Is Amazon’s Prime Air…Shot Down?

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Deutsche Post tests parcel uavAs drones continue to become more and more popular, consumers and businesses alike have been waiting on the FAA (Federal Aviation Administration), hoping for drone rules and regulations. Well, the new rules and regulations have finally been drafted; and for the most part, drone enthusiasts are incredibly happy with the result. However, companies that plan to use drones commercially, like Amazon, aren’t happy at all. Today, we’ll talk about the new FAA rules, the hypothetical roadblock the regulations are to Amazon and companies like it, Amazon’s response to the new regulations, and what this could mean for Amazon as an investment. So, let’s get right to it.

The Drone Regulations That Have Amazon Squirming

According to the Federal Aviation Administration, companies can use drones for commercial purposes. However, they can’t use them in the way that Amazon plans to. That’s because the new rules state that commercial drones must be within line of sight of the operator at all times and that the drones cannot be flown over crowds of people. That’s exactly what Amazon’s Prime Air was intended to do.

The ultimate goal of Amazon’s Prime Air program was to create a delivery system where drone operators were inside the warehouse (not within an eye shot of the drone) and could fly packages anywhere within a certain radius (even over crowded parks and other areas).

This Is A Major Roadblock For Amazon

Amazon has pumped quite a bit of money into their drone program. As a matter of fact, in the beginning of the R&D phase, the company spent about as much on the program in a single quarter as it costs them to ship an entire year’s worth of packages. Given the fact that the program has been developing for quite a while at this point, if Amazon can’t get around the rules in one way or another, they’ve wasted a ton of money.

Amazon’s Response To The New Regulations

Amazon responded how one would imagine they would in this situation. They’ve spent billions of dollars on the Prime Air program and don’t want to see that money go down the drain. So, they’ve issued strong announcements essentially stating that they are committed to the program and will fight to ensure that their goals do come to fruition. In their response, Amazon made it clear that they believe faster deliver is a consumer need and that the FAA must make changes to address this need. Here’s what they had to say…

The FAA needs to begin and expeditiously complete the formal process to address the needs of our business, and ultimately our customers…We are committed to realizing our vision for Prime Air and are prepared to deploy where we have the regulatory support we need”

Knowing Amazon’ historic overspending habits, the message is clear. Jeff Bezos is screaming…”We will pump billions of dollars into this, even if our investors don’t like it because in the long run, our business and it’s customers need Prime Air (In my almighty opinion of course.)”.

Is Amazon A Good Investment

Recently, Amazon produced meager positive earnings that excited investors enough to send their stock value skyrocketing. However, I didn’t invest then and would not invest now. The reality is that even though they produced meager earnings, their stock is incredibly over valued. With such small margins, issues like what we’re seeing with the FAA could cost Amazon enough money to send them back into the negative for Q1 2015. With that being said, I wasn’t convinced on meager earnings, and I’m definitely not convinced that I should buy Amazon now!

What Are Your Thoughts

Would you invest in Amazon? Why or why not? Let me know in the comments below!

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1 COMMENT

  1. If anyone can make this happen, it’s Jeff Bezos. I thought this was a great idea at first, but once I realized the weight limitations, I don’t know. It seems like they would only be able to deliver papers/documents and very light items. Plus, if it’s an issue for that weight going over crowds, it will be a bigger issue for larger drones to go over crowds.

    As far as investing in Amazon, I still think it’s a bad idea. The stock is inflated and there will always be too much value placed on their perceived value. It may work for some, but their stock isn’t my style.

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