Navigating Legal Frontiers: A General Counsel's Guide to Advanced Air Mobility Financing

02/10/2025

Summary of Key Points

The AAM sector is projected to reach $115 billion by 2035, with passenger services being a primary revenue driver and over 900 million passengers expected annually by 2040.
Regulatory efficiency is critical, with anticipated reforms potentially reducing certification times by 30-50% through streamlined processes and automated compliance systems.
Public-private partnerships are essential for infrastructure development, particularly in funding vertiport networks and charging stations through combined government and private sector resources.
Environmental, Social, and Governance (ESG) considerations and green bonds are becoming increasingly important financing tools for AAM infrastructure projects.
The evolving regulatory landscape includes key developments like the Advanced Air Mobility Coordination and Leadership Act and the establishment of the AAM Integration Executive Council.
Market consolidation is expected as the industry matures, with smaller players likely merging with larger entities to achieve operational efficiencies and scale production.

Introduction
The Advanced Air Mobility (AAM) industry is revolutionizing urban transportation through innovative aircraft like electric vertical takeoff and landing (eVTOL) vehicles - essentially electric aircraft that can take off and land like helicopters but operate more efficiently and with less environmental impact. These vehicles are being developed to transport small groups of passengers between locations like airports and city centers, or between different urban areas, offering a practical solution to urban congestion and transportation challenges.

As these technologies move from concept to reality, with passenger services expected to begin operations within the next decade, legal professionals must navigate complex regulatory and safety considerations. By 2040, over 900 million passengers annually are projected to use these services globally. The timeline for implementation is already underway, with the Federal Aviation Administration (FAA) actively developing frameworks for integrating these aircraft into existing airspace through initiatives like the "Blueprint for AAM Integration" and the Advanced Air Mobility Coordination and Leadership Act.

Key practical implications include the development of "vertiports" - specialized takeoff and landing facilities for these aircraft - in urban areas, ensuring safety standards for passenger transport, managing air traffic in increasingly crowded urban airspace, and addressing environmental concerns through electric propulsion systems. These developments are not science fiction - companies are already conducting test flights and working with regulators to certify these aircraft for commercial passenger transport, with significant infrastructure development expected to begin by 2025.

The role of legal counsel is critical in addressing immediate challenges such as securing aircraft certification, establishing safety protocols, managing liability considerations, and structuring innovative financing models to support the estimated $115 billion market valuation projected by 2035.

The Evolving Regulatory Landscape
The evolving regulatory landscape in the Advanced Air Mobility (AAM) industry presents significant challenges and opportunities for legal counsel of AAM companies. As the industry rapidly develops, legal professionals must stay informed about the latest regulatory developments that impact financing and operations.

The Federal Aviation Administration (FAA) has taken a proactive approach to integrating AAM into the existing airspace system. The "Blueprint for AAM Integration" outlines the regulatory path for incorporating AAM operations into the National Airspace System, providing a crucial framework for legal professionals to navigate.

Another significant development is the Advanced Air Mobility Coordination and Leadership Act, which mandates the creation of an interagency working group to coordinate AAM advancement efforts. This act demonstrates the government's commitment to fostering collaboration across various agencies, which has important implications for legal strategies in securing financing and ensuring compliance.

The establishment of the AAM Integration Executive Council in 2024 marks a significant step in streamlining regulatory processes. By bringing together leaders from various federal agencies, this council aims to coordinate AAM integration efforts and create a more cohesive regulatory environment. For legal counsel, this development signals the need to stay abreast of potential changes in regulatory requirements and to adapt legal strategies accordingly.

These initiatives collectively demonstrate the government's commitment to fostering a supportive ecosystem for AAM development. For corporate counsel, this evolving landscape necessitates a proactive approach to legal strategy. It affects how legal professionals approach securing financing, as they must consider the potential impact of these regulatory changes on investment structures and compliance requirements. Additionally, ensuring ongoing compliance with these evolving regulations requires constant vigilance and adaptability in legal practices.

Structuring Innovative Financing Models
Legal counsel plays a pivotal role in structuring financing deals that blend public and private resources to meet the unique needs of Advanced Air Mobility (AAM) companies. Key considerations in this process include intellectual property-backed financing, revenue-based and milestone-based financing, and government loan programs and guarantees.

In the realm of intellectual property-backed financing, corporate counsel must be adept at negotiating and structuring loans secured by intellectual property assets, given the high value of patents and proprietary technology in the AAM sector. This requires a deep understanding of IP law and its intersection with finance, enabling counsel to effectively leverage these assets to secure necessary funding.

Legal professionals must also draft and negotiate agreements for alternative financing models such as revenue-based financing, which ties loan repayments to a company's revenue, and milestone-based loans, where funds are released as companies achieve specific technological or regulatory milestones. These structures require careful legal crafting to align with AAM companies' unique financial characteristics and risk profiles, ensuring that the financing terms are both favorable and sustainable for the company's growth trajectory.

Furthermore, corporate counsel must navigate the complexities of government financing programs. This includes programs such as the Export-Import Bank of the United States (EXIM) program for AAM exporters and the U.S. Small Business Administration's (SBA) Small Business Innovation Research (SBIR) program with its dedicated AAM track. Legal expertise is crucial in structuring these deals to maximize benefits while ensuring compliance with program requirements, as these government-backed initiatives can provide significant financial support and credibility to AAM ventures.

Risk Management and Compliance
Legal counsel in the AAM sector must develop comprehensive risk management strategies that address regulatory compliance across multiple jurisdictions, product liability concerns, and data privacy and cybersecurity issues. As AAM operations often cross state and national borders, legal professionals must ensure compliance with varying regulatory frameworks, which may include different airspace regulations, safety standards, and operational requirements.

Product liability concerns are particularly crucial as new AAM technologies are deployed in urban environments. Therefore, legal counsel must work closely with engineering and safety teams to develop robust risk mitigation strategies, establish clear operational guidelines, and ensure proper documentation of safety protocols. This proactive approach can help protect the company in the event of accidents or malfunctions.

Data privacy and cybersecurity issues related to the collection and transmission of flight data present another significant area of risk. Corporate counsel must develop and implement comprehensive data protection policies that comply with relevant regulations such as GDPR or CCPA, depending on the jurisdictions in which the company operates. Additionally, they must ensure that robust cybersecurity measures are in place to protect sensitive flight data and prevent unauthorized access or breaches.

Navigating Public-Private Partnerships
Navigating public-private partnerships is a critical skill for corporate counsel in the AAM industry. As these projects often involve collaboration between private companies and government entities, legal professionals must be adept at structuring and negotiating these complex relationships. This includes drafting agreements that clearly delineate responsibilities and risk allocation between parties, ensuring that each stakeholder's roles and obligations are well-defined and legally enforceable.

Ensuring compliance with public procurement regulations and transparency requirements is another crucial aspect of managing public-private partnerships. Corporate counsel must be well-versed in the specific procurement laws and regulations that apply to government contracts and partnerships in the jurisdictions where the company operates. This knowledge is essential for navigating the bidding process, contract negotiations, and ongoing compliance throughout the project lifecycle.

Structuring deals that allow for flexibility in a rapidly evolving industry while protecting the interests of all stakeholders is a delicate balance that corporate counsel must strike. This may involve incorporating adaptive clauses in agreements that allow for adjustments based on technological advancements or regulatory changes, while still providing sufficient certainty and protection for all parties involved.

Emerging Legal Trends in AAM Financing
Corporate counsel should also be prepared to address several emerging trends in AAM financing. Tokenization and blockchain-based financing solutions are gaining traction in the industry, requiring expertise in securities law and digital asset regulations. Legal professionals must stay informed about the evolving regulatory landscape surrounding these innovative financing methods to ensure compliance and mitigate potential risks.

Environmental, Social, and Governance (ESG) considerations are becoming increasingly important in financing agreements as sustainability gains prominence among investors and regulators. Corporate counsel must be prepared to incorporate ESG metrics and reporting requirements into financing documents, ensuring that the company's commitments align with investor expectations and regulatory standards.

Lastly, cross-border financing structures that leverage international investment opportunities while navigating complex regulatory environments present both opportunities and challenges for AAM companies. Corporate counsel must be well-versed in international finance law, tax implications, and regulatory compliance across multiple jurisdictions to effectively structure these deals. This may involve coordinating with local counsel in various countries to ensure full compliance with all applicable laws and regulations.

Conclusion
The role of legal counsel in the AAM industry extends far beyond traditional legal advisory services. As the sector continues to evolve, legal professionals must serve as strategic partners, helping to shape financing strategies, navigate regulatory challenges, and manage risks. By staying at the forefront of legal and technological developments, corporate counsel can play a pivotal role in propelling the AAM industry from concept to reality, ushering in a new era of urban air transportation.

The legal landscape for AAM financing is as dynamic as the technology itself. WBNY, through the Emerging Technologies Law Group can provide companies with critical representation services and can ensure they not only comply with current and emerging regulations but also anticipate future developments in this rapidly changing sector.

If you have any questions regarding matters involving emerging technologies law, or corporate practice law in general, please contact James A. Wolff, at jwolff@wbny.com, 212-984-7795, or any of the undersigned, or your regular Warshaw Burstein attorney.

Frederick R. Cummings, Jr.
fcummings@wbny.com
212-984-7807

Stephen W. Semian
ssemian@wbny.com
212-984-7764

Martin S. Siegel
msiegel@wbny.com
212-984-7741

Jason I. Diener
jdiener@wbny.com
212-984-7797