Forget Archer Aviation's Earnings; This Is the Biggest News for Investors

When Archer Aviation (NYSE: ACHR) reported fourth-quarter 2024 earnings, those numbers showed that the company is bleeding red ink. The last earnings report highlighted the same fact, and the next one will probably tell the same story.

In fact, Archer Aviation's bottom line is likely to be in the red for at least several more years, which is why investors really need to be paying attention to a different piece of the equation. Here's the big news that should be watched closely in 2025.

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What does Archer Aviation do?

Archer Aviation wants to be an aircraft manufacturer and also an airline. Neither of these goals is simple to achieve, so the start-up is attempting something pretty audacious. To make the story even more exciting, the aircraft it wants to sell and use is a small electric vertical lift vehicle that has, basically, never been created before. The hope is that it will allow users to fly over traffic in congested cities, like an air taxi.

Image source: Getty Images.

There are huge costs and a lot of steps in the process of building a new airplane and getting it approved for use. Archer Aviation has been working toward the end goal and making good headway. It still has more approvals to get from the Federal Aviation Administration, but the process is moving forward step by step. Notably, it has already been approved to operate an air taxi service. So assuming its planes get final approval, it will be ready to start flying as soon as possible.

That said, the approval process noted here is for the United States. The rest of the world, which is part of Archer Aviation's overarching plan, doesn't necessarily have the same safety standards in place. That's not to suggest that Archer Aviation will fly dangerous planes, but that the U.S. is particularly strict when it comes to new aircraft. This is why another bit of recent news is so much more important than the company's earnings.

ACHR data by YCharts

Archer Aviation gets ready to fly in Abu Dhabi

Just before Archer Aviation released its fourth-quarter earnings, it announced that it had reached an agreement to launch an air taxi service in Abu Dhabi later in 2025. Basically, this is the first real test of the company's concept, from the electric vertical lift plane to the idea of an air taxi service. And that makes it a huge litmus test for Archer Aviation's future.

There are really three things to watch. As the company gears up to support this deal, it is attempting to create a template that it can use in the future with similar deals. There are a lot of unknowns that will be answered, from delivery and use of the aircraft to hiring and training pilots. Every aspect of setting up an air taxi service will have to be run through for, effectively, the first time. There will probably be mistakes made along the way, but they will be lessons for the future. Investors, however, will want to see a successful effort and get an understanding of what the process looks like.

The next two issues to monitor are a bit more basic. One, does the aircraft live up to expectations -- from simply flying at all to what are the ongoing maintenance needs. At this point, there's no gauge of what to expect when Archer Aviation's aircraft is used regularly. What actually transpires could make or break the company. And, secondly, is there going to be enough demand to justify air taxis? Opening the next air taxi service somewhere else will be harder to justify if an air taxi service is created in Abu Dhabi and nobody shows up to use it.

It's not about numbers; it's about execution

Right now, investors can be pretty certain that Archer Aviation is going to lose money for a while longer. Being a start-up business in a capital-intensive industry means that red ink isn't at all surprising. That's why execution is what investors need to keep an eye on. There's the FAA clearance process, which is important to monitor, but the new deal to actually establish an air taxi service in Abu Dhabi is basically the first real-world test for Archer Aviation, and it is taking place in 2025. If you are interested in this stock, that's the story to watch right now.

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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.