Mergers, acquisitions and losses: three elements that will drive the consolidation of the crewless aviation industry

The airline industry is a perfect example of corporate consolidation as a sign of industry maturity. Just a few years ago, there were at least three major airliner manufacturers in the United States alone, namely Boeing, Lockheed Martin (remember the infamous L-1011 Tristar?), and MacDonnell-Douglas. Today, there is only one: Boeing.

A similar story was unfolding simultaneously in general aviation, with five major manufacturers building single-engine light twins and corporate jets for the civilian market: Cessna, Beechcraft, Piper, Lear Jet, and Gulfstream. Now only Piper and Gulfstream are independent companies, the rest have been absorbed by large conglomerates such as Textron Aviation and Bombardier.

However, manned or traditional aviation has been around for over 100 years, so it stands to reason that decades of experience and trial and error have resulted in stronger companies and more robust products. Setting aside Boeing’s recent troubles for a moment, today’s airliners are safer and more reliable than ever before, and the industry is widely considered the safest way to travel.

In the case of uncrewed aviation, which can be considered an industry still in diapers, this consolidation has not really started and the prevailing approach is that new startups emerge every day with brilliant ideas and questionable business models.

This week we received an announcement that may indicate that the creation of the giants of the future has begun when Drone Delivery Canada announced that it is merging with drone services company Volatus Aerospace Corp.

This merger appears to combine one company’s drone manufacturing and design capabilities with the other’s solid and proven business model. The question is: will this be enough to cross the difficult threshold of revenues and external investments higher than operating costs?

It was this lack of new investments and the inability to generate sufficient revenue that killed the Swedish company Aerit, which announced bankruptcy on May 23. When analyzing the business model Aerit chose to penetrate the delivery market, we noticed a misguided focus on the end user, the consumer at the end of the distribution line, in other words, the last mile.

Companies that insist on delivering goods to end users before global BVLOS (beyond visual line of sight) regulations are in place are doomed to hit a brick wall, no pun intended. Delivering a package to a person or company is the most difficult part of the delivery process because each flight involves different landing conditions. In other words, we know the take-off location, we may know the route, but we do not know the conditions at the landing site.

Companies like Aerialoop in greater Latin America and Orkid in Colombia have instead focused on different aspects of the complex delivery workflow. Aerialoop focuses entirely on the middle mile, enabling traditional delivery companies to use drones to traverse impossibly crowded cities and delegating the first and last miles to traditional distribution methods. Orkid, on the other hand, focuses exclusively on the business to business (B2B) sector, connecting wholesale pharmacies with large hospitals to expedite the delivery of life-saving medicines.

Another great example of successful business models is Speedbird, a Brazilian company that has expanded globally and, regardless of its choice of end-user delivery, its thoughtful approach to technology and commercial applications has allowed it to survive and thrive.

In anticipation of the BVLOS regulation in both Europe and the US, companies around the world are looking for ways to generate enough revenue and attract enough investment to accumulate flight hours, trying to find the sweet spot for the nascent industry. Let’s hope we see more success stories, more consolidation and fewer painful failures.