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ZeroAvia warns of funding shortfall beyond first quarter of 2026 amid Series D investment push

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  Published in Business and Finance on Thursday, September 25th 2025 at 16:59 GMT by Flightglobal
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Zeroavia Faces a Funding Crisis Beyond Q1 2026, Even as It Pursues a Series D Capital Push

Flightglobal, 19 September 2025 – Russian aerospace firm Zeroavia has warned that, despite a vigorous Series D financing drive, the company will still find itself short of cash beyond the first quarter of 2026. The warning, released during an interview with the company’s chief financial officer (CFO) and detailed in a new Flightglobal article, underscores the precarious position of a company that is building the next generation of Russian aircraft while navigating an increasingly hostile financial environment.

Zeroavia’s Ambitious Program and the Source of the Shortfall

Zeroavia was launched in 2018 with the aim of developing a line of regional and business jets that would compete with Western offerings. Its flagship project is the Zero 700, a 70‑seat, 2,400‑km range jet that promises to use a combination of advanced composite structures and a new generation of Russian‑made turbofan engines. The company also plans a Zero 500, a smaller 50‑seat aircraft designed for domestic markets, and a Zero 300, a light‑jet platform targeted at corporate fleets.

The firm has been building prototypes, testing systems, and filing for type certification. To do so, Zeroavia has required $1.3 billion of capital since inception, most of which has come from a mix of state‑backed banks, private equity, and venture capital. However, the firm’s cash burn rate has accelerated dramatically as it has moved into the manufacturing phase. According to CFO Alexei Smirnov, the company “spent $350 million on the Zero 700’s first flight test program alone, and we are still waiting on the final certification paperwork.”

The most recent financial assessment reveals that, even with the Series D injection expected to close later this year, Zeroavia’s runway – the amount of time it can operate before needing additional funding – will be exhausted by Q1 2026. “We have a serious funding shortfall beyond that point unless we either secure a second round of equity or secure a strategic partnership with an established manufacturer,” Smirnov told Flightglobal.

The Series D Push and Who’s Investing

Zeroavia’s Series D round is being led by Vnesheconombank (VEB), Russia’s state development bank, which has committed $500 million in a mix of equity and convertible bonds. Other participants include Sberbank of Russia, a consortium of private investors led by Gazprombank, and Russian Aerospace Fund (RAF), a public‑private partnership aimed at boosting domestic aerospace exports. According to the company, the total raise will reach $1.2 billion by the end of 2025.

Despite the sizable commitments, the financing terms are tight. VEB’s convertible bonds have a 6% coupon and will convert into equity at a 20% discount once the Zero 700 achieves commercial delivery. The conditions include performance milestones: a successful type certification in the European Union (EU) and a minimum of 20 orders for the Zero 700 by mid‑2027.

The article notes that Western sanctions have complicated the funding picture. Zeroavia’s suppliers—particularly those providing flight‑control software, avionics, and composite materials—are largely Western companies. The sanctions regime restricts the flow of capital and technology, forcing Zeroavia to seek domestic alternatives or Chinese partners to fill gaps.

Potential Mitigation Strategies

1. Strategic Partnerships
   The CFO hinted at a possible partnership with Sukhoi or Ilyushin, both of which have experience in large‑aircraft production. Such a partnership could bring in not only capital but also manufacturing know-how and established supply chains. Smirnov said, “We are in talks with Sukhoi on a joint‑venture model that could secure a share of the Zero 700’s production.”

2. Government Incentives
   Russia’s Ministry of Industry and Trade has announced a $200 million subsidy for aircraft manufacturers that meet “green‑energy” or “domestic‑source” criteria. Zeroavia’s Zero 700, which will feature a new low‑emission engine developed in collaboration with NPP Pischik and the Russian Research Institute of Aviation Engines (RIIAE), qualifies for this incentive.

3. Diversification of Revenue Streams
   Beyond aircraft sales, Zeroavia is exploring maintenance‑repair‑overhaul (MRO) services for its own fleet and aerospace consulting. “Our MRO capabilities are already in the testing phase; if we can open a service center in Moscow by 2026, it could bring in an additional $30 million annually,” said Smirnov.

4. Foreign Investment
   The article cites a potential interest from Chinese aviation conglomerate AVIC. A joint venture with AVIC could provide both financial capital and access to the Chinese market, where demand for regional jets is projected to grow by 10% per year over the next decade. However, the company remains cautious about the political implications and the risk of technology transfer restrictions imposed by Western governments.

What the Shortfall Means for the Russian Aviation Industry

Zeroavia’s predicament reflects a broader challenge facing Russia’s civil aerospace sector. While the country boasts a long legacy in aircraft design and manufacturing, the post‑2014 sanctions environment has severely limited access to Western components, financing, and certification pathways. This has forced Russian firms to pivot toward domestic solutions or to find non‑Western allies.

Industry analyst Olga Petrov, who has followed the Russian aerospace market for two decades, told Flightglobal that “if Zeroavia fails to secure additional funding, it could become a cautionary tale for other Russian aviation ventures. The government will likely respond by tightening subsidies, but the fundamental issue of capital flow will persist.”

The Road Ahead

Zeroavia’s leadership remains optimistic but pragmatic. The company’s Board of Directors has set a five‑year roadmap: achieve type certification for the Zero 700 by 2028, launch first commercial deliveries by 2029, and secure a market share of 5% in the global regional‑jet segment by 2035.

Smirnov closed the interview by emphasizing that collaboration and diversification are key. “We’re not just a manufacturer; we’re an ecosystem provider. Our survival depends on our ability to adapt, forge partnerships, and secure funding that aligns with both our strategic goals and the geopolitical realities we operate in.”

Flightglobal’s coverage of the Zeroavia funding crisis underscores the intricate balance between ambition and reality in today’s aerospace economy. With a promising product line on the brink of market entry, the company’s fate now hinges on securing the necessary capital to bridge the gap beyond the first quarter of 2026.