Air taxi start-up Lilium (LILM -18.04%) has reportedly secured a firm order from a state-owned Saudi Arabian airline. Investors appreciate the vote of confidence, sending Lilium shares up about 10% as of 11:30 a.m. ET.
Support, and potentially cash?
Lilium is one of several start-ups working to develop and commercialize so-called "eVTOL" airframes, shorthand for electric vertical takeoff and landing planes. The aircraft are designed to take off and land like a helicopter, ferrying a handful of people over city traffic or from an outer suburb to a metropolitan airport.
On Thursday, Reuters reported that airline Saudia is closing in on a major order for Lilium planes. The agreement would build on a framework between the two companies signed 18 months ago, with Lilium reportedly eager to convert that framework into a firm order.
Lilium declined comment but sent out invitations for an event at its headquarters in Germany scheduled for July 18.
Lilium has about 780 orders for its jet, including the Saudia interest, but the report says it needs to solidify those deals and secure advanced payments to fund continued development of its plane.
Is Lilium stock a buy?
A firm order from Saudia would be a step in the right direction for Lilium, but investors need to be aware the company still has a long journey up ahead of it.
These new designs require extensive testing and regulatory approval before beginning commercial use, and at least two rivals -- Joby Aviation and Archer Aviation -- appear to be ahead of the pack in terms of winning approvals.
That said, if eVTOLs deliver on their promise there is room here for multiple winners. Investors should be encouraged by the development, but limit Lilium to a small, risky sliver of a well-diversified portfolio.
