.) considered by many as one of the most ambitious designs in the AAM sector. At its Bruchsal site in the state of Baden-Wuerttemberg, Volocopter is preparing for certification of the VoloCity, currently a two-seat multicopter intended for inner-city routes of up to 30 km. The company is following a more conservative approach.
Conservative or not, both companies have been hit with a 180-deg. change of financing conditions in the AAM sector. “The finance markets have turned,” Volocopter CEO Dirk Hoke says. “They went away from throwing money after good storylines to doing real due diligence and a focus on companies that are already generating revenues or, even better, profits. We, as a company in the late stage [before product introduction], are in the worst category that you can imagine. And Germany’s investment market is significantly more risk-averse than in the U.S.”
“The capital market is not buzzing at the moment,” Lilium CEO Klaus Roewe concurs. “Everyone assumed that interest rates would come down sooner, but that has not happened yet. The market is still cautious, and that the government is not supporting us is a negative signal that is causing massive issues.” Roewe insists that investors are still convinced by Lilium’s business plan and market outlook. The company has spent around €1.4 billion ($1.5 billion) on the program so far and is estimated to need another €500 million to reach certification if it incurs no delays.
Both Lilium and Volocopter are now confronting extremely urgent near-term financial issues. Hoke even says that Volocopter “may have to consider filing for insolvency in the foreseeable future” if it cannot find another quick solution. No detailed financials are available for Volocopter, which is privately owned. Lilium, a publicly traded company, entered 2024 with about €200 million in cash but was projected to burn some €350 million over the year. Roewe says it will need fresh funding in July. “My Plan A is to be successful in Germany; Plan B is to be successful in another country,” he adds. “Failure is not an option.”
At both Lilium and Volocopter, talks with shareholders are ongoing and may lead to small funding rounds that could buy the companies some time. But there is a very real chance that they will have to be sold to foreign strategic investors. Industry sources say Chinese or Saudi firms are the most likely options.
Much political drama has been evolving for more than a year over the funding of the AAM sector. Volocopter was the first to start discussions in early 2023 and initially received positive feedback from the state government of Baden-Wuerttemberg, where it is based. Two of the three coalition parties in the federal government, the Social Democrats and the Free Democrats, supported the proposal to help Volocopter, but the Green Party was skeptical. In the end, while the Greens agreed not to block a package at the federal level, the party ultimately rejected it at the state level.
Volocopter then approached the government of Bavaria, where it also has a substantial presence, and offered to move its headquarters to Munich. Again, one of the coalition parties, the Christian Social Union, supported a proposal for a €100 million loan guarantee, but the Free Voters party vetoed the proposal, arguing that the risks for the state were too high.
Lilium put in an application for the same amount late last year, but it has not been processed. “Over six months, nothing has happened,” Roewe says. “That is a very, very long time for a startup.” An audit by PwC that would have to precede a decision by the government has now been given the green light. It would normally take at least 8-10 weeks to complete.
Frustration is growing: “Sometimes I think we would not be worse off on the Moon than in Germany,” Roewe says. “Only 2% of our private capital is from Germany, only 20% of the staff. We have spent €200 million here but got zero support, while our competitors in the U.S. and China have received hundreds of millions. You are asking yourself: Why are we doing this here? If there is so little support, what reason is there to do everything here?”
In spite of the early Airbus success story, government support is generally contentious in German politics, particularly for aviation. The federal coordinator for aerospace policy, Anna Christmann, is a member of the Green Party and highly skeptical of the merits of aviation. However, the government has tended to help in moments of crisis: It bought a stake in Lufthansa and guaranteed loans during the COVID-19 pandemic and supported rival Condor twice—first when its former parent, Thomas Cook, collapsed and again during the lockdowns. “German politics steps up to avoid disaster, but never to help build champions,” Lilium founder and Chief Technology Officer Daniel Wiegand says.
Operationally, it is business as usual at both Volocopter and Lilium, at least for the time being. Volocopter is still targeting flights in Paris during the Summer Olympics, although with full certification no longer achievable, it is going for a more limited “permit to fly” instead. The permit to fly limits where the VoloCity can operate. Volocopter is also awaiting the much-delayed delivery of the latest electric motors, which include a double shaft for redundancy and are required for the approval of passenger flights. Hoke says the Paris project is taking up so many resources that it affects the pace of regular certification, which is “on the last mile.” Still, the opportunity to showcase the VoloCity to a global audience is “too good to miss,” he adds.
Meanwhile, Volocopter is continuing certification test flights at Bruchsal with MSN 3, which is flying more or less daily, Hoke says. The first aircraft to be used in the Paris flights, MSN 4, is in an advanced stage of production; another three are in earlier production phases but could still be completed in time for Paris. Supplier delays, mainly for electric motors, are also slowing down the certification campaign.
Lilium has begun final assembly of the first Lilium Jet test vehicle, internally called the Pegasus. The aircraft is to be rolled out later in the summer, with first flight planned for year-end. “There are still risks,” Roewe says. Sticking with the timetable is also important financially. Roewe estimates that €100 million in investor funding plus the €100 million loan guarantee should see it through to first flight. He hopes customer downpayments will kick in then and a new dynamic could develop among investors.
Lilium insists that all the tests, including high-speed wind tunnel tests completed recently, are validating its performance goals, and improved batteries will guarantee the initial range that many have doubted.
Assembly of MSN 2 is scheduled to start in mid-May; MSN 3 should also be completed and MSN 4 70% completed before year-end. Lilium Jet intends to build a structural test cell in that time as well.
Most of Lilium’s flight testing will take place in Oberpfaffenhofen, but some—particularly hot-weather tests—will be transferred to its test site in Andalusia, Spain, where the company has conducted extensive tests using its Phoenix technology demonstrator. Roewe says the flight-test campaign is scheduled to take around 18 months, given that “everything is new” on the Lilium Jet.
Production at Oberpfaffenhofen is to begin ramping up in 2026. Although more facilities have yet to be built, the site is planned to be capable of building up to 400 Lilium Jets per year.
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