Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
In July 2016, a box of Slurpees, snacks and a chicken sandwich was flown from a 7-11 convenience store in Nevada to a nearby customer’s back garden by drone start-up Flirtey. It was, Flirtey said, the first US Federal Aviation Administration-approved commercial drone delivery. Yet eight years on, the US still lacks a national drone delivery service.
Flirtey (now called SkyDrop), Amazon, Alphabet, UPS and Walmart all invest in drones. Global competitors include DJI in China. Unmanned aircraft could free up roads, enable delivery to remote locations and cut waiting times down to a matter of minutes. They could also reduce delivery costs. Research published in 2016 by academics at the University of Tennessee estimated that per package, drone delivery would cost 20 cents, compared to $1.20 for UPS delivery.
For a decade, Amazon has been promising that drones will soon deliver customer packages. In 2015, Alphabet’s Wing claimed that it would have a commercial business running in two years. But the US Federal Aviation Administration has prevented this by maintaining strict guidelines about where drones can fly.
Companies continue to invest in vehicles and infrastructure. Alphabet is focused on creating a network of landing pads for drones to recharge, load up and lift off. Amazon recently unveiled a new, six-bladed MK30 drone that can carry packages up to five pounds — a MacBook Pro, say, or a bag of footballs.
A record 500,000 commercial deliveries were made around the world in the first half of 2023, according to McKinsey. More than 40 per cent were in the Asia-Pacific region. In the US, concerns about accidents, noise and interference with other aircraft outweigh interest in convenience. To date, the FAA has granted crucial part 135 certification to just a handful of companies, including Amazon and Wing. This is required for drones to carry goods for sale beyond visual line of sight.
To reassure regulators, the industry is working on “sense and avoid” technology that it says will allow autonomous drones to better detect and avoid obstacles such as people, buildings and pets.
But regulatory approval requires more than accident avoidance. Noise and privacy concerns are still high.
The shortcut could lie in healthcare. In Germany, Matternet has received approval to operate drones in Berlin in partnership with a hospital laboratory. In December, San Francisco drone company Zipline announced that it would work with 30 NHS hospitals and clinics to make deliveries. Amazon is launching prescription medicine orders by drone in College Station, Texas.
Drone companies cite possible uses in defence, safety, transport, insurance and retail. But healthcare may be the way to win regulatory hearts and minds.
Lex is the FT’s concise daily investment column. Expert writers in four global financial centres provide informed, timely opinions on capital trends and big businesses. Click to explore
