US regulations, infrastructure hold down cargo delivery by drone

Since Amazon (NASDAQ: AMZN) first began developing drones in 2013 for consumer deliveries, a multitude of companies, including UPS and FedEx, have stepped forward with their own plans for the technology.

However, U.S. Federal Aviation Administration (FAA) regulations for drone flight ceilings, times of operation, and visual contact by operators during flight continue to hold back the technology’s commercial cargo potential, Blades said.

Blades estimates that between 2019 and 2023, about 100,000 drones will be in use for cargo delivery applications and they will be operated by firms providing niche services.

One of the most successful services for delivering cargo by drone was launched in 2014 by San Francisco-based Zipline. The company’s small, fixed-wing drones deliver shipments of medical supplies using parachute drops to remote locations in Africa.

According to Zipline’s website, the company operates strategically located distribution centers across Africa from which its drones take off and return. Zipline said its drones can make hundreds of deliveries a day from these sites to any point within an 8,750-square-mile radius.

UPS (NYSE: UPS) has expanded its investments in drone technology in recent years. In March 2019, the company’s UPS Flight Forward unit began using M2 drones, developed in partnership with Matternet, to deliver pharmaceutical parcels across the WakeMed medical campus in Raleigh, North Carolina. Last November, UPS announced its first “revenue deliveries” of prescription drugs for CVS Corp. (NYSE: CVS) to the doorsteps of customers in Cary, North Carolina.

Earlier this year, UPS entered a partnership with Wingcopter of Germany to develop heftier, longer-range drones for shipment deliveries.

Other manufacturers, such as DJI, Flirtey and Elroy Air, have successfully developed package-transporting drones in recent years.

Blades said unless the FAA grants a waiver, the requirement for visual contact with the drone by the operator will continue to limit the technology’s growth prospects for commercial cargo delivery in the U.S.

In December, the FAA proposed a so-called “license plate” rule for drones which could allow for their operation beyond visual contact of the operator, but the rule is fraught with privacy and operator liability concerns and will likely take years for the agency to finalize, Blades said.