Amazon Prime Air drone enterprise hampered by laws, weak demand
David Carbon, Vice President of Prime Air at Amazon.com Inc., speaks during the Delivering the Future event at the Amazon Robotics Innovation Hub in Westborough, Massachusetts, on Thursday, November 10, 2022.
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Mid-January, Amazon’s Head of Drone Delivery, David Carbon, sat down with staff for his weekly “AC/DC” video address, where he provides the latest updates on Prime Air.
The acronym stands for A Coffee with David Carbon, and the event followed a very busy end to 2022. A decade after the launch of Prime Air, Amazon began drone deliveries in two small markets, bringing one of founder Jeff Bezos’ dreams closer the reality.
In the video provided to CNBC, Carbon told employees that Prime Air recently began durability and reliability (D&R) testing, a key federal regulatory requirement needed to prove Amazon’s drones are over People and cities can fly.
“We started with D&R and are about 12 flights into D&R at the time of this shoot,” said Carbon. “So, I’m really excited to get this behind us.”
However, there is a huge gap between the beginning and the end of the process, and people can be forgiven for expressing skepticism.
At least since last March, Carbon has been telling Prime Air staff that D&R testing is ongoing, according to people who worked on the project and have asked not to be identified because they are not authorized to speak about it. He even had baseball caps made that said “D&R 2022” with the Prime Air logo on them.
But the Federal Aviation Administration didn’t give clearance for testing until December, and the company launched the campaign shortly after, in January of this year, Amazon said. Before wider adoption, Prime Air must complete several hundred flight hours without incident and then transmit that data to the FAA, which oversees the approval process for commercial deliveries.
It’s all standing in the way of Prime Air’s expansion and its efforts to meet Amazon’s wildly ambitious goal of getting groceries, medicines, and household products to shoppers’ doorsteps in 30 minutes or less.
Bezos predicted a decade ago that a fleet of Amazon drones would take to the skies in about five years. But as of now, drone shipments are limited to two test markets — College Station, Texas, and Lockeford, California, a town of about 3,500 people south of Sacramento.
Even in these handpicked areas, operations have been hampered by FAA restrictions that, according to government documents, prohibit the service from overflying people or streets. This comes after years of challenges with crashes, missed deadlines and high turnover.
Although Prime Air has about 1,400 customers signed up for the service between the two locations, it can only service a handful of households, three former employees said. In all, CNBC spoke to seven current and former Prime Air employees who said ongoing friction between Amazon and the FAA has slowed progress on drone deployments. They asked to remain anonymous as they were not authorized to comment on the matter.
Amazon told CNBC that thousands of residents have expressed interest in its drone delivery service. The company said it serves a limited number of customers and plans to expand over time.
CEO Andy Jassy, who succeeded Bezos in mid-2021, hasn’t spoken much publicly about Prime Air. It has much bigger problems to solve as Amazon navigates a period of deep cost-cutting while trying to restart its business after revenue growth in 2022 was the slowest in the company’s quarter-century in the public market.
But Jassy also wants to preserve a culture that thrives on big bets and the willingness to take risks. According to two employees, his management team, known as the S-Team, had previously set itself the goal of starting drone deliveries at two locations by the end of 2022.
In January, a significant number of Prime Air employees were laid off in the largest round of layoffs in Amazon history, totaling more than 18,000 people, CNBC previously reported. Prime Air’s Lockeford, College Station and Pendleton, Oregon locations were all affected by job cuts, further straining operations.
There is only one pilot left at the Lockeford site who is certified to operate commercial flights, a former employee said. Days after the layoffs were announced, Amazon flew an employee there from College Station to help with the deliveries.
Not that there is much activity. Employees told CNBC that the Lockeford location can only ship to two homes that are adjacent and less than a mile from Amazon’s facility. Some details of the FAA restrictions were previously reported by The Information and Business Insider.
Employees remaining after the layoffs told CNBC that morale at the division has continued to plummet since the cuts. With more work to do and less clarity about their parent company’s continued commitment to the mission, some say she and her colleagues have started looking for jobs.
Maria Boschetti, a spokeswoman for Amazon, said in a statement that Prime Air’s layoffs and delays had not affected long-term plans for deliveries. The company is staffed to meet all applicable FAA requirements for safe operations and safety standards, she said.
“We’re just as excited about it now as we were 10 years ago – but difficult things can take time, this is a highly regulated industry and we’re not immune to changes in the macro environment,” Boschetti said. “We continue to work closely with the FAA and have a robust testing program and team of hundreds of employees who will continue to meet all regulatory requirements as we move forward and safely make this service available to more customers in more communities.”
Prime Air’s FAA problem isn’t a new phenomenon, and the company has long worked to maneuver through restrictions that limit its flying capabilities.
Of particular note was the attempt to change an important rule at the end of 2021. On November 29 of the same year, Sean Cassidy, Prime Air’s director of safety, flight operations and regulatory affairs, wrote to the FAA requesting relief from an order that government documents say specifies the operating conditions for Amazon’s drones.
Cassidy said in the letter that Amazon’s new MK27-2 drone featured several safety improvements over the previous model, the MK27, that rendered many of the “conditions and restrictions” set out by the FAA obsolete. Among the restrictions Amazon sought to remove was a provision prohibiting Prime Air from flying its drones near or over people, roads and buildings.
A year later, in November 2022, the FAA denied Amazon’s application. The agency said Amazon did not provide sufficient data to show the MK27-2 could safely operate in these circumstances.
“Full durability and reliability parameters have not been established to allow flying over or near humans,” the FAA said.
An Amazon drone operator loads the single shoebox-sized box that fits into his MK27-2 Prime Air drone
It was a surprise setback for Amazon. In early 2022, the company was so confident that the FAA would soon lift restrictions that it paid around three dozen employees to temporarily reside in hotels and airbnbs in the Pendleton area, a small town in rural eastern Oregon, according to five employees that’s about a three-hour drive from Portland.
After restrictions were lifted, Amazon intended to move workers to Lockeford and College Station with a goal of beginning deliveries in the summer of 2022, employees said.
But as of October, the Pendleton crew was still “living out of their suitcases,” an employee said, while the company paid for their room and board.
The following month, Prime Air moved employees to their respective locations, just in time for the FAA to deny Amazon’s efforts to seek a pardon. But the company chose to proceed anyway. On Christmas Eve, Carbon announced in a LinkedIn post that Prime Air had made its first deliveries in College Station and Lockeford.
“These are tentative first steps that we will turn into giant leaps for our customers over the next several years,” wrote Carbon.
Boschetti said Prime Air’s delivery team received “extensive training” at the flight test facility in Pendleton before being dispatched to delivery locations.
Some employees viewed the launch as a rushed effort and wondered how the service could function fully without being able to skim streets or cars, former employees said.
Additionally, demand from Prime Air’s tiny customer base isn’t exactly picking up. At the Lockeford site, employees are required to contact the two eligible households regularly to remind them of the order, and Amazon is motivating them with gift cards, according to two people familiar with the situation.
Meanwhile, Amazon is working on developing its next-generation Prime Air drone called the MK30, known internally as the CX-3. At an event in Boston in November, Carbon unveiled a mockup of the unmanned aerial vehicle, said to be lighter and quieter than the MK27-2.
In January, Carbon was still bullish on its weekly AC/DC chats. He said Prime Air has a target of 10,000 deliveries between its two test sites this year, even as the D&R campaign is ongoing and FAA restrictions are firmly in place.
Carbon acknowledged that Prime Air “is not immune to the cost savings” Jassy is implementing, but he sounded undeterred.
“This year is going to be a big year,” said Carbon. “We have a lot to do.”
The MK30, which is expected to launch in 2024, will have to go through the same regulatory process, including a separate D&R campaign as well as what’s known as Type Certification, an even stricter FAA benchmark that allows a company to manufacture drones at scale.
It’s not an award the FAA is quick to hand out. Of all the drone makers vying for commercial supplies, only one has received type certification — a startup called Matternet.
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