Billions-dollar air taxi startup Lilium is now facing insolvency.

• Lilium has been negotiating emergency capital financing with government officials in Germany.
• The federal government rejected the state aid request of 50 million euros ($54 million) made by the firm.
• The company is continuing discussions with the Free State of Bavaria regarding a guarantee of at least €50 million, as stated in a company filing.

The German aerospace startup is at risk of insolvency unless it receives emergency funding from the Bavarian state government.

The failure of a promising European startup to become profitable would represent a significant setback in its efforts to create the next generation of flying cars.

One of the companies working on "eVTOLs," or electric vertical take-off and landing vehicles, is Lilium.

These vehicles, commonly referred to as flying cars or air taxis, are being developed by startups in the US, Europe, and Asia.

Despite its efforts, Lilium has not been successful in raising taxpayer funds in Germany.

What happened?

The Bavarian state government and Germany's federal government have been negotiating an emergency capital injection with Lilium.

Despite requesting 50 million euros ($54 million) in loans from the federal government, the firm's application was denied by German lawmakers.

Last week, Lilium announced that the budget committee of the Federal Republic of Germany's parliament had indicated that it would not approve a €50 million guarantee for a contemplated €100 million convertible loan.

The proposed state aid would have been issued by KfW, the German development bank.

Lilium is currently in talks with the Free State of Bavaria regarding a minimum €50 million guarantee, as stated in their filing.

A Lilium representative stated to CNBC that the company has no intention of providing additional commentary beyond what was included in its 6K filing.

Bavaria's economy minister, Hubert Aiwanger, criticized Germany's decision to deny Lilium state aid, calling it "regrettable" that the federal government opted not to support the firm.

Danijel Višević, co-founder of Berlin-based climate technology investors World Fund, stated that although it was "understandable" that lawmakers denied Lilium support due to concerns about the government supporting one company over another, there was a misguided notion among politicians that air taxis are only for millionaires. This notion was "too short-sighted."

Lilium was not able to receive a U.S. government loan, despite being a promising electric car manufacturer, while Tesla, which lost billions before turning a profit, did receive such funding.

What Lilium tried to build

Lilium aimed to create a vertical take-off and landing aircraft that would transport people between cities to alleviate road congestion, rather than flying cars.

The company initially planned to launch a digital "hailing" service that would allow users to order rides on its jets from designated areas where the vehicle could take off and land.

Lilium subsequently decided to change its business model.

The company chose to collaborate with airlines and airport operators to develop the service product and infrastructure necessary to achieve its goals.

Lilium's jets can cost as much as $9 million, with a six-seater version in development that would have set a buyer back about $7 million.

Lilium struck major deals with international partners in Germany and Saudi Arabia, and also agreed a tie-up with Groupe ADP, an international airport operator based in Paris.

Rise and fall

In 2015, four university students launched Lilium, which quickly became one of Europe's top-funded air taxi companies.

The company successfully obtained hundreds of millions of dollars in funding from investors such as Tencent, Atomico, and Earlybird.

In September 2021, Lilium became publicly traded on the Nasdaq through a merger with SPAC Qell.

Lilium's stock market debut saw its shares valued at $3.3 billion, but they have since fallen to less than 50 cents, resulting in a more than 95% decline.

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