Amazon's 100 drone deliveries puts Prime Air far behind Alphabet's Wing and Walmart partner Zipline

Nearly a decade after announcing grand plans for 30-minute drone delivery of items up to 5 pounds, Amazon told CNBC it's now completed just 100 deliveries in two small U.S. markets.

Compare that number with internal projections from January for 10,000 deliveries by the end of this year, according to a video address in early 2023. Days after Amazon set its target, a significant number of Prime Air workers were let go as part of the largest round of layoffs in company history. 

Now, Amazon's 2023 goals have changed, the company said, pointing to regulatory hurdles put in place by the Federal Aviation Administration.

"While the FAA broadened Prime Air's authority to conduct drone deliveries to include sites in California and Texas, the phased process for expanding our service areas is taking longer than we anticipated," said Av Zammit, an Amazon spokesperson.

CNBC went to Lockeford, California, a 4,000-person town and one of the two U.S. markets where the company's drone program is operating. Amazon said it started drone deliveries there in December, but there was no apparent aerial activity at the former concrete manufacturing warehouse that now serves as the unit's local hub.

"I would love to see the drones flying around. I can't wait," said Ken Thomas, who co-owns a nearby deli that's served lunch to some Amazon employees. "I haven't seen any yet."

Thomas added, "One guy said they had 14 customers signed up, which seems kind of low to me."

Amazon said thousands of people "have expressed interest" in the program and that the company is "working with each one of them to make this a reality."

Company employees previously told CNBC that the drones are only delivering to two homes in Lockeford, located next door to each other less than a mile from the warehouse. The employees asked to remain anonymous because they weren't authorized to speak on the matter.

But where Amazon has stalled, other companies' drone programs have seen greater traction, particularly those that started outside of the regulatory confines of the U.S.

CNBC visited Wing, a subsidiary of Google parent Alphabet, at a drone test facility in Hollister, California. At one point, there were 37 drones in the air at once making demo deliveries.

Wing CEO Adam Woodworth said it's made 330,000 deliveries. While thousands of those have been for partners such as Walgreens in Virginia and Texas, the company primarily delivers in Australia, where it brings orders from DoorDash and the supermarket Coles to homes in more than 50 suburbs. 

"The service area that we cover there is between 70,000 and 100,000 people and it's a relatively sort of geographically constrained location," Woodworth said. "If you look at metrics from last year, we were seeing on the order of about 1,000-plus deliveries a day to that sort of one snapshot of the planet."

CNBC also got a glimpse of Walmart drone deliveries in its home state of Arkansas, with partner Zipline, which recently announced its fixed-wing aircraft has made 600,000 commercial deliveries, largely of medical supplies in Africa. In March, Zipline unveiled a far different model that lowers a "droid" to the ground by a tether.

A growing list of companies, including Sweetgreen and nutrition retailer GNC, have signed up to deliver with the new drone when it's scheduled to come online in 2024.

"We operate in three states: North Carolina, Arkansas and Utah," said Zipline CEO Keller Rinaudo Cliffton. "For some of the families in those states that we serve day in and day out, not only is drone delivery a thing, not only is it possible, it's also now boring."

Brandey Oliver, a Zipline customer in Pea Ridge, Arkansas, said she likes the services because they're secure.

"If we're not here and we get a delivery, nobody has access to our backyard," said Oliver, who lives about 10 miles from Walmart's headquarters in Bentonville. "It really helps in emissions, and global warming has me worried. So I like it that no delivery cars are used."

DroneUp is another Walmart partner with financial backing from the retailer. CEO Tom Walker said its drones have made more than 110,000 deliveries in the U.S. DroneUp cut some jobs this week, in a shift to focus more on consumer delivery and away from enterprise services such as construction and real estate monitoring.

"We have 34 locations operating in six states today, and we're delivering in less than 30 minutes," Walker said. "The routes are designed to minimize flight over people, minimize flight over moving vehicles, and it chooses the optimum route both from a safety standpoint, but from an efficiency standpoint."

Walmart said it made more than 6,000 drone deliveries across seven states in 2022 with DroneUp, Zipline and a third partner, Flytrex.

Reese Mozer has been in the drone industry for 14 years and remembers when Amazon's then-CEO Jeff Bezos first announced Prime Air drone delivery on CBS' "60 Minutes" in December 2013. 

"Those of us who were in the industry at that time could foresee many of the challenges that were coming to actually fulfill that vision," said Mozer, now president of Ondas Holdings, which owns several drone companies such as Airobotics. "You know, delivering packages via drone is a very complicated problem because what we're talking about is theoretically thousands of autonomous drones carrying packages over people's heads, avoiding structures, avoiding other air traffic. And this is a particularly difficult problem in the United States because we have the busiest and most complex airspace in the world."

In 2020, Amazon brought in former Boeing executive David Carbon to lead Prime Air. He announced the program's first official deliveries on LinkedIn on Christmas Eve 2022. 

"It's actually not that hard to deliver a package via drone," Carbon said at an Amazon event in November. "It's a very different problem space to design, build, certify and operate an autonomous safety-critical system that can operate over densely populated environments within the national airspace."

Safety, Amazon said, remains its top priority. There have been multiple crashes at Amazon's test site in Pendleton, Oregon, including one in 2021 that sparked a 20-acre brush fire. In a statement, Amazon said that Pendleton is "a closed testing facility where the intent is to learn the limits of our technology" and that it's "never had an incident during an actual customer delivery flight."

Amazon's drone design has evolved significantly over the years. It started as a vertical lifting "octocopter" with eight exposed rotors, and then moved to a design with four large enclosed rotors. Then came a version that could take off vertically and fly forward like a plane.

The latest design was first unveiled in 2019. It's now on its second iteration: the MK27-2, which is about 5.5 feet wide and weighs about 80 pounds. In an interview in November, Prime Air's Calsee Hendrickson, who leads product and program management, said the technology onboard for safety features is what makes the MK27-2 bigger.

"If the drone encounters another aircraft when it's flying, it'll fly around that other aircraft," Hendrickson said. "If when it gets to its delivery location, your dog runs underneath the drone, we won't deliver the package."

The FAA takes these types of safety features into consideration when companies such as Amazon apply for Part 135 air carrier certification, which allows drones to make commercial deliveries. Only five drone operators have been granted such certification: Wing and UPS in 2019, Amazon in 2020, Zipline in 2022, and Flytrex partner Causey Aviation Unmanned in 2023.

But there are multiple levels of Part 135 clearance. Prime Air drones, along with most other delivery drones, operate with a number of federal exemptions that greatly restrict where and how they can fly. For example, most delivery drones have to avoid active roadways and people. The FAA also greatly limits operations of drones beyond the visual line of sight of an observer. Beyond visual line of sight, or BVLOS, while meant to ensure a human can steer away from other aircraft that could cause a crash, is also perhaps the biggest current obstacle to drone delivery scalability.

When asked how many of Wing's resources were going toward BVLOS, Woodworth said, "I would say all, right?" He added, "Otherwise, what's the point of using an airplane?"

Introduced in February, the Increasing Competitiveness for American Drones Act of 2023 would streamline the BVLOS approvals process. For now, the restriction often means drones can fly only one or two miles from the takeoff spot and require extra people to watch each flight.

"That person is getting paid to stand there, watch that drone, and that all factors into the cost," said Jeremiah Karpowicz, editorial director of Commercial UAV News. "Very quickly you see that's not going to make sense."

One way to get FAA clearance for BVLOS is with a "detect and avoid" system, or what Amazon calls sense-and-avoid. The idea is to identify moving objects such as other aircraft, people and pets, and static objects such as a chimney or a clothesline, and automatically steer clear of them. These systems often use cameras, which make it tough to operate in cloudy conditions or at night.

Zipline uses microphones to listen for and automatically avoid other aircraft. The FAA recently certified Zipline's detect and avoid system so its drones can fly beyond visual line of sight and over populated areas.

"Zipline achieved 40 million commercial autonomous miles with zero human safety incidents before we sought certification in the U.S.," Rinaudo Cliffton said.

In late 2021, Amazon wrote to the FAA about the safety features on the MK27-2 in hopes the regulator would remove some restrictions. But a year later, the FAA declined Amazon's request, saying the company didn't provide sufficient data to show the MK27-2 could operate safely over people, roads or structures.

Amazon moved forward anyway, though gradually, in Lockeford and in College Station, Texas. Amazon said the two markets were chosen because of their demographics and topography. 

"The FAA cares about two things," Mozer said. "They care about you colliding with another aircraft and they care about you hurting someone on the ground. So if you are in a less populated area, that means there's less people on the ground, less chance for injury. And there's also probably just less air traffic."

Aside from clearing FAA hurdles, public acceptance remains a big obstacle facing the whole industry.

"The biggest public pushback is: What is that drone doing? It's probably spying on me," said Karpowicz.

In Lockeford, Thomas said that fear could cause problems.

"I did think some people might try to shoot it down," he said.

All the drone companies we interviewed said their cameras don't record or, if they do, the video isn't made available to operators.

"The cameras on our aircraft are just for navigation," said Wing's Woodworth. "They just look straight down. They can't move around and there's no feedback to the operators, so they're just used to help the plane figure out where it is."

Some residents also worry the noise of drones will change the quiet rural feel of Lockeford.

"There's a field with cows in it, and that's just down the street from the Amazon warehouse," Thomas said. "I don't know if the cows will be bothered by the drones or not. Horses might be, though. Horses are skittish."

Prime Air drones are not expected to exceed 58 decibels, according to an FAA assessment, about the noise level of an outdoor air conditioning unit. Woodworth said Wing's drones stay under 55 decibels at cruising altitude. Zipline said its coming P2 model is even quieter.

"People completely hate the way that quadcopters and octocopters sound," Rinaudo Cliffton said. "It's super annoying. It sounds like an angry swarm of bees and there is zero chance that communities are going to accept that kind of an experience scaling up and becoming something that you have to listen to multiple times a day."

For some companies, weather remains another hindrance to reliable delivery. DroneUp had to cancel flights due to wind on the day we visited the company in Arkansas. Earlier that morning, Zipline made two deliveries.

"We fly in really crazy rain storms, lightning storms, dust storms," Rinaudo Cliffton said. "We fly in wind that is so strong that sometimes the aircraft is actually moving backwards relative to the ground. That is a gigantic engineering challenge. It's taken us seven years of hardening every part of the system."

Wing said its drones can operate in sustained winds above 20 knots and moderate rain. Amazon said the MK27-2 flies in clear, dry weather and can handle sustained winds up to 14 knots. 

Now Amazon is working on its next model, the MK30, meant to better handle high temperatures and rain and to fly further. It's also supposed to be lighter, smaller and half as loud.

But user demand remains the big question.

"I'm still trying to figure out what exactly the benefit or the perk of the drone program would be," said Audrey Tankersley, who was having lunch in Lockeford at Thomas' deli the day of our visit.

Customers in Lockeford and College Station told CNBC that Amazon incentivizes them to order drone deliveries by offering them gift cards. Amazon said it was consumer demand that drove the program from the start.

"They're excited about this," Hendrickson said. "And that's what Amazon does: We listen to our customers and then we work backwards to design the most efficient service that we can."

It's a challenging time for the market, as regulation and a slowing economy forced some downsizing and delayed plans. But those on the inside remain optimistic.

"I wish everybody else in the space the best luck," Woodworth said. "Because I want the space to exist."

Watch the video to learn more about how Amazon fell behind in drone delivery: https://www.cnbc.com/video/2023/05/17/at-100-deliveries-amazon-drones-fall-far-behind-google-and-walmart.html