Building a drone network that matters to people

Deep Dive

by Yves Le Marquand

13 November 2024

In 2023, DoorDash alone delivered over two billion takeouts to US customers. That is one company. Between DoorDash and Uber Eats, the pair made nearly five billion deliveries—the equivalent of every US citizen ordering 15 times a year.

That is just food delivery. When e-commerce from companies such as Amazon and Temu is included, along with medical transport, the number of journeys, mostly by vehicle, grows even larger. Amazon, for example, delivered 4.79bn packages in the US in 2022. At 300 packages per vehicle, that equates to over 15m journeys. All of this occupies road space and some of it directly contributes to pollution.

So why not begin to alleviate this impact with drones? That is an idea being pursued by more and more companies, from giants like Amazon (which received FAA approval this week for its MK30 drone and has begun deliveries in Arizona), Walmart and UPS to smaller players like Matternet, Zipline and Manna.

For Matternet, a firm founded in 2011 that has raised over $85m, the clue is in the name. The company is building what it views as a physical representation of the internet, best described as a decentralised peer-to-peer distributed information network. It began with a focus on the medical market and is now expanding to food delivery and e-commerce.

Revolution.Aero sat down with founder and CEO Andreas Raptopoulos to discuss Matternet and explore how its recent achievements, including a drone delivery trial in Silicon Valley, align with its goal of creating an internet-like network for physical goods.

“The enabling technology in our case is drones,” says Raptopoulos. “Put simply, we see a world where you can transport items as easily as you can send information from A to B. Transporting things is a fundamental human activity that we do every day. As we have progressed through different stages of civilisation, we have developed new technologies to allow us to do this better.

“If food delivery means someone gets in a car or on a bike five billion times a year to deliver a burger or a salad, creating pollution and taking up road space, we believe drones are a much better solution for instant delivery.”

The M2

Matternet’s drone, the M2, is a lightweight aircraft with a maximum take-off weight of 13kg (including 2kg payload). The M2 is the only FAA type-certified platform for drone delivery in the US, having achieved this status in late 2022. Flying in controlled airspace over densely populated areas, the drones use a “tether drop” system, enabling packages to be lowered directly to doorsteps.

According to Raptopoulos, the process is fully automated. Drones are loaded at a central hub, fly directly to the customer’s location, descend above a drop zone and release the package via the tether.

“Our drones can go from A to B without one-to-one human oversight. We oversee them in networks or fleets. We believe that in the next five to 10 years, this will become so commonplace that it will seem absurd that we used humans for this type of transport,” he says.

Launching the service

Raptopoulos describes two potential methods for launching the service. One option is to set up a small hub near a merchant, such as Walmart or CVS, with two or three drones and two human operators. “This would allow us to start operations more swiftly,” he says.

The alternative is to establish an automated port, which Matternet has been developing since 2017. With a footprint of about four square metres, it can be installed on ground or rooftop locations. The port locks the drone in place after landing and automatically swaps its battery and payload.

“We saw early on that automated delivery loading, battery swapping and aircraft hangaring were essential to bringing costs down to viable levels. Storing aircraft is crucial as it enables a distributed network without high real estate costs. The ability to swap batteries and load fresh payloads in as little as 60 seconds removes the ‘dead leg’ between where the drone is and where the order is picked up from.

“This station can be installed at the same location as the manned system, but no operators are needed. A customer can walk up, scan their phone or badge and input a request,” says Raptopoulos.

Regulatory focus

Having the idea is one thing, but regulatory approval is required for the vision to get off the ground.

“The value proposition is so compelling that it really just comes down to the regulatory framework. The FAA has been working to put all the regulatory layers in place to scale drone delivery in the US,” he says.

Raptopoulos divides the regulatory blueprint into three pillars: airworthiness, integration into airspace and operational methods. Matternet achieved the first pillar when it obtained FAA type certification for its M2 drone in 2022.

“The second part is how you integrate your operations into national airspace where there are other users. For that, we have the BVLOS regulatory framework. Matternet, alongside UPS, was among the first companies to get BVLOS authorisation to fly in US national airspace in November last year.

“The third pillar is about operations,” explains Raptopoulos. “For this, the FAA has adopted an airline certification structure. We have partnerships with UPS and Ameriflight, the largest cargo airlines in the US, allowing us to operate our drones at scale.” UPS and Ameriflight have FAA approval to operate Matternet’s M2 under Part 135.

The arrival of Part 108

A new rule, set to be proposed in January 2025, will establish a comprehensive framework for BVLOS operations, ending the need for exemptions. It will also outline a right of way for drones in airspace below 400 feet and create a pathway for scaling drone airlines by bringing together regulatory elements into a streamlined package.

“We see the FAA is moving the ecosystem in the right direction. That is why we got our BVLOS authorisations through exemptions to test the water. With all this, and with interest from commercial companies, we predict that in the next two to three years drone delivery will scale in the US.”

Cost per delivery

Regulation is vital to scaling drone delivery, but reducing the cost per delivery to make the enterprise profitable is equally essential.

A McKinsey report published in 2023 stated that a single package delivered by a drone with one observer per aircraft costs $13.50. Increasing the ratio to 20 drones per observer reduces costs to $1.80 per delivery. Although energy and other costs remain constant, the major saving is on labour, which accounts for up to 95% of the total delivery cost. In comparison, delivery in a petrol or diesel vehicle costs $11.60 with one package per vehicle, or $1.90 with 100 packages per driver.

For drones to be “truly cost-competitive” across the board, operators will need to shift from airspace observation to drone operations, with a significant increase in drones per operator. The report suggests that advancements in technology and regulation are necessary to enable a single operator to manage up to 20 drones in dense airspace.

FAA-exempted trials in authorised airspace sections allow developers and operators to test their drones, bringing them closer to the 20:1 ratio McKinsey describes.

Since the end of August Matternet has been running its own drone delivery pilot under Part 107 in the Silicon Valley cities of Mountain View and Sunnyvale.

“After years of advancing drone delivery in healthcare, we’re excited to launch our first home delivery operation in Silicon Valley,” says Raptopoulos. “This pilot is a precursor to a larger operation. Within six quarters of launching, we expect to match existing delivery costs. Our goal is to end up at less than half of today’s costs, and we believe this is achievable with increased scale.”

Matternet is authorised to have one observer overseeing three aircraft from its “mission control” under Part 135 operations. It also has permission to enable one observer to oversee 20 aircraft in its test area in California, with a goal of eventually allowing one observer to manage 50 aircraft.

Currently a Series B company, Matternet aims to move to Series C following some “major commercial announcements” expected in early 2025.

Notwithstanding a huge drop off in consumers ordering online, if Matternet can get approval to operate at a 20:1 drone to observer ratio nationwide logic suggests that it will achieve a commercially viable cost per delivery. Looking at the growing number of approvals and exemptions on the market and with Part 108 on its way that reality appears increasingly likely.

The question that remains: Is society ready to have delivery drones crisscrossing the skies of suburbia?

Amazon has already faced a number of noise complaints from residents near its Texas operation, particularly sleeping shift workers. Whilst the Irish Aviation Authority has had to permanently reroute a delivery drone around a property in Ireland due it disrupting the resident parrot when overhead.