German air taxi developer Lilium Aerospace has filed for insolvency for a second time, saying that it has failed to secure funding and casting doubt on its ability to fulfil orders.
The company, which had initially entered administration in October, said in a brief statement that “funding options to secure Lilium’s future have not materialised in time”, forcing it to file for insolvency.
“While talks about alternative solutions are still ongoing, the chance [of] restructuring right now is highly unlikely and therefore operations will be stopped,” the statement said.
“[Given] the situation, this is deeply regretful for all employees and Lilium Aerospace thanks them for their resilience and dedication.”
Lilium, based in Bavaria, has been developing electric vertical take-off and landing (eVTOL) jets, a new class of EV designed to take off, hover and land vertically, much like a helicopter. They are powered by electric propulsion systems, making them eco-friendly and quieter than helicopters. The company completed test flights of the world’s first electric flying taxi jet in 2017.
The eVTOL market was hyped for its capabilities and support for achieving sustainability goals, but some makers have hit turbulence.
In December, air taxi maker Volocopter filed for bankruptcy, citing financial difficulties. The company, also based in Germany, plans to develop and enact a “restructuring concept” by the end of February, it added.
UK-based Vertical Aerospace sought emergency funding last year, shortly before Lilium's first insolvency. In November, Rolls-Royce pulled out of the electric flying taxi sector after chief executive Tufan Erginbilgic signalled the British engineering firm would focus on profitable contracts.
It is unclear what Lilium's next steps are, or what the insolvency means for signed agreements to supply jets.
In July last year, aviation conglomerate Saudia Group signed a binding agreement with Lilium to buy 50 eVTOLs. The agreement included an option to buy another 50 jets, and Saudia expected to receive the first jets in 2026. The jets would have had cabin capacity for up to six passengers, plus luggage room.
That followed Saudia's initial agreement with Lilium, in October 2022, to buy 100 Lilium aircraft for its domestic network.
Lilium had touted the “tremendous opportunities” in the Middle East, particularly the GCC, where the development of megacities calls for ways to minimise traffic and slash carbon emissions.
The company had made waves, earning backing from Saudi Arabia's Future Investment Initiative Institute. In 2021 the institute invested in Lilium as part of a $3.3 billion transaction that helped the company list on the Nasdaq Composite in New York. Former Airbus chief executive Tom Enders joined Lilium's board in the same year.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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