UPS Launches Drone Subsidiary; Seeks Certification Granted to Alphabet

The U.S. Federal Aviation Administration (FAA) requires a Part 135 certification to permit companies to operate as legal commercial entities and as a certified air carrier and operators. This eliminates limitations that include line-of-sight operation, nighttime flights, charging for flights, and other restrictions. To date, only Alphabet’s Wing has been granted the exception to operate beyond the Part 107 certification, which is limited to noncommercial small unmanned aircraft systems (UASs)--e.g., drones--and operates on a smaller scale. UPS has created a new subsidiary called Flight Forward that will use commercial drones and has requested approval for Part 135 certification. How soon will the FAA issue a ruling, and will it be ready to extend the scale of commercial operations without more experience?

Interest and trials of drones for freight delivery are growing exponentially across continents, with an estimated more than 100,000 commercial UAS in operation in the United States alone. Interestingly, Walmart beat out Amazon in 2018 for the most drone technology patents filed. Still, some of the least risky applications continue to be remote locations for medical supplies as opposed to e-commerce. Other companies included in the Part 107 certification pilot are Uber, Intel, Apple, FedEx, Microsoft, and AT&T, along with AirMap, Precision Hawk, and Airbus.

Despite ongoing concerns about privacy and safety, agreements on contents, weight, and timing; and economic questions—not counting the speed and volume of usage for commercial freight applications—, efforts to use UASs in the United States continue. Alphabet’s Part 135 is the same certification that smaller airlines obtain, and will enable the company to begin routine delivery of small consumer items that are planned for a few rural parts of Virginia.

While Amazon was not selected for the initial program, it has not been deterred and has developed its own UAS trials. The FAA recently granted Amazon Prime Air permission to begin testing “within months.” The permit will be allowed for up to one year with a renewal option. The new drone is able to fly up to 15 miles with packages under five pounds and deliver in fewer than 30 minutes.

The transition from a limited Part 107 certification to a Part 135 certification is material. Even Alphabet is limited to rural Virginia communities in a defined area. It is UPS’s intent to expand further into other U.S. healthcare networks. These and other FAA signals, such as the rate of approvals and the intensity of security and training required, allude to a still slow rollout and an expectation of intermittent approvals as both the government agency and the players/partners learn from experience. The initial transition to Part 135 certification will allow the companies to monetize the flights and find optimal use cases and mechanical specifications. Additionally, the tech giants had to complete numerous preparations in order to acquire FAA approval—not unlike a commercial airline.

There will be significant attention on the Alphabet flights in Virginia as well as those in other countries, including Air Canada Cargo’s partnership with Drone Delivery Canada and U.K.-based Skyports’ pilot tests around the Helsinki, Finland, airport. In addition to the stringent preparation by Alphabet, UPS will likely benefit from proposed flight paths in more remote areas such as those already conducted in the Bahamas; they will also benefit from a current focus on the medical vertical with smaller payloads that operate between recurring, defined locations.

The FAA itself does not appear to be ready for a full-blown commercialization with its pilot partners. Restrictions are expected to continue for crowded urban areas for the near future. The agency has created a center of excellence to investigate the impact of drones on safety and is exploring how to evolve and simplify the approval process.

For now, expect a wait-and-see attitude for broader adoption of Part 135 certification, with some exceptions for special use cases and rural/remote locations. Additionally, little controversy is expected in the United States with the 2020 election on the horizon.