eResearch | On July 23, 2019, United Parcel Service, Inc. (NYSE: UPS; LSE: 0R08; DB: UPAB) announced that their newly created subsidiary, UPS Flight Forward Inc., submitted an application for the Party 135 certification from the Federal Aviation Administration (FAA), which would allow UPS to use drone delivery over people and out of sight from an operator in the U.S.
This comes shortly after March 2019, when UPS became the first company to generate revenue through a drone delivery service, which was done in partnership with Matternet Inc., the first company in the world to be authorized for urban drone delivery in 2017.
The drone delivery with Matternet was supervised by the FAA and was used to deliver medical supplies to WakeMed, a private, non-for-profit health care organization based in Raleigh, North Carolina. The service improved deliveries significantly as it made same-day deliveries possible, lowered costs, and most importantly, enhanced patient care.
Bala Ganesh, vice president of the Advanced Technology Group at UPS stated “We believe unmanned aerial systems could better serve customer needs and provide opportunities for network improvements that generate efficiencies and enable us to grow our business.”
Until at least 2020, UPS plans to focus on the medical market for drone delivery, which it estimates to be a US$3-4 billion market within the U.S. The Company has long terms plans for targeting the industrial and manufacturing sectors but e-commerce is currently not a priority.
According to ResearchAndMarkets, the drone logistics and transportation market is expected to grow to US$29 billion by 2027, fueled by increasing demand for faster and more efficient logistics including commercial use for consumer product delivery as well as military use for getting supplies to soldiers.
UPS’s drone delivery success is mainly due to their relationship developed with the FAA after the Company was accepted into the public-private U.S. Department of Transportation drone-testing program in June 2019 alongside tech giants Airbus, Alphabet, Apple, AT&T, General Electric, Intel, State Farm, and Uber. Surprisingly, Amazon, who boasted in June 2019 that their drone delivery service would be launching in months, was not included in the program.
As UPS awaits approval for the Party 135 certification, in April 2019, Alphabet’s subsidiary Wing, which is focused on the commercial market for drone delivery, was the first company to receive the certification. The quick approval was attributed to Wing’s FAA supervised commercial drone delivery pilot test in Australia, where drones performed over 70,000 test flights and delivered more than 3,000 packages to individual consumers.
On August 8, in an effort to catch up to UPS and Alphabet, Amazon wrote a 29-page petition to bypass the FAA’s airworthiness certification, requesting to be excused for requirements including (1) operating a drone only when an operator can see it, (2) a limit to the height a drone can fly, and (3) a limit to how much fuel a drone can carry.
As UPS targets time sensitive deliveries in the health sector and Alphabet targets commercial deliveries, it will be interesting to see if the FAA approves Amazon’s proposal.
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Alphabet Inc. (NASDAQ: GOOGL; LSE; 0RIH; DB: ABEA)
- Headquartered in California, United States, Alphabet is a multinational conglomerate of technology companies that was created through a corporate restructuring of Google in 2015, and is now the world’s fifth largest technology company.
- GOOGL currently trades at US$1,191.58 per share with a market capitalization of US$825.95 billion.
Amazon.com, Inc. (NASDAQ: AMZN; LSE: 0R1O; DB: AMZ)
- Headquartered in Washington, United States, Amazon is a multinational technology company with diversified operations in e-commerce, cloud computing, digital streaming, and artificial intelligence.
- Amazon currently trades for US$1,823.54 per share with a market capitalization of US$902 billion.
United Parcel Service, Inc. (NYSE: UPS; LSE: 0R08; DB: UPAB)
- Headquartered in Georgia, United States, UPS is a multinational package delivery and supply chain management company with multiple business lines including UPS Airlines, UPS Freight, and UPS Store.
- Ups is currently trading at US$115.93 per share with a market capitalization of US$80.9 billion.
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