American Airlines Group recently made a non-refundable deal with Boom to purchase twenty Overture supersonic jets. Similarly, United Airlines agreed to buy fifteen of Boom’s Overture jets last year. Boom, a supersonic jet startup, is developing planes capable of traveling faster than the speed of sound, around 761 miles per hour. Boom designed Overture to carry sixty-five to eighty passengers at Mach 1.7 over water, or 1.7 times the speed of sound, which is about twice as fast as commercial planes can fly today.
American Airlines faces fierce competition and pressures and need to get an edge in the airline industry after dropping by more than 60% in value since 2015. In pursuit of survival and to alleviate their $15.6 billion in debt, they want to reopen a market that died nearly twenty years ago. But there is a problem with this endeavor—the sonic plane market was an impossible market to survive in and will ultimately lead to failure unless Overture overcomes the errors of the Concorde.
What is Concorde:
On January 21, 1976, developers and manufacturers—Sud Aviation (later Aérospatiale) and the British Aircraft Corporation (BAC)—introduced the Concorde to the world, the first supersonic commercial plane. The airliner could maintain a supercruise up to Mach 2.04 or 1550 miles per hour at an altitude of 60,000 ft. Supersonic travel made the flight twice as fast. But its sonic booms caused severe damage to the ground, commonly shattering windows, so they were forced to only fly the jets over water. Jets were This new method of commercial flight was supposed to be the future of travel for the whole world, but Air France and British Airways remained the main customers for the Concorde.
Then, on July 25, 2000, Air France Flight 4590 ran over debris on its take-off run and crashed with all 109 occupants and four on the ground killed; the only fatal incident involving Concorde. Commercial service was suspended until November 2001, and partially due to the events of September 11, 2001, Concorde aircraft were retired in 2003. The Concorde was also very expensive to use and had a very high fuel consumption, which meant additional hefty prices and high maintenance costs.
The Return of Commercial Supersonic:
Supersonic air travel ran for nearly 27 years and there seemed to be no return for this dead market until United and American Airlines invested, for commercial use in 2029. Boom Supersonic plans to have a cleaner and more fuel-efficient plane than Concorde and engineering designers from NASA are developing a way to make sonic booms less violent, in hopes that they can be flown over land.
All of this sounds good but we do not know if Boom's planes are going to work and profit for their investors. Boom Supersonic is only a startup company with no successes other than having the first independently developed supersonic jet since the Concorde was developed and sponsored by the French and British governments. Also, Boom Supersonic has had no legitimate successes with its independently developed jets and does not even have the Overture model design finalized and the jets will not be available for commercial use until 2029. Boom Supersonic, in the last week, split off from Rolls Royce after deciding that their engine design is not what they want for their jet. Now they need to find a new partner for their and probably extend their deadline past 2029. In addition, Boom plans to engineer Overture to fly silently so it can travel over land, but NASA’s development of silent supersonic air travel has not arrived and that might mean longer wait times for the jet’s development.
In addition, while Boom partnered to make clean fuel and they say they are making a more energy-efficient jet than Concorde, they are still developing their product. Prometheus, a 2019 startup that wants to make carbon-neutral fuels, is partnered with Boom Supersonic to make Overture a carbon-neutral jet and change the air travel market. While Prometheus has a value of $1.5 billion, they face problems of its own. They are missing claims and promises like becoming carbon neutral by 2020 and they are facing skepticism for their high costs of $16.80 a gallon of their clean fuel. Prometheus is making slow moves in development, but growth could prove to drop the cost down to $6.40 in the next decade and $3.60 by 2050.
Should I Invest In Airlines, Boom, or Both?
Investing in airlines is one of the riskier investments in the market since there are so many factors to their business: there's fierce competition, changing prices for fuel, changing laws and regulations, changing employment standards and wages, and the management and care for planes and airline gates. It's even riskier to invest in flight technology that proved dangerous in the past and is now developed by startups, not Airbus or Boeing which have been engineering and building planes for decades.
Boom Supersonic Overture jets could be worth it for United Airlines and American Airlines if Boom figures everything out: make the jet more energy efficient, find success in their partnership with Prometheus Fuels to use cleaner fuel for flying, engineer their planes to fly quieter so they can fly over land, and make a plane that doesn’t have as high maintenance hours or costs as Concorde. With more environmental activism than ever, Prometheus Fuels could eventually convert the energy and transportation sectors of our global market with its product and help clear the atmosphere of carbon at the same time. If any company wants to turn profits, they are going to have to meet goals and not lose to a large number of obstacles, but with lots of growth, time, and funds, these companies could find success.
With more people flying privately than ever due to new easy access services through our smartphones and the pandemic creating some necessity for travel privacy, more people want to fly fancy and exclusive. There is seriously a market for Boom Supersonic to take over but they need to establish themselves as safe and better than regular flights due to supersonic travel’s bad track record. We need to see how advanced these jets are from the Concorde since they have had so many problems in the past with efficiency, reliability, and profitability. As an investor, I would be speculative about investing in startups because of the rising costs and supply chain problems. Investing in strong reliable companies and assets would be the smartest move, like buying up the lease of your car and selling it on the used market is a smart move.