Saudi’s EVTOL Plans Receive Jolt as Lilium Faces Insolvency

Four after signing an agreement with Saudi Arabia’s Saudia Group to supply 50 Lilium jets, and options for purchase of 50 more, Lilium, the Munich-based electric aircraft manufacturer and pioneer in Regional Air Mobility (RAM), said that its request for a $53.92 million loan guarantee from the Bavaria government has been rejected.

This development has come as a setback to the Kingdom’s EVTOL plans as the agreement with Lilium was the largest of its kind in the MENA region and represented an important industry milestone. It was also the largest reported firm order of eVTOL aircraft by an airline that plans to operate the aircraft.

With the German firm facing insolvency, one has to wait and see the Saudi Group’s decision on the agreement. The Group can either support Lilium or look at other companies for supplying these aircraft.

Lilium announced that its principal German subsidiaries will apply for self-administration proceedings in the next few days with the competent court in Germany. This follows a lengthy and complex government approval process for a loan from KfW, which failed in the Budget Committee of the German parliament. 

Lilium’s international competition is receiving grants and loans in the US, France, China, Brazil, and the UK. Therefore, German government support was seen by Lilium investors as critical to retain market confidence and potential future investment.

CEO Regrets Insolvency

Lilium CEO Klaus Roewe said that their plan was to obtain shareholder investment in a new funding round anchored by a German government backed loan of $107.85 million. The company has already conditionally secured additional private capital to complement the KfW loan. However, the Budget Committee was unable to agree on the loan and Bavaria couldn’t do it alone, he said.

“We deeply regret the insolvency and its consequences for all stakeholders at such a crucial stage of our company’s development. However, while there is no guarantee for success in insolvency proceedings, we hope that the Lilium Jet will get a chance for a fresh start after the self-administration process is completed,” he said and added that they strongly believe that electric flying is our best hope for the decarbonisation of aviation sector.

The German government support of the KfW loan was a closing condition to already committed private funding and without this support Lilium was left with no alternative but to cause the principal German subsidiaries to file for self-administration.

Lilium was also in advanced discussions regarding a French government guarantee of a $236.19 million loan to finance a battery factory and an assembly line in the Southwest of France. 

Following the Lilium Jet’s planned first flight in early 2025, Lilium anticipated receiving pre-delivery payments and new investment to finance the company into 2026 when the company expected delivery would begin on its current order pipeline consisting of firm orders, reservations, options, and memoranda of understanding for more than 780 Lilium Jets to operators in the US, South America, Europe, Asia, and the Middle East.

Supporting the insolvency proceedings is now the top priority for Lilium and the customers, employees and suppliers will be notified by the company as soon as possible.

Self-administration, if and when granted by the court, aims to preserve and continue the business that is the subject of the proceedings. Management would retain control and would continue operating the business under the supervision of a custodian.

The procedure is often used to initiate investment by new parties or a process to sell the company’s assets and/or business as a whole. In Germany, the procedure is generally perceived as providing an improved chance for a successful in-court business restructuring.