- To resolve day-to-day impediments in logistics, a new stream of customer order distribution and delivery is emerging – Drone logistics.
- Global drone and logistics market is expected to grow at a CAGR of 16 per cent from 2020 to 2030.
- Flying drones is legal in Canada, as per Transport Canada Civil Aviation (TCCA), Canada’s national aviation authority.
The logistic market is evolving with the changing times. This growth is accelerated by technologies that enable order tracking, safe shipment, and timely delivery using Unmanned Aerial Vehicles (UAVs). Sticking to timely delivery promises is a challenge for many logistic service providers and e-commerce companies. To resolve the day-to-day impediments, a new stream of customer order distribution and delivery is emerging – Drone logistics.
Drones have long been used for military applications. But now, they are also used for commercial purposes such as inventory management, tracking, delivery of food and medical supplies, border surveillance and so on. Rising acceptance and developments in the e-commerce sector is further driving growth of the drone logistics market globally. However, lack of skilled operators and operational difficulties have raised penetration concerns and stalled immediate growth potential of the sector.
According to a market report by InsightSlice, the global drone and logistics market was valued at US$9.9 billion in 2019 and is expected to grow at a CAGR of 16 per cent from 2020 to 2030.
Looking into the not-so distant future of the transportation and logistics industry, few companies have managed to tap and explore the potential of the drone logistics market today.
Google owns drone delivery service Wing Aviation, which currently operates in Australia, Finland and the United States. United Parcel Service (UPS) is also offering “Flight Forward” service empowered by drones for customers.
Amazon is the third company after Google and UPS to acquire Federal Aviation Administration (FAA) certification for its drone delivery program. The tech company will expand the use of autonomous air delivery system to connect rural populations and offer improved delivery times. Amazon’s Prime Air provides 30-minutes or less delivery option in the US. These behemoths of technology being forerunners in the niche drone logistics space, enjoy a clear distinct advantage over the competition.
Flying drones is legal in Canada, according to laws by Transport Canada Civil Aviation (TCCA), Canada’s national aviation authority. According to rules by Transport Canada and the Royal Canadian Mounted Police (RCMP), individuals and corporations could face serious consequences as heavy penalty or even a jail term for putting people at risk by flying unregistered drones without a drone pilot certificate. All drones weighing between 250g and 25kg must be registered with Transport Canada.
Let us take a look at some drone logistic companies creating ripples in the stock markets: Drone Delivery Canada Corp. (TSXV:FLT), AeroVironment Inc. (NASDAQ: AVAV) and Amazon Inc, (NASDAQ: AMZN).
AeroVironment Inc (NASDAQ:AVAV, AVAV:US)
The shares of AeroVironment surged by 13.6 per cent in the first week of October. The company’s current market capitalization is C$1.80 billion and has earnings-per-share (EPS) of C$1.42. YTD performance of scrips show gain of 21.59 per cent. As per data on TMX, the stock has a positive return on equity (RoE) and return on Assets (RoA) at 6.60 per cent and 5.94 per cent, respectively. The company’s total revenue in the first fiscal quarter 2021 (ending August 1, 2020) is US$87.45 million, as compared to US$86.91 million in the same period last year.
Amazon Inc (NASDAQ: AMZN, AMZN:US)
The scrips of the world’s largest online retailer have been growing strong steady during the year, despite Covid-19 disrupting businesses to reflect a steep hike of 77 per cent. The total revenue increased to US$88.91 billion for the second quarter ending June 30, 2020, as compared to US$63.40 billion in the same period last year. The company reported increase in gross profit from US$17.79 billion in Q2 2019, to US$22.45 billion in Q2 2020. Cash flow from operations grew from US$9.11 billion in Q2 2019, to US$20.60 billion in Q2 2020.
Drone Delivery Canada Corp. (TSXV:FLT)
Drone Delivery Canada (DDC) focuses on design, development and implementation of commercially viable, drone-based logistics systems on a fully integrated hardware and software platform based on a SaaS business model to serve government, industries and businesses across the globe. The company teamed up with Africa-based Astral Aviation to launch drone operations in Kenya. The stocks have declined 20 per cent year-to-date.
Drone Logistics: A Game Changer
Drone logistics will help customers get their package delivered, wherever they are. While big companies are weighing out the pros and cons of using drones for quick delivery and enhanced convenience to customers, it is the brick and mortar retailers who might face problems in the future once drone delivery picks up.
While drones are autonomous, challenges are numerous, be it landing a drone in an unknown environment or ensuring that the package is delivered in the right condition without damage on time, and many more.
These unmanned aerial vehicles (UAVs) are expensive pieces of machinery and people might want to damage the drone or your packed items. Even your order could be stolen on the way. What happens then? How can customers return a product delivered by a drone?
There are many unanswered questions. But the drone logistic players and e-commerce giants claim to have it all figured out, ready to welcome and embrace the future of drone delivery. Coronavirus pandemic has certainly accelerated the pace of change and drone logistics is picking up fast to meet the peak demand season.