Google receives Government Approval to become First Drone Delivery Company

Posted by MarketsandMarkets on May 9, 2019 5:48:51 PM
MarketsandMarkets

In April 2019, Google became the first drone operator to receive government approval as an airline, an important step that gives it the legal authority to begin delivering products to customers.

MarketsandMarkets™ View Point:

Shreeja Bakare, Senior Analyst, Research: Aerospace and Defense at MarketsandMarkets™, shares her views:

The market for package delivery via drones is emerging as it provides various advantages, such as increasing the speed of delivery, especially in crowded megacities and remote areas; reducing shipping costs, resulting in cost savings for retailers as well as consumers; and reducing the risks and accidents through automated delivery. Drone deliveries are also environment-friendly (low carbon footprint and less energy consumption), which is an added benefit.

Various startups have received investments from venture capitalists for the adoption of drones for deliveries. Companies such as Flirtey (US) and Matternet (US) use drones for food and last mile delivery. These startups have been focusing on the manufacture of low-cost and light-payload drones to smoothen the process of small parcel deliveries.

In continuation with these investments, Wing Aviation LLC, a subsidiary of Google, has become the first drone operator in the US to get government approval as an airline. This is an important step for the company as it gives it the legal authority to begin delivering products to customers. Wing Aviation LLC has been working on this project, called Project Wing and an undertaking of Google X, since August 2014. Major experiments and trials were conducted in Australia, where regulations for the operation of UAVs are much more liberal than in the US.

During the initial phase of development, Google innovated an unusual design called a tail sitter, a hybrid between an airplane and a helicopter that takes off vertically, and then rotates to a horizontal position to fly. At the point of delivery, it holds the package down to the ground, and a small electronic bundle called the egg detects when the package has been placed on the ground.

Project Wing has received the certifications that smaller airlines receive from the US Federal Aviation Administration and the Department of Transportation. It plans to begin routine deliveries of small consumer items in 2 rural communities in Virginia within months. As the idea of drones flying over people’s homes is very new, the company plans to conduct extensive outreach programs for local government leaders and the public.

IMPACT ON DRONE LOGISTICS AND TRANSPORTATION MARKET

Drones in the logistics industry involve solutions, such as warehouse management, infrastructure, traffic management, and software, and provide significant market opportunities for landing pad manufacturers, DaaS (Drone-as-a-Service) providers, insurance providers for drone deliveries, battery manufacturers, charging pad manufacturers, and manufacturers of safety and alarm systems.

PINC Solutions (US), Skysense (US), Altitude Angel (US), and Workhorse Group (US) are some of the companies providing drone logistics solutions. PINC Solutions provides advanced yard management, finished vehicle logistics, and inventory robotics solutions; Skysense offers drone charging stations for its customers in the drone logistics and transportation market; Altitude Angel caters to U-Space and unmanned traffic management solution projects; and Workhorse Group provides cloud-based, real-time telematics performance monitoring systems to optimize the route and energy efficiency of drones. These companies will see high growth opportunities in the near future when drone deliveries are commercialized.

Furthermore, drones can be used to carry small items from one place to another without having to worry about personnel, costs, traffic, or labor strikes. Drones will also enable a smooth and cost-efficient supply chain. With current technology, the idea of managing warehouses using drones and infrastructure solutions is also possible within a 5-10 mile radius.

Likewise, in urban air mobility, the cargo industry is planning to manufacture large drones to transport international freight for about half the price of piloted aircraft. Companies are also focusing on the use of aerial vehicles for intercity and intracity heavy cargo deliveries. Japan is one of the few countries to have tested large UAVs for use in freight transport. Currently, 2 Swiss companies, Swiss Post and Swiss WorldCargo, are carrying out experiments with drones for air freight solutions.

Google will definitely have the first mover advantage amongst its competitors. Having a good brand image and huge customer base Google will be able to attract huge amount of potential customers Also, this approval will impact the regulatory bodies of other countries to provide waivers for such initiatives, which would help to develop an organized ecosystem for the drone delivery services globally.

As per market projections by MarketsandMarkets™, the drone logistics and transportation market is projected to reach USD 2,906 million by 2027 at a CAGR of 21.01% between 2022 and 2027, while the cargo air vehicle market in urban air mobility is projected to reach USD 440 million by 2030, at a CAGR of 11.43% between 2025 and 2030.

FIGURE 1     DRONE LOGISTICS AND TRANSPORTATION MARKET HAS HIGHER MARKET POTENTIAL

AS COMPARED TO CARGO AIR VEHICLE MARKET

Google Spinoff's Drone Delivery Business

Source: MarketsandMarkets™ Analysis

Google was the first to recognize the market potential and became the first US drone operator to receive federal clearance as an airline. As per the Federal Aviation Administration, Wing Aviation LLC, a subsidiary of Google, provided extensive documentation to support its application, including records of thousands of safe flights conducted in Australia in recent years. Other companies, such as Uber and UPS, are competing for the same Federal Aviation Administration approval, according to a Washington Post report.

IMPACT ON TOP COMPETITORS

Delivery through drones will become an established online option over the next 10 years, particularly for last-mile logistics of small items. Companies such as Amazon, Google, UPS, DHL, and Alibaba are competing against each other and running high-profile experiments to test drone delivery systems. However, Google has taken the lead and is expected to begin deliveries through drones in Virginia, which can extend across the US over time with approvals. This is a major attempt by the company to diversify its businesses outside advertisements and search.

CONCLUSION

Technological limitations, regulatory restrictions, and public concerns around safety and privacy are expected to have a significant impact on the drone delivery landscape. Traditional delivery companies, new entrants, as well as wholesalers themselves could use drones to offer same-day delivery services, which will satisfy customers throughout the value chain, in an environment-friendly way. Even though the use of drones will be limited to a certain delivery distance and package size, the market potential is very high for countries where regulatory bodies have provided waivers for drone delivery services.

Topics: Aerospace and Defence, Packaging, google, drone delivery

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