Xponential 2023 Making Aviation Worthwhile
Today in Denver at Xponential 2023, a panel of experts discussed a topic on the minds of everyone in the industry: how do we make aviation profitable?
In the last several years, investment in the drone industry has grown significantly. With that investment, however, comes expectation: eventually, regardless of manufacturing challenges, regulations, technology hangups and adoption hurdles, companies have to figure out how to make money.
In January of 2018, early industry players PrecisionHawk received $75 million, at that time the largest funding round in the industry: but over the five years since, the company struggled to find profitability, eventually merging with a European geospatial firm in March of 2023. Other early industry names including AirMap, Skyward Verizon, CyPhy Works, and Airxos have all been closed down after several successful – but not profitable – years.
More recently, investment amounts have grown. US drone manufacture Skydio has scored over $562 million to date to develop and manufacture their autonomous platforms. The US government has thrown support behind US manufacturing, and regulations have evolved significantly since the 2016 introduction of Part 107, which made commercial drone operation legal in the US But as the industry advances into UTM, UAM, passenger eVTOL, drone delivery, dual use technology, and digital twins, the essential problem of profitability stays the same.
Bob Brock is the Director of Aviation and Unmanned Systems from the Kansas UAS Task Force. Professor Darryl Jenkins, a manned aircraft pilot and co-founder of the Aviation Institute at George Washington University, quite literally wrote the book on drone economics (and 15 others.) Steve Willer is the Business Development Manager for Thales Digital Aviation, and Toni Drummond is the President of Titan Aviation Global. What are the lessons that the drone industry can take from manned aviation and other more traditional industries to become profitable? What will it take for drone companies to survive in the long term?
“We spend a lot of time talking about technology…,” says Brock. “But if we aren’t making money, none of us is going to be here next year.”
Economies of Scale, Economies of Scope
To be profitable, says Jenkins, some fundamental aspects of economics apply. “Across industries, economies of scale are very similar. If you increase outputs, costs go down.” Jenkins expands upon this idea with a second principle applicable to the drone industry: economies of scope. He uses DroneUp, the drone services provider operating drone delivery for retail giant Walmart, as an example. “DroneUp goes out 1 mile,” he says. “But if they can get [permission to fly out] 2 miles, you increase that scope by about 300%. If you go out 3 miles, it expands exponentially, and so on. To be profitable [in this industry] we need to be able to fly longer, and we need to be able to fly higher.”
Jenkins makes an additional point about scale – m:N operations. “We need to have one pilot for many drones. To get to economies of scale, we need one pilot operating 10, 20, or 50 drones.”
Common Use Infrastructure
Steve Willer says that one key to reaching economies of scale in the drone and aviation industries is infrastructure: both digital and physical. “We need everyone in this room to be violently successful, because we need to fund and deliver the infrastructure necessary to reach scale.”
“Imagine if you flew on United Airlines and had to fly into the United Airport, or you flew on Delta and needed to fly into the Delta Airport. We need common use infrastructure.”
However, Toni Drummond points out, businesses can’t focus on the perfect future infrastructure. “When it comes to profitability, you need to start these businesses up within the current infrastructure,” she points out. Willer concurs: “That ties into the regulatory environment that we’re working in, or the lack thereof. We’re kind of handcuffed as to the type of operations that we are doing right now, so we have to find a value proposition within the current environment that will allow us to have the staying power to be there when the good stuff happens.”
As a wish list, all of the panelists agree that regulations and older design decisions are holding the industry back. “If I could wave a magic wand and totally redesign the airspace, I would,” says Steve Willer. “The way things were designed a long time ago doesn’t necessarily work now.”
While agreeing that regulations need to become aligned with the speed of technology, Jenkins ended the session on a note of optimism. “There is so much ahead of us,” says Jenkins. “In my lifetime, the things I’ve seen are just amazing. I was able to see the first jet flight! Things are moving fast.”
Miriam McNabb is the Editor-in-Chief of DRONELIFE and CEO of JobForDrones, a professional drone services marketplace, and a fascinated observer of the emerging drone industry and the regulatory environment for drones. Miriam has penned over 3,000 articles focused on the commercial drone space and is an international speaker and recognized figure in the industry. Miriam has a degree from the University of Chicago and over 20 years of experience in high tech sales and marketing for new technologies.
For drone industry consulting or writing, Email Miriam.
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