A recent article on the Australian Broadcasting Corporation’s news website (‘Drone delivery service Wing stops flying in Canberra as business shifts focus to large shopping centres’ – 18 September 2023) provides some potential insights into how drone delivery services may evolve in Australia.
The article also noted that community resistance may have been a factor in the cessation of the delivery operation. Similarly, the recently released Aviation Green Paper ‘Toward 2050’ noted that community concerns could increase in proportion to the uptake of drones and Advanced Air Mobility (AAM) technology.
In brief, it may be some time before having drones delivering groceries or pizzas becomes an everyday occurrence.
At present, the Civil Aviation Safety Authority (CASA) has approved two drone delivery services in Australia:
- Wing Aviation Pty Ltd – to deliver food and drinks, over the counter pharmaceuticals and hardware on-demand to customers who live in a 10 km radius from a base station; and
- Swoop Aero – to deliver medical supplies, prescriptions and equipment in a 60-kilometre radius from a base station at Goondiwindi Airport.
As well as the Canberra operation, Wing Aviation conducts a grocery delivery operation (for small items) around Logan in south-east Queensland.
Swoop Aero and a pathology company recently announced a plan to use drones to deliver pathology samples from its collection centres to its testing facilities, reducing the time between collection and testing and reporting of results.
Swoop Aero and Wing Aviation illustrate differing models for the use of drone deliveries:
- Delivering consumer items in a suburban environment;
- Delivering items such as prescriptions to patients in rural areas; and
- Assisting a business with internal deliveries.
Given the small number of drone delivery services that have operated in Australia, it may be premature to draw any definitive conclusions about the future of drone deliveries. However, drone deliveries appear better suited to regional and internal deliveries for the following reasons:
- Rural areas provide greater areas of uninhabited space, reducing liability risk for drone operators in the event of a mishap, compared to more densely populated suburban and city areas;
- There is no shortage of ground-based delivery providers in Australian cities and suburbs – would drones markedly reduce delivery times? Not everyone has a backyard for drone deliveries and human delivery drivers can get to places that drones cannot reach, such as apartments;
- ‘Social licensing’ – Given the availability of ground-based delivery services in cities and suburbs, people would likely prefer that delivery operators use the streets around their homes rather than the airspace above them; and
- An internal drone delivery network can allow a business to streamline its internal operations by allowing it to move items more rapidly than ground-transportation.
Apart from considering these factors, a prospective drone delivery operator will also need to satisfy CASA that the proposed delivery system can operate safely. Additionally, the recent Aviation Green Paper noted that the Commonwealth government would retain responsibility for airspace management, there may need to be collaboration between Commonwealth, State and Territory to develop, manage and enforce rules relating to drones.
Risk management
In addition to clearing relevant regulatory hurdles, any business looking to incorporate drones into its operations also needs to consider how to manage the risks associated with drone operations.
The Aviation Green Paper also noted that, in the future, automated AAM aircraft have larger payloads than drones (approximately 50kg plus). Larger drones with heavier (and more valuable) payloads inevitably mean that there is a more material level of risk to manage with regard to both cargo and third parties.
To date, drone delivery systems have involved an agreement between a business and a drone operator. Given the licensing requirements and safety considerations, it would likely be more cost effective for a business to engage a specialist drone operator to assist it in creating a delivery system rather than attempting to set up a system from scratch.
As with any transport contract, any agreement between a business and the drone operator should clearly identify which party bears the risk of mishaps to cargo and third parties and at what stages of the carriage.
A business will likely seek to include provisions requiring the drone operator to indemnify it in respect of damage to cargo or claims by third parties. This is a matter for negotiation between the parties. However, any party contemplating agreeing to indemnify the other party to a contract (whether it is for drone deliveries or any other service) should make enquiries with their insurer to ascertain whether agreeing to an indemnity will prejudice their insurance arrangements and whether revised arrangements are required.
A business engaging a drone delivery service should consider including a provision in the agreement setting out the drone operator’s insurance obligation and requiring proof that appropriate insurance is in place – to increase the likelihood that any contractual indemnity will be effective.
Summary
With only two approved drone delivery services presently operating in Australia, drone deliveries are in their infancy. However, the drone delivery services that have emerged to date provide some guidance as to how they may evolve in the future and what risk management strategies will be required as additional drone delivery networks develop.
This article was written by Jayne Heatley, Partner, and James McIntyre, Special Counsel.
