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The FAA Just Cleared BP’s Commercial Drone for Takeoff

First commercial drone dculd open floodgates for UAV companies

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The Federal Aviation Administration’s first approval of a commercial drone over U.S. land could be a watershed moment for public unmanned aerial vehicle (UAV) companies and their shareholders — if the agency can keep other aircraft safe while protecting privacy.

drones-faa-approvalUAV enthusiasts cheered on Tuesday when the FAA announced approval for the first commercial drone to operate over U.S. airspace. BP’s (BP) Puma drone, made by AeroVironment (AVAV), had already been approved for military operations, and is expected to improve safety in the oil fields and reduce maintenance costs.

But that’s not the only positive news for the drone market. Earlier this month, the FAA announced that seven aerial photo and video production companies have asked for regulatory exemptions that would allow the film and television industry to use unmanned aircraft systems (UAS) with FAA approval. To receive the exemptions, the firms must prove that their drone operations will not adversely affect safety and that the exemption would be in the public interest.

With such a clear value proposition, will FAA’s approval of BP’s drone open the skies to thousands of UAVs and quickly boost the fortunes of the industry and its shareholders? Here are three pros and three cons for the UAV industry:

Pros for Drones

Drones are a huge market opportunity: Annual spending on drones will more than double over the next decade from $5.2 billion in 2013 to $11.6 billion in 2023, according to a market report released last year by Teal Group. Despite near-term military spending cuts, the UAV market will reach a whopping $87 billion by 2023, the researchers predict.

Military drone companies have the edge on approvals: The FAA’s quick approval of BP’s AVAV drone occurred because AVAV’s Puma drone already had been certified for similar military operations — that means FAA didn’t feel it needed to determine airworthiness for a similar application. So, companies that want to fly commercial drones will be best served seeking out UAVs that already have been used by the military for similar applications over land. And defense giants like Northrop Grumman (NOC), Boeing (BA), Raytheon (RTN) Textron (TXT) subsidiary AAI and privately held General Atomics have drones that already have proved their mettle. AVAV, which has teamed with Lockheed Martin (LMT) and supplies drones for military and commercial use, will also gain because FAA may not require a separate airwothiness certification.

Lawmakers are supporting UAV integration: Congress and the Obama administration have made it clear they want a plan to integrate UAVs into the national airspace fast because of the myriad benefits commercial UAVs would yield. In fact, the FAA is under the gun to integrate drones into U.S. airspace by September 2015 and has said it will publish rules for integrating drones that weigh less than 55 pounds later this year. Earlier this week, the FAA announced that the state of Nevada’s test site is working to determine the impact of drone integration on air traffic control as well as the FAA’s next-hen airspace modernization program.

But it isn’t all bright skies for drones…

Article printed from InvestorPlace Media,

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