Airbus’s stratospheric drone business is open to IPO, CEO says

Aalto HAPS' drones have a coverage of roughly 2,895 square miles-equivalent to up to 250 towers on the ground-and weigh about 165 pounds. (Stock Image: Pixabay)
Aalto HAPS' drones have a coverage of roughly 2,895 square miles-equivalent to up to 250 towers on the ground-and weigh about 165 pounds. (Stock Image: Pixabay)

Summary

An Airbus unit developing high-altitude drones that offer mobile connectivity and Earth observation services is open to an initial public offering after it launches commercial operations in the coming years.

An Airbus unit developing high-altitude drones that offer mobile connectivity and Earth observation services is open to an initial public offering after it launches commercial operations in the coming years, its chief executive told The Wall Street Journal.

Based in Farnborough just outside London, Aalto HAPS makes solar-powered, fixed-wing drones that operate above 60,000 feet. Known as Zephyr, these high-altitude platform stations, or HAPS, can be fitted with payloads that provide 5G connectivity as well as services such as wildfire prevention and border control via Earth observation.

Airbus’s involvement in Zephyr, which was conceptualized in the early 2000s, dates back to 2013. Almost a decade later, the European aircraft maker launched Airbus HAPS Connectivity Solutions as a dedicated subsidiary to commercialize Zephyr. It rebranded the company as Aalto last year.

Now, Aalto is on the hunt for investors other than Airbus to scale up its business and launch commercial operations. “We’re targeting an entry into service in early 2026," Chief Executive Samer Halawi said in an interview.

“At some point, the company will become publicly accessible… Whether it’s through an IPO or an M&A transaction of some sort," Halawi said. “Shareholders will have to decide what is the best outcome at the time, but of course, an IPO is going to be a possibility."

While Aalto’s official entry into service is about two years away, the company has already been working with selected customers. In 2014, Zephyr was used in a flight trial for an undisclosed civil customer from a site near Dubai Airport. Two years later, the British Ministry of Defence became the first government client.

The business in 2022 signed a letter of intent with Space Compass to service the Japanese market with mobile connectivity and Earth observation. A year later, Aalto also signed a memorandum of understanding with stc Group in Saudi Arabia.

The company has been building revenue ahead of its planned rollout of services and expects to invest a few hundred million dollars by 2026. “By that time, we will have developed the project to a point where it’s available on a commercial basis to multiple customers around the world with enough of a supply of aircraft," Halawi said.

The market for the provision of connectivity and Earth observation services is relatively crowded with companies offering services to rural and remote areas through constellations of satellites, but Halawi said Aalto wouldn’t be competing directly with the likes of satellite operator SES or Starlink, the satellite-internet service operated by Elon Musk’s SpaceX.

“What we do is very different," Halawi said, noting that Aalto’s aircraft would be ideal not in cities or deserted areas, but somewhere in between, with enough population density to justify coverage but where it is not economically viable for network operators to do so through traditional towers.

“We sell the mobile operators a tower service," Halawi said. “We do not sell a service directly to an end user on a mountaintop somewhere." Zephyr can complement or replace non-terrestrial networks, connecting to mobile platforms without relying on expensive satellite dishes.

The drones have a coverage of roughly 2,895 square miles-equivalent to up to 250 towers on the ground-and weigh about 165 pounds. Still, Halawi said they aren’t designed to go through storms and Aalto is looking to establish a presence in four or five different locations that have favorable weather patterns.

“We are working quite aggressively with the Kenyan government to establish as soon as possible so that we can start flying from Kenya this year," he said. Aalto is also looking to set up an assembly line to manufacture the aircraft in the African country.

Meanwhile, the company is engaging with governments in Latin America and Asia to establish operations there. “It’s a matter of where we can find the best facilities," Halawi said.

Aalto counted some 65 employees when Halawi took the helm in July 2022, he said. The company just exceeded the 200 mark and it expects a headcount in the upper hundreds in the next few years.

But for the time being, its priority remains to bring in investors. “Airbus is really good at the aviation part, so we’re looking to bring telecom partners now into the mix," Halawi said.

Write to Mauro Orru at mauro.orru@wsj.com

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