The Federal Aviation Administration, after soliciting proposals for drone testing, has approved 10 of them. These tests should start to help the agency lay the framework for how and where the technology will be used.
On this episode of Industry Focus: Energy & Industrials, host Sarah Priestley is joined by Motley Fool contributor Daniel Kline to talk about a few of the drone projects that have been approved for testing. These include a test in bad weather in Alaska, two that involve delivery, and another that tests the precision agriculture application.
A full transcript follows the video.
This video was recorded on May 24, 2018.
Sarah Priestley: The FAA has given the go-ahead to ten proposals from local state and tribal governments, which they then partner with private sector participants to safely explore further exploration around how drones will operate, as we've talked about. Apparently, they were inundated with projects.
Dan Kline: They got 149 applications and picked ten. There was no standard for how many they were going to pick, and they actually could still, later on, approve other uses.
Priestley: These have all been approved just on the basis of the plans, but they haven't gone into detail on what will actually be involved. So, there's still an approval process to come.
Kline: This is an absolute hand-holding process, and you have to understand why. If I'm going to test a drone in a remote field, that's one thing. If I'm going to test a drone in a busy FedEx warehouse, and some pilot error or something goes wrong, these aren't small. Let's pretend it's a 54-pound drone. You could cut someone's head off with that. Having been around these things, they're not toys -- I mean, some of them are toys, but these aren't. So, they're being almost too careful, but if you look at it, we've seen in the driverless car industry, the statistics are overwhelmingly that they're safe, that they're much safer than regular cars. But if there's an accident, it's on the front page of every newspaper.
Priestley: It's a perception thing.
Kline: That's what they're trying to do here, is make sure that every I is dotted and T is crossed when it comes to safety.
Priestley: The first project I wanted to talk about is the University of Alaska Fairbanks project. They'll be looking at pipeline inspection in remote areas, specifically how harsh weather conditions affect drone usage. As an oil and gas enthusiast, the focus is on this aspect, it could be a game-changer because a lot of oil and gas operations are in harsh weather environments, specifically offshore rigs, desert environments that you have in, like, Saudi Arabia. I'm assuming this project will focus more closely on cold weather. Assuming. I don't know.
Priestley: Wind, yes. But, hugely important, and very, very encouraging. Anybody that's worked in the oil and gas industry will undoubtedly have heard about health and safety accidents that arise from inspection because you're dealing, often, with highly pressurized, sometimes volatile commodities. So, yeah, absolutely, from a safety perspective, we could improve a lot. And the frequently having to access these pipelines is so difficult when you're talking about people, and the drone is going to expand that length that --
Kline: And, this test is more about drone engineering. These are not easy to fly in good weather. If you're talking, it's a storm, the human inspectors who check the various points can't go out, that's a heavy-duty drone you have to engineer. So, this is certainly not the public safety issue. These are generally remote areas where these things are being tested. This is much more about, can we create a drone that can put up with cold weather, the weight of snow and ice. I mean, your plane doesn't take off in extreme weather, so building a drone that can inspect a pipeline during height of a storm is a feat.
Priestley: And long-term for this, we're talking a few years down the line, there were a lot of companies like Total and pipeline operators Kinder Morgan and TransCanada that were already using this technology. But, it has the potential to save a huge amount, just because of the frequency of inspections. It can get safer for less cost, eventually, which is wonderful.
Kline: And it also has applications in, call it, municipal use. When power is out because we had a hurricane in Florida, which we tend to do all the time, you can't send people out until weather conditions are in a certain place. But if you could send a drone out and diagnose before you send the people out, in theory, you could be saving time. Every one of these projects, the goal isn't the specific project, the goal is to create a use for drones that can then be used in other areas with other companies.
Priestley: Yeah. The second project we want to talk about is the Memphis-Shelby County Airport Authority. They're working in partnership with FedEx, which is headquartered in Memphis. The drones will be used to inspect planes, deliver parts. Plane downtime for this company is a serious issue, considering that 60% of its revenue comes from air shipping. But, as you said, it opens it up to other applications for this, and you can't help but think delivery when you hear FedEx.
Kline: Yeah. And the word delivery. Obviously, for FedEx, and extend it to Amazon, last mile delivery is the ultimate prize when it comes to drones. So, the delivery tests are going to be very specific. Business-to-business. They're not delivering plane parts to your door, they're more likely delivering plane parts from a warehouse to the plane. But, it's the first steps of testing this for the practicality of it. Your drone shows up with the piece of the wing that's missing, how does that work? How does the guy take it off? How does he account for it all? So, you're starting to see the framework with this test.
Priestley: Notably, Amazon wasn't included in any of these projects.
Kline: I question that. Amazon's application -- they did apply -- was for testing delivery in New York City.
Priestley: That's ambitious. [laughs]
Kline: They had to know that that wasn't going to get approved. Amazon has been supportive of the FAA's efforts, they continue their own private testing of drones. I believe they've tested drone delivery in England. So, I think this is one where, given the current political climate, Amazon threw its hat in the ring knowing it was going to lose and will probably be supportive of, and perhaps involved with, some of these projects, even though they're not the main company.
Priestley: OK. The third one that we want to talk about -- and as I said, there are ten, we're just touching on four today -- is the Kansas Department of Transportation. They'll be studying applications for BVLOS. I'm not sure if there's a better way to pronounce that. It means beyond visual line of sight. Which, as we've talked about with the line of sight rules, it would be a huge change.
They're testing a variety of applications, but one that's interesting for me is the precision agriculture application, which is to use drones to measure, observe and correct variabilities found in crops. This is technology that's actually been used for years in Japan, in the rice fields. It's to allow farmers to, a farmer can't always see, from the top down, what his vast area looks like. This is to address these areas of low productivity. You can have patches where the soil composition may not be quite right, or some other pest has gotten into the crop. Then, they can address the issue. This market specifically, just the agricultural element is suspected to be worth about $32.4 billion.
Kline: This is going to be the area where approvals come fastest. You're not talking populated areas. Yes, your drone goes crazy, it takes out a small section of your crop, that's probably pretty trivial compared to the upside of it.
Priestley: Yes, absolutely. Risks are lower, the operating area is huge, and the upside is potentially great. Pesticides, looking at doing water sample testing, soil sample testing, pesticides, has a huge amount of applications that could be, really, a great time saver and efficiency driver in agriculture.
The last project we wanted to mention is that AT&T is involved working with the city of San Diego in California. They will test 4G LTE cellular network and AT&T's FirstNet, which is the new national public safety network, I think. They're doing other things, as well. In San Diego, they're looking at border protection, delivery of packaged goods, international commerce, the smart city, Internet of Things that we've been talking about.
Kline: This is the most wide-open of all the proposals. It basically says they're going to do everything. When they say 5G and 4G, what they mean is, when you go to, say, a football game here, AT&T will sometimes have, it's usually a blimp, a small blimp, that will be giving added capacity so the network doesn't get overwhelmed. Of course, there are stadiums that have that built in. But, when you have something at a place where it normally isn't as crowded -- let's say a fairground -- that's the type they'll be testing. This is already being done, it's just being done with things that are tethered. So, this is going to give you the capacity to have that.
Everything else on here is wide open. Testing delivery of packages in a city is pretty much as close to what Amazon and FedEx would want. I think we're going to see some very slow rollout on that, whereas the 4G and 5G, as long as you can prove that it's going to stay in the air, I don't think it's all that different from having a tethered flying device.
Priestley: Yes, absolutely. Applications in developing nations, too, could be huge, in terms of bringing connectivity to areas that don't have it.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel B. Kline has no position in any of the stocks mentioned. Sarah Priestley has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Kinder Morgan. The Motley Fool recommends FedEx. The Motley Fool has a disclosure policy.