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UPS expects to expand private home drone delivery by 2021

United Parcel Service (UPS) vice president Bala Ganesh said three key guidelines are coming together that will pave the way to expand private home drone delivery within two years.

“The first one is technology, a safe and sustainable technology that can be deployed. Number two is the regulatory environment that puts some guide rails around it. And last but not least, you need the customer needs,” said Ganesh, who is vice president of UPS’s advanced technology group, which oversees the Flight Forward drone program. UPS Flight Forward has flown more than 1,000 revenue generating flights as part of its hospital campus delivery program at WakeMed in Raleigh, N.C. Those flights began last March.

Flight Forward recently announced plans to expand that program to the University of Utah Health Network in Salt Lake and UPS just launched private home delivery last month in partnership with CVS Pharmacy (CVS). Flight Forward has flown two private drone deliveries since the program began.

Ganesh said UPS is working with the U.S. Department of Transportation (DOT) and Federal Aviation Administration (FAA) on what’s called an integration pilot program or IPP.

“The FAA helps us learn, to operate in this environment, and we give back data,” he told Yahoo Finance’s On the Move. “We contribute data back to the environment so they learn about what’s working and what’s not,” he added.

The IPP will run through October 2020, according to Ganesh. The FAA is expected in 2021 to publish permanent rules on drone delivery after analyzing the data it obtains from the program. That “will then start putting some guard rails and road maps to what can be done in what part of the country,” Ganesh said.

Making drones eventually deliver profits

Ganesh said drone delivery is still in the very early days of development. “There are two pieces we are looking at. The first is as a growth engine, the new revenue streams we can create. And the second is what improved efficiencies we can create for our existing business.”

UPS is looking at its business-to-business hospital medical delivery program as an engine of growth, “which is moving specimens between hospitals and labs,” Ganesh said. He added, “We think that is a really good use case because that is life-changing.”

SHANGHAI, Nov. 8, 2018 -- A staff member of UPS introduces drone delivery at the Trade in Services area of the first China International Import Expo in Shanghai, east China, Nov. 8, 2018. (Xinhua/Fang Zhe) (Xinhua/Fang Zhe via Getty Images)

Ganesh said UPS has had a variety of conversations with health care providers about its medical delivery program as well as retail and high tech companies about same day drone delivery. Those discussions include firms like Kaiser Permanente and pharmaceutical wholesaler AmerisourceBergen Corp. (ABC). “The question is what is the right fit and the right time for the use case because the cost over time is going to come down and the regulatory environment is going to expand,” Ganesh said.

He said roughly 50 customers have expressed interest in Flight Forward drone delivery. “We have to fit in the right customers at the right time at the right place,” he said, adding that for the time being, “We have to work hand in glove with the FAA and DOT as we move forward because it is still a framework that is constrained by what we can do within the regulatory framework.”

Adam Shapiro is co-anchor of Yahoo Finance On the Move.

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