Wall Street has found a combination even more faddish than blank-check companies and electric vehicles: Blank-check companies and Jetsons-style flying taxis. While there is some promise in the idea, investors had better hope that this isn’t too much glamour packed into one.

On Wednesday, electric air-taxi developer Archer announced a merger with

Atlas Crest Investment,

ACIC 2.92%

a special-purpose acquisition company, or SPAC, led by billionaire investment banker

Ken Moelis.

In a SPAC, investors give money to a publicly listed sponsor in the hope that it will find an attractive acquisition target, without knowing what it will be. The SPAC frenzy of recent months has focused on electric vehicles as well as other “cool” startups such as space-tourism venture Virgin Galactic.

Archer will have a $3.8 billion valuation, and get $1.1 billion in extra funding. The company’s pitch is to develop an electric vertical-takeoff-and-landing vehicle, or eVTOL, that can fly four passengers over congested urban areas for distances up to 60 miles. Futurists have long anticipated that people will fly to work as they do in the famous Hanna-Barbera cartoon “The Jetsons.” Now investors and companies are taking it seriously.

United Airlines and

Mesa Airlines

said Wednesday that they have placed a $1 billion order for Archer’s aircraft. The idea is to fly people from populated areas to United’s hubs—for example, from Hollywood to Los Angeles International Airport—by 2024, cutting carbon emissions per passenger by about 50%. Archer plans to make 10 vehicles that year, and increase to 250 in 2025.

The companies trying to develop air taxis range from aerospace manufacturers and airlines to car makers and technology firms. There are hundreds of designs, and even the U.S. Air Force has partnered with some projects.

Lufthansa Innovation Hub estimated in a report earlier this month that only startups with capital over $700 million had a chance of succeeding in developing, certifying and commercializing the technology. Until the latest SPAC deal, only Joby Aviation, which is backed by Uber, Toyota and


had cleared that bar. Now there are two.

An all-electric commercial jet is infeasible due to battery weight: At triple the current pace of battery improvement, it would take until 2100 to build an electric 737. But an air taxi or even a small regional airplane may be within the reach of today’s means. New designs also lower noise levels.

But technology doesn’t equate to a viable commercial enterprise.

In the mid-2000s, money poured into promises of a similar boom in very light personal jets that never ended up happening. Conventional helicopter taxi services have always been grounded by problems such as high pricing, inadequate infrastructure and poor safety standards.

It is doubtful that the Uber-style air taxis that many backers have in mind can develop anytime soon. For one, these vehicles will need dedicated landing pads. Also, a joint analysis by Ford and the University of Michigan found that a fully loaded eVTOL vehicle reduces carbon emissions in trips above 62 miles, but ends up polluting more than gasoline cars if flown for under 22 miles. This limits the technology to the kind of airport-feeder traffic that United envisages.

Ever since Britain’s 19th-century canal and railway manias, revolutions in transportation have been facilitated by easy money chasing a science-fiction future. The reality is often unpleasant for investors that get caught up in one.

Private companies are flooding to special-purpose acquisition companies, or SPACs, to bypass the traditional IPO process and gain a public listing. WSJ explains why some critics say investing in these so-called blank-check companies isn’t worth the risk. Illustration: Zoë Soriano/WSJ

Write to Jon Sindreu at jon.sindreu@wsj.com

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Appeared in the February 12, 2021, print edition as ‘Blank-Check Firms Take to Air.’



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