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Kratos Defense & Security Solutions will build Elroy Air’s Chaparral hybrid-electric autonomous VTOL cargo aircraft at its factory in Sacramento, California, with the first production airframes planned for late 2026. San Diego-based Kratos, which Elroy Air named its exclusive U.S. manufacturer under a five-year agreement in September 2025, said on July 20 that it will fulfill all U.S. customer orders from the site.

San Francisco-based Elroy is prioritizing demand for military use cases for the Chaparral, which has a range of 391 nm (450 miles), and the company has engaged with the U.S. Army, Marine Corps, and Air Force for the past six years. In 2025, the California-based start-up initiated the FAA type certification process. However, it will address defense demand first, saying that this “represents a highly lucrative, immediate-revenue pathway because military operations are uniquely insulated from civilian airspace restrictions.”

Last month, Elroy agreed to go public through a merger with Columbus Circle Capital Corp II, a special purpose acquisition company led by the management teams of Inflection Point Asset Management and Cohen & Company. The deal, expected to close in the fourth quarter, values Elroy Air at $800 million pre-money and about $1 billion post-transaction. More than $165 million in committed private investment in public equity (PIPE) capital comes from Inflection Point, existing backers, and new institutional investors. The combined company plans to trade on Nasdaq under the ticker ELRY.

For the commercial drone market, Elroy’s main focus is on international customers. In January, prior to the start of the Iran War, it launched a $200 million joint venture with the Barq Group in Abu Dhabi to manufacture the Chaparral for commercial and humanitarian operators in the Middle East and North Africa. The company now says that with local approvals, flight operations in the UAE will start in 2027 with U.S.-made aircraft.

In the U.S., the Chaparral is participating in the Department of Transportation’s . According to Elroy, this process will help it to secure certificates of waiver or exemption for beyond visual line of sight autonomous operations.

Kratos is preparing to recruit 50 employees to its 450-strong workforce in Sacramento to support Chaparral manufacturing. The group already produces a family of drones , as well as being involved in developing hypersonic aircraft.