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Michael McDonald

Michael McDonald

Michael is an assistant professor of finance and a frequent consultant to companies regarding capital structure decisions and investments. He holds a PhD in finance…

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The Drone War Is On: Australian Startup Beats Google, Amazon

Startup Company Flirtey is making enormous progress in the drone industry, far sooner than some of the most prominent tech companies. The Australian based company has developed drones capable of carrying packages over vast distances to potential customers. Not only this, but they are the first company to get the thumbs-up from the Federal Aviation Administration for this type of delivery service. The FAA passed a ruling on June 21st allowing commercial use of drones but requires them to be within view of their respective pilots.

Flirtey is already being used in New Zealand where customers can order Dominos right to their doorstep. This is highly preferable as opposed to driving to store or having a delivery guy come to you. Both of these scenarios require personal involvement and potentially driving in rush hour traffic. If Flirtey is successful in perfecting their service, it could prove to be significantly more efficient to companies and consumers who don’t have the time. The startup also made its first delivery in the United States in July and continues to test their drones in the desert of Reno Nevada.

Google and Amazon are still in earlier phases of their drone testing and won’t be making deliveries nearly as soon, especially in the United States. Google’s project wing is now under Alphabets subsidiary, X, a secretive company revealing little of their projects. Google has been developing their drones since 2012 but under current U.S. regulations, will not gain approval for commercial use due to safety concerns.

Amazon’s Prime Air service is still no more than an idea either. Announced in 2013, the company is still waiting on FAA’s approval for its service as well. Amazon recently began testing their drones in the less regulated United Kingdom as of August. The US requires Amazon keeps their drones in view, a problem considering it would be redundant for pilots to follow the unmanned octocopters to the customer’s homes. Until regulations change or Google and Amazon make the necessary modifications, they will remain in specified testing zones. If Flirtey continues advancing, these companies could stand to miss out on valuable market share and ultimately realize losses. Related: Why Oil Could Head Back To $90 Sooner Than Thought

The race to launch these drones has shipping companies worried. Successfully creating a new logistics system would render UPS and FedEx useless. Flirtey would move beyond partnerships with dominos and 7/11 and assist in the transportation of larger companies resources and products. Flirtey hopes to have their drones as common as delivery trucks within the next several years, this could pose a serious issue to ground transportation. If this were to come true, businesses strategies would change drastically.

The public is worried about drones for several reasons such as privacy, public safety, and security of these unprotected packages. Larger companies hoping to enter the drone industry have to maintain an image to their already developed client base. Because of this, Amazon and Google have to listen and adhere to their consumer’s opinions on the matter. What gives these consumers a sense of completion, however, is the fact that drones are completely electric. This could be a massive accomplishment for green energy if companies were to step away from conventional delivery trucks. This would also mean a decline in gasoline consumption. If investors have the opportunity, investing in drones long term would mean hedging themselves against the struggling fossil fuel market. Flirtey and companies alike have the potential to severely disrupt the market crude market if drones are to truly take off.

By Michael McDonald of Oilprice.com

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