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The Future of Commercial Drone Use

March 29, 2016

There could be 7 million small drones in the sky by 2020, according to U.S. aviation officials, who believe that as many as 2.7 million of them will be used for commercial purposes.

These same officials predict that small unmanned aircraft systems (sUAS) or drones “will be the most dynamic growth sector within aviation” within a few years.

The real estate, agriculture and insurance industries are projected to be among the biggest commercial users of drones.

In its most recent aviation forecast, the Federal Aviation Administration (FAA) estimates that combined total hobbyist and commercial UAS sales will rise from 2.5 million in 2016 to 7 million in 2020. Hobbyist UAS purchases may grow from 1.9 million in 2016 to as many as 4.3 million by 2020. Sales of drones for commercial purposes are expected to grow from 600,000 in 2016 to 2.7 million by 2020.

As of mid-March, the FAA had issued more than 4,000 permission slips, or exemptions, to insurers and other organizations for commercial drones to operate in the national airspace, which the agency said demonstrates “considerable potential demand for UAS operations, in low-risk, controlled environments.”

The agency said predictions for small commercial fleet drones are more difficult to develop because the market is quickly evolving.

FAA Regulations

The drone market will be influenced by FAA’s regulations. In December, the FAA began requiring users of drones of certain weights to register with the agency. All drones weighing between 0.5 and 55 pounds have to be entered into the database. As of mid-March, more than 400,000 had been registered.

In February 2015, the FAA issued proposed safety regulations for small UAS (under 55 pounds) that would be permitted to operate in the national airspace conducting non-recreational operations. The rules will for the most part eliminate the need for businesses to seek exemptions on a case-by-case basis as they now must. The new rules would not apply to model aircraft.

The rules would limit flights to daylight and visual-line-of-sight operations. They also address height restrictions, operator certification, optional use of a visual observer, aircraft registration and marking, and operational limits.

Under the proposed rules, an operator would have to be at least 17 years old, pass an aeronautical knowledge test and obtain an operator certificate. To maintain certification, the operator would have to pass FAA knowledge tests every 24 months. A small UAS operator would not need a private pilot license or medical rating.

The sUAS regulatory proposal received more than 4,600 public comments. The FAA says it expects to publish a final rule in late spring.

Industry Use

The FAA said that once this final small UAS rule is implemented, two different categories of small UAS (sUAS) are likely to emerge: higher end drones with an average sales price of $40,000 per unit, and lower end units with an average price of $2,500.

After the final rule is in place and over the next five years, the FAA projects that drone manufacturers will turn out a fleet of about 542,500 small commercial drones that will serve industries and be permitted to operate in nation’s airspace, with roughly 90 percent being these being lower-priced units.

The agency said it expects that the number of sUAS will be able to satisfy industries and government agencies that want to use them. It projects that the top five markets served by commercial drones will be:

  • Industrial Inspection: 42%
  • Real Estate/Aerial Photography: 22%
  • Agriculture: 19%
  • Insurance 15%
  • Government 2%

The FAA said that forecasting the number of small UAS is highly uncertain but officials believe that once a final rule is published, these units will become more commercially viable than they are today.

Drones Beyond Sight

Looking beyond existing regulatory efforts, FAA said it is exploring how drones might be used safely in populated areas, how UAS flights outside the pilot’s direct vision might allow greater UAS use in rural areas, and what might be some of the command-and-control challenges of using UAS beyond visual line of sight in rural/isolated areas.

The report predicts that overall demand for commercial UAS will soar once regulations clear the way for operating beyond the visual line of sight (BVLOS) and for operations of multiple UA by a single pilot. Once a framework is enabled for BVLOS operations, the projected market sizes could be higher than those forecast.

“Venture capitalists are already investing considerable amounts of money into this emerging industry with the intention to build early market share in this technology,” notes the report. “Manufacturers’ efforts are focused on building systems optimized for particular segments of the market. Unmanned aircraft systems will be the most dynamic growth sector within aviation.”

Encounters of Drone Kind

Officials also said reports of possible pilot encounters with drones continue to rise.

The FAA’s latest report on pilot, air traffic controller and citizen reports of possible encounters with drones lists 582 reported incidents during the five months from August 22, 2015 through January 31, 2016. A similar prior report covering nine months between November, 2014 and August, 2015 contained 765 reports.

The FAA said that “safely integrating unmanned aircraft into the national airspace system is one of the FAA’s top priorities, and the agency wants to send a clear message that operating drones around airplanes and helicopters is dangerous and illegal.”

The FAA wants operators to know where it’s legal to fly their drone. The FAA’s free B4UFLY app lets operators know where it is safe to operate. Unauthorized operators may be subject to stiff fines and criminal charges, including possible jail time, the FAA warns.

Speed of Government

While some have applauded FAA’s drone safety efforts, there have also been some complaints from industry and operators that the federal government is moving too slowly to issue regulations and hurting the competitiveness of the the U.S. in the drone market as a result.

In remarks earlier this month at the South by Southwest event in Austin, Texas, FAA Administrator Michael Huerta spoke about the challenge of government keeping up with the drone market and the need for it to work with industry and operators.

“I have said more than once that innovation moves at the speed of imagination and that government has traditionally moved at, well, the speed of government. And when you’re a safety agency like the FAA, a methodical and deliberative approach is necessary,” he said.

“But at the same time, we are working to change the traditional speed of government – when possible–by anticipating what’s coming next and maintaining a flexible regulatory approach. Remember that ad from the 1980s with the tag line, ‘This is not your father’s Oldsmobile’? Well, we’re trying hard not to be your father’s FAA.”

He said the FAA has been following a partnership theme as it goes about doing its job as expeditiously and safely as possible.

“[W]e have been finding our way forward through partnerships–with industry, with government and with law enforcement. I can say with certainty that the path in front of us will continue to be paved with the same kind of partnerships that have taken us to where we are today,” he said.


Topics Trends Legislation Commercial Lines Business Insurance Aviation Agribusiness

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