Where Are The Drones?
The Industry Is Growing But It's Too Slow - Why?
Thank you to everyone for reading and I hope you enjoy this week’s article. Please find me at SkyTrade or jonathan@sky.trade
“Embracing landowner airspace rights and business models around them is the crucial step drone companies need to make their vision a reality” - Troy A. Rule, Prof. of Law, Arizona State University (2023)
Drone deliveries have transitioned into a fundamental aspect of commercial activities in various regions globally. The industry experienced an 80% surge in packages delivered by drones from 2021 to 2022, reaching nearly 875,000 deliveries globally. In the first half of this year, an estimated 500,000 commercial deliveries were achieved by the end of June. It is less the total number, which relatively speaking is low, it is more the growth story that’s interesting here.
If we think about the growth of the internet as a comparison it was not just the internet per se that was the most interesting aspect, it was what could be done with the internet. The same is true of the Unmanned Aerial Vehicle (UAV) industry.
Infrastructure
With drones the need for infrastructure is vital. This is decentralised, as is the property market and local governments will, of course, play their part, adding in locations, ports and facilities as they have some of the best prime real estate. Nevertheless, it is the private landowners who will propel this physical infrastructure forward allowing the industry to grow rapidly.
Locations to take off and land at, to swap out batteries and perform maintenance for example are key requirements. Sites to collect frequently purchased packages and highly specialised items, like car parts and deliver them to the mechanic within minutes of ordering.
The current way many of the drone companies are trying to do deliveries is by using a hub, where they package up whatever is close to the hub if ordered, and deliver it to the destination. They then fly back to the hub. An example of this is Malls. Here the drone companies are restricted to the mix the retailer or management has decided works and to the individual retailers within the mall. There are obvious disadvantages to this.
In food delivery or ride share, for example, there are multiple pick-up and drop-off points and the coverage of products is wide and distributed in the community. The existing models for the drone companies who are doing urban delivery are from point A to B and then they come home empty-handed using the same amount of energy that they need to get to their destination. Without the correct infrastructure, this will continue, the unit economics will become squeezed and the promise of efficient energy usage using drones will evaporate.
Businesses and private landowners that support the UAV industry will allow drones to go to multiple points as and when the demand requires it. These are in the form of localised drop-off points, micro collection hubs, charging stations and maintenance areas on people’s land, and ports on top of buildings. To get to these buildings and properties the drones must first travel through the airspace and to do so legally they require the permission of the infrastructure controllers, the air rights holder.
Regional Growth
Some figures that came out of a recent report highlight the growth. Hit tip to
McKinsey for their recent report. The Asia-Pacific region has a dominant position with 43% of global drone deliveries in the initial half of 2023. North America only had a 15% share, marking a substantial 50% upswing compared to 2022. Africa has a share of global drone deliveries increasing from 13% in 2022 to 32% in H1 2023. Europe witnessed a decline, as its share of global drone deliveries slipped from 17% in 2022 to 9% in the first half of 2023.
The restaurant sector experienced a 195% upsurge in drone deliveries from 2021 to 2022. The grocery and convenience industry witnessed an impressive 100% increase during the same period. The healthcare sector constituted 45% of deliveries in 2022 and grew to 54% of total deliveries in the first half of 2023.
Laws & Regulations - Flying Objects and Property Assets
The Federal Aviation Administration (FAA) has established the Beyond the Visual Line of Sight (BVLOS) Advisory and Rulemaking Committees (ARC). ARC detailed a framework that encompasses aspects such as airworthiness certification, and governing unmanned aerial vehicles (UAVs) engaged in commercial BVLOS flights. The FAA is now granting part 107 waivers for BVLOS quicker than before.
Property owners control the air rights above their property in low-altitude airspace. The regulations and laws around this are well-trodden. The regulators who deal with flying objects, namely drones do not control property rights or laws. Their position is clear and required for safety.
“Landowners have a claim to low-altitude airspace and that invasions of it are in the same category as invasions of the surface” - United States v. Causby, 328 U.S 256 (1946)
What’s vitally important is to help the regulators and private property owners adapt to this industry. It is imperative to allow the industry to move at a pace that we make sure the lines remain clear and that neither the property industry strays into the FAA regulatory space and the FAA doesn’t stray into the property domain. No one wants to be in a situation where the lines are confused and the growth of a multi-billion dollar industry for drones is slowed down. It has been long enough to get to this point and we must help those with the specialisation in their field to stay in place.
Forecasts indicate the likelihood of exceeding one million commercial drone deliveries in 2023. This projection is based on the expansion of applications designed to facilitate the delivery of multiple item types. This ranges from food and medication to various consumer goods across geographical locations.
Hiding In Plane Sight
Very positively as we look forward this growth trajectory shows no immediate signs of slowing and it is still in its early stages. Commercial drone deliveries will accelerate further as regulatory adjustments allow more BVLOS operation waivers to be granted.
As the air rights holders enter the ecosystem they will quickly enable the drones to fly in their airspace, and the skies will become more open. With this, the synergy of growing consumer adoption and the realisation of economies of scale will allow the industry to grow exponentially.
Thanks for reading and please contact me at jonathan@sky.trade with any information or if you want any more details about how we can open the skies. SkyTrade
