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In Episode 3 of BOOM! The Southeastern Commerce Podcast, Ken Stewart (AiRXOS) joins Adams and Reese attorneys Chris Kane and Grant Guillot for a look above and ahead at the growing use of commercial drones throughout the Southeast. This episode covers how drones are being used today, what types of regulations are in place, what regulatory and public perception hurdles are preventing further adoption of commercial drones and where the drone industry is expected to expand in the future.

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Transcript and Show Notes

Christopher Kane: Hello, everyone. I’m Chris Kane with Adams and Reese in New Orleans. Welcome to this episode of Boom! The Southeastern Commerce Podcast, where we talk trade, economic development and business issues affecting the region.

Today we’ll be focusing on the outlook of drones in the Southeast and having a conversation with Ken Stewart, CEO of AiRXOS, which is part of GE Aviation, and Grant Guillot, a Partner with Adams and Reese based in Baton Rouge.

Grant, welcome to the program and I’d like you to introduce yourself. You are the leader of our Unmanned Aircraft Systems Team. Tell us a little bit about that.

Grant Guillot: Thank you, Chris. Grant Guillot. I’m a partner in the Baton Rouge office at Adams and Reese. We recently officially established our Unmanned Aerial Vehicles Team, also called unmanned aerial systems or unmanned aircraft systems — all sort of mean the same thing, and that’s drone technology that’s being increasingly utilized across various industries.

I started working with drone clients a couple of years ago and I started out with my representing a nationwide drone pilot network company and at that point in February 2018, the network had 10 pilots in four states, and in less than two years, there are now 4,000 pilots in all 50 states and internationally. And the reason I mention that is that’s a reflection of the growth of the commercial drone industry and the need for drone pilots.

In addition to representing drone service providers, our firm also works with several industries that are increasingly utilizing drones. So, I’ve also been working with construction, energy and telecommunications clients in companies to harness the full maximum benefits of drones.

Christopher Kane: Great, Grant. And Ken, CEO of AiRXOS, as part of the GE Aviation group, tell us about that.

Ken Stewart: Sure. So, as you said, AiRXOS is part of GE Aviation. We were incubated about two and a half years, three years ago within GE Ventures through an investment of GE Ventures and GE Aviation Systems. And in January of 2019, we rolled into fully GE Aviation and an area that we really focus on is enabling what we would generally call advanced operations for drone pilots in critical infrastructure areas, areas of public safety, and working closely with the Department of Transportation for smart cities and smart buildings.

Christopher Kane: Excellent. I’ll start off our conversation. Drones, from my vantage point and not being somebody who is immersed in the industry, are fascinating. You see technology touching every industry and everything we do and I think about it from a standpoint — I think I mentioned this in another podcast, but the iPhone, which is in our pocket, has 100,000 times the processing power than the computer that landed a man on the moon 50 years ago.

I can’t imagine what my nine-year-old daughter’s going to have at her disposal in 50 years from now, but certainly the technology, particularly relative to drones, is going to be a major part of changing our economy and changing the way that we do business.

And I’d like you guys to talk about and to discuss really where we’re going and how drones have developed into this commercial industry and where you see the status of the industry today. Ken, how about you start us off?

Ken Stewart: Sure. So, drones really evolved out of radio-controlled aircraft and the difference is in radio-controlled aircraft, you always had to have your hands on your joystick and your controllers. And really, drones are flying robots, so they’ve taken that essential hobbyist activity to the next level. And we started seeing commercial companies start understanding how they can use drones really to replace what we call the dirty, the dangerous and the repetitious jobs that some people do today.

So, a lot of these activities of inspections for oil and gas can be very hazardous, and being able to replace those with drones that can carry various sensors tends to keep people out of harm’s way, you get better results.

And we’re starting to see that adoption take off at a much faster rate. I think some of the numbers we’ve seen, drones in the U.S. have gone from tens of thousands three years ago to probably greater than 2 million today with about 150,000-plus commercial Part 107 pilots.

Christopher Kane: And Grant, what would you add?

Grant Guillot: I would — Ken just mentioned commercial Part 107 pilots. This might be a good segue to just give a very general introduction to what that means and what the Part 107 and capabilities mean.

So, just briefly I’ll say prior to 2016, it was quite challenging to use a drone for commercial purposes in the United States. You had to get a certain document called a Section 333 Exemption in order to use drones for commercial purposes and it was a painstaking process and there wasn’t a prima facie case for being able to use drones for commercial purposes.

That all changed in 2016 when Congress passed its — the Code of Federal Regulations Part 107 of Title 14 — and what it does is it pretty much says that commercial drone operations are legal, provided you perform certain functions and you refrain from performing certain functions.

But really at the end of 2016 is when we really saw a boom in terms of commercial drone use and that’s only grown, and it’s only poised to grow, because of recent regulatory developments that we can get into later.

But when Ken says Part 107, that is basically the overall federal regulatory scheme that commercial drone pilots are operating under.

Christopher Kane: Sure. And as I understand it, since then we had the FAA Reauthorization Act — I think that was in October of 2018 — signed by President Trump. What did that do?

Grant Guillot: So, essentially what was noteworthy about the Reauthorization Act is it requires the FAA to adhere to deadlines for developing and implementing an Unmanned Traffic Management system and I’m going to let Ken explain what that is in just a second.

But a couple other things it did was require the FAA to implement a remote identification system, which actually, we very recently have had some movement on that front, as recent as New Year’s Eve, and we’ll talk about that in a bit. And then also to ease the process for obtaining a waiver to be able to perform certain advanced operations.

I mentioned that Part 107 prohibits you from doing certain things; advanced operations is the ability to do those things that are ordinarily prohibited. Right now, you need to obtain a Part 107 waiver to do so, but that also is in the process of changing.

And, finally, overall what was great about the Reauthorization Act is it essentially was a signal from the federal government that it is ready to put manned aircraft and unmanned aircraft on the same grid and have them work together to make it to where unmanned aerial systems, or colloquially known as drones, where they can be integrated safely and efficiently into the national airspace.

But before I go on, Ken, I think this is a good chance for you to mention what — or explain what unmanned traffic management is because that ties in directly to what AiRXOS does.

Ken Stewart: Sure. Thank you very much. So, really, unmanned traffic management systems, or what we generally call UTM, is really a new system that’s being developed from a national architecture that NASA put together and is being adopted by the FAA.

And the idea behind that is we have infrastructure and have had infrastructure for years in place to manage manned airspace and manned aviation. The challenge with the drone is obviously there’s nobody sitting in the drone flying it. So, that really required a large amount of digitization of the airspace. Without eyes being able to see where the vehicle’s going or a voice to communicate, we’ve had to essentially digitize that infrastructure.

So, really, UTM is the next generation of air traffic management still separately maintained, separate from the air traffic management system, that’s really is going to help us evolve these operations that Grant had talked about, primarily these advanced operations.

When he talked about Part 107, Part 107 today doesn’t allow us to fly at night, it doesn’t allow us to fly one pilot to multiple drones, you can’t fly the drone beyond visual line of sight. So, those restrictions are all in place today as we work to develop the UTM. Once that UTM evolves over the next few years — and we’ve been working closely with NASA and the FAA and public/private partnerships to develop that — we’ll be able to see these advanced operations more commonly completed.

Christopher Kane: And Ken, that would — obviously that seems to be the accelerator of what would trigger rapid commercialization, even more rapid than we’re already seeing. Is that — would that be a fair assessment?

Ken Stewart: That’s correct. What the waivers really allow you to do, forget all the technical terminology around them, it really gives you a scalable, repeatable and economically viable way of performing an advanced operation. To be able to fly and do transmission distribution line inspection, you need to fly 30, 40, 50, 60, 70 miles. You can’t do that today. These systems that we’re all developing are going to enable that.

Christopher Kane: Interesting. Well, while we’re talking about it and your role in terms of GE AiRXOS’ role in the UTM solutions world, why don’t we take a second and can you tell us a little bit how AiRXOS came to be and how it developed and your relationship with GE Aviation?

Ken Stewart: Sure. So, as I mentioned earlier, the whole ideation behind AiRXOS came out of GE Ventures and it was the first time that GE Ventures had partnered with GE Aviation under the GE Corporation. Now, they’d worked with many other groups and business units, but never Aviation.

And the whole idea was looking at this space as we moved to more autonomous flight, what was the role that a GE Aviation can play in that space. And so, AiRXOS was born of an investment from both of those entities. And the first 12 months to 18 months, we spent a lot of time doing research and development, testing different capabilities and then the last, probably, 24 months, we’ve begun commercializing many of those capabilities.

The capabilities that we’ve been focused on developing started with the ability to provide waivers and exemptions to our partners and as we mentioned earlier, waivers and exemptions are required to fly these advanced operations. We then take those waivers and we digitize them and put them into our Unmanned Traffic Management platform to be able to ensure that when people have the authorization to fly, that it’s all done so digitally, it’d help automate their whole processes end-to-end. So, really, the waivers and exemptions are almost a pull-through for our UTM services and applications.

Christopher Kane: Interesting. So, how does the UTM Pilot Program fit in and how does that work?

Ken Stewart: Sure. So, the UTM Pilot Program was essentially started by the White House and they chose 12 different cities, states, I believe, and different tribal nations to participate in that. We participated on three of those: primarily the City of San Diego, Memphis International Airport and the Choctaw Nation of Oklahoma. And each one of these essentially had a series of concept of operations that they wanted to go through to help be able to prove out those capabilities so that coming out of these different programs we can start commercializing these capabilities.

An example from the City of Memphis or Memphis International Airport was to be able to fly and detect foreign objects or debris on a runway or to inspect an aircraft on an active ramp using a drone. Choctaw Nation of Oklahoma is using drones to help with feral pigs, to be able to determine the impact of micro weather on drones. So, each one of these kind of has an end goal that helps us all commercialize these services.

Christopher Kane: In this pilot program, is there a central reporting mechanism where data is collected and information is collected, and how is that used?

Ken Stewart: Each one of these programs has an FAA representative assigned to it or an FAA program manager. That program manager is responsible for working with all the members of each of these, what we call IPPs, to ensure that that information is being all reported back to the FAA to help create the criteria for future operations.

So, today, when you have to get a waiver, many of these operations have never been done, so the FAA doesn’t have the historical data by which they could say, “This operation meets the safety requirements.”

And so, as we continue to develop this data, it provides the FAA with the criteria by which they can make those decisions, ensuring that we’re safely integrating drones and UAVs into the National Airspace System.

Christopher Kane: Grant, would you like to add anything to that?

Grant Guillot: Yes. I think what is special about these programs is that it shows the FAA is trying to be innovative in how it partners with both state and local levels of government to facilitate the safe and efficient integration of drones into the National Airspace. Ken was speaking about the use of advanced operations and I think it may help to kind of give an example of an issue that is going to be heavily dependent upon advanced operations.

Without getting too technical, I’ll say that drone deliveries, pilots who are attempting to perform drone deliveries right now actually are operating under another part of the Code of Federal Regulations Title 14 Part 135.

But without getting technical, assuming a drone pilot wanted to operate under Part 107 for a drone delivery, how are you going to deliver goods if: a) you can’t fly beyond the line of sight of pilot; or, b) if you can’t fly more than one drone at a time; c) you can’t fly over people? These are three extremely challenging hurdles that a transportation company, a deliverer of consumer goods, such as UPS, Amazon, are going to face issues, and are facing issues, with these regulations as they attempt to operate under Part 107.

So, through some of these programs, the FAA is testing out the ability of some of these groups to deliver goods to consumers without having to obtain the Part 107 waiver. So, you’re looking at prescriptions being delivered to customers’ doorsteps, which is quite amazing. And the future of consumer delivery is certainly with drones, as we are seeing.

So, I think that through the programs that the FAA is instigating and participating in with state and local governments, we’re seeing some major breakthroughs in how we are coming to know delivery of consumer goods as well as other operations.

Christopher Kane: Well, and at the end of the day, where I see this heading and how it’s going to impact the economy is how the commercial side is going to integrate into these — what comes out of these pilot programs, right?

And that goes to the end-user industries and I’d like to talk about some of the experiences you guys have had in seeing the development of drones and how they’re impacting some of the industries that really impact the Southeast particularly; and starting off with that, probably no bigger, perhaps, than the energy sector.

And Ken, I understand AiRXOS is doing some work in the energy sector, and if you could explain a little bit about what those services look like and how that works, that may help explain the end-user side of the drone market.

Ken Stewart: So, I’ll use — like, oil and gas is probably a good primer for this. We work with a partner of ours, somebody called Avitas, who does robotic inspection of oil and gas wells on behalf of their end customers. And one of the challenges that they had is they go out into areas like the Permian Basin and others to do these well inspections and it would generally take two people a full day to get 10 wells inspected.

So, they weren’t really scaling it beyond the capability of manual inspection. Now, they were getting more consistent outputs by using — these drones would have things like LIDAR to build a digital twin of the well, they would also have 4K ultra high-def video cameras and they would have methane fugitive emissions sensors on them.

What we were able to do in working with them is to build a use case, or what we call a concept of operations, where they could get these exemptions and be able to fly beyond visual line of sight. We helped them pick the right vehicle, we helped them pick the right radar system to integrate into our platform, we helped them with their pilot operations, their safety management systems and put all of this together so that now when Avitas is out flying in the Permian Basin, that same set of two people are scaling up to 40 to 50 wells a day.

And so, this is an area where, in a meeting with one of the oil companies, they said that there’s a death on average every 36 hours in the Permian Basin; the goal is to get people out of that area because it’s a hazardous work environment between the highway that goes through there as well as the industrial nature of the activities that take place.

And so, now that we’re able to scale that, we’re creating a much safer environment, they’re seeing more efficiencies in terms of the number of wells that they can inspect on a day-to-day basis. There are 30,000 wells in the Permian Basin, so you can imagine how many people that would take on an annual basis to go out and do those inspections.

And so, the whole idea of doing it with drones and being able to perform these advanced operations, they’ve seen almost a 40% increase in efficiency even with the capital investments for the — it’s a very expensive drone, as you can imagine: radar systems, communications and tying all that together.

Christopher Kane: And that just screams of efficiency in terms of improving the time component, but also the safety component. And at the end of the day, that’s got to impact the bottom line, right?

Ken Stewart: Exactly. That’s the goal is we try to make it repeatable, scalable and economically viable, and so we target sectors of the industry where that makes a lot of sense. And so, oil and gas, energy with transmission and distributions, those types of inspections are really kind of the critical pieces that we’re focusing on today.

Christopher Kane: Well, and another sector I’d like to spend a little bit of time and talk about is public safety. Probably — I don’t know the exact numbers, but a lot of folks have now, whether it be a doorbell that has got a camera on it or the house has got cameras on it you can see from your iPhone, the technology from a public safety standpoint and personal safety standpoint has significantly increased.

And it seems that the drone component of that is only going to help enhance and supplement the technology edge to try to curtail whether it be crime or even all the way to the military component of it, which I understand to be a very large part of the market. Can you guys share your thoughts on that?

Grant Guillot: What I will say is the potential for the amount of good drones can do in law enforcement and public safety matters cannot be overstated. With search and rescue missions, for example, you’re talking about being able to deploy a drone to search a much larger area in a much shorter period of time than humans are able to do, and as a result, you’re able to drastically increase your chances of being able to locate an individual who’s gone missing.

Similar things can be said about forest fires. What we are seeing, and this kind of ties into drone use by the forestry industry, but really public safety, too, is that drones with their sensing capabilities and versatility of services they’re able to offer are proving to be highly helpful when it comes to combating fires.

And also, one of the common stories I’m hearing about drones and how public safety and law enforcement agencies are utilizing them is drones are able to chase after criminals when criminals are fleeing the scene of an accident or when they’ve gone into hiding. Drones are able to be an invaluable tool that increases the chances of locating the criminal and stopping them in their tracks.

So, I’m just providing some cases here that I’m hearing about across the country. And, of course, this is an international issue, too, and really part of the issues that we are facing as a nation is being able to convince people living in the United States of the immense level of good drones are capable of performing, but I don’t want to get ahead. But in terms of public safety and law enforcement, those are just a few of the cases that really stand out for me, but I’m happy to defer to Ken.

Ken Stewart: Yes. So, sure, a couple things to talk about here is where public safety really differs from, say, oil and gas, as oil and gas and critical infrastructure inspections, you can plan those objectives and those operations weeks, months in advance. Public safety really needs to fly now; they literally need the “easy” button. And so some of the challenges that they have are getting airborne quickly and efficiently and safely because they need waivers just like commercial operators. So, we’re enabling some of that to be able to give them what I would call waivers on demand.

Then there’s other unique cases, when you think about drones will probably never replace helicopters but they certainly can augment them as an additional tool. Helicopters cost $1,000 an hour to fly. We’re finding now that public safety can use drones for — a drone may cost $2,000 and they can reuse it over and over and over again. And the benefit of that is you can deploy it out of a backpack with a very capable thermal sensor on it and much more effectively find people that are doing search and rescue and things like that.

So again, it really comes down to scalable, repeatable and economically viable opportunities. Not every policeman can jump into a helicopter and fly it, but you could pretty much equip each one of them with a drone and a backpack and they can perform that operation. Much more cost-effective than a helicopter, and on demand.

Christopher Kane: Well, this is a good time to turn our eye maybe looking a little bit forward and a quick story: this morning I was dropping my daughter off. I’m leaving town for a few days and she asked what I was doing today and I said, “I’m going to talk to a few friends about drones.” And, of course, the conversation began with her asking me, “Hey, Dad, can drones take American Girl dolls to American Girl or can they pick them up from American Girl?” And I started laughing to myself because, of course, this is a topic that we had talked about, which is really the last mile endo-delivery mechanism that drones are trying to participate in on a more regular basis.

So, I’ll start there and I have another one to ask you about. But what are your thoughts on the inventory, door-to-door delivery component and where that market may be going with the utilization of drones?

Ken Stewart: So, I think we’re still a little bit of time off for that happening ubiquitously across the United States, but we are starting to see it in some rural areas or more suburban areas. Today I think Google’s doing some in Virginia, I think UPS has announced some areas where they’re doing that. But they’re still doing it with extended visual observers. So, they still have people kind of out monitoring the drones on behalf of the pilots.

So, we’re still not quite to that scalable environment where you can pretty much press the button and have American Girl deliver an American Girl doll to your doorstep.

Christopher Kane: Maybe by the time that she’s in college, she could have a pizza delivered to her, maybe.

Ken Stewart: Sure. I think Uber Eats and all these companies are investing heavily into this space. So, I think package delivery is certainly something out there that everybody’s looking at.

And if you think about whether it be FedEx or UPS or Amazon, we’re really entering this phase of intermodal connected mobility, whether you’re delivering it via a vehicle, that vehicle could be flying, on the ground, we’ve got scooters that are electric today that are monitored today and all-enabled through cellphones, we have bicycles that are enabled through cellphones and applications today just like Uber and Lyft and these other — you’re really starting to see this intermodal connected mobility being used logistically to deliver packages for people.

And so, a drone is just another aspect helping to support that.

Christopher Kane: Well, and you probably can guess what her next question was and I call it the “George Jetson” question: “When am I going to be able to hop on a drone and go from Point A to Point B?” Is that something that we’re going to see in our lifetime or our kids’ lifetimes? What do you think?

Grant Guillot: Uber is certainly working on it. Uber Elevate is a company that is seeking to utilize drones to transport individuals from one spot to the next. Obviously, it doesn’t take great effort to see the advantage of being able to hop in a drone at JFK Airport and be able to cross over to any area of the state much quicker than you would be able to do in automobile traffic.

The issue is the safety case still is being made, it’s still being proven. The FAA is going to prioritize safety over everything. So, when you’re talking about urban air mobility matters and being able to have drones in that setting coexist with manned aircraft, I think you’re looking at several years before we’re ready to take that step, although certain developments certainly are in the process of being made, and some of these videos are very, very interesting.

I encourage whoever has time to go to Uber Elevate’s website, look at the videos, see what the future for urban air mobility and being able to be transported from one place to another, what that looks like. It really is interesting, and it very much is something out of the Jetsons.

But before we get to that level of drone use, I think we’re far more likely to see widespread drone use of smaller drones in commercial operations. Ken, would you agree?

Ken Stewart: Yes. I think the development of the drones really help us usher in the era of urban air mobility. The UTM needs to be fully developed, a lot of aircraft certification has to happen. I mean, you can look at helicopters today being a form of urban air mobility; the challenge is the noise, the safety and all the things that Grant just mentioned overall have got to be solved and we’ve got to get to electric vehicles that are far quieter.

And then, of course, people have to be accepting of drones flying overhead and delivering things to their homes probably in advance of them being accepting of urban air mobility vehicles flying over their homes.

Grant Guillot: And while we’re on the subject of delivery, Chris, we just spoke about public safety and I think this is a good opportunity for Ken to discuss what is perhaps one of the most amazing, in my opinion, examples of drones being used for good in a delivery capacity and that is AiRXOS’ facilitation of the delivery of a kidney to an organ transplant recipient, which I think is absolutely amazing.

And again, I talked earlier about the negative press governing drones. It’s a shame stories like this don’t make the headlines more often. But Ken, could you talk a little bit about that historic delivery?

Ken Stewart: Sure. We really supported the University of Maryland UAS Test Site, University of Maryland Hospital, and Dr. Scalea, who created the actual cargo container to do this, to actually manage the organ during flight. And the idea around this is that I think it’s greater than 50% of organs are lost when they’ve been donated for transplant because they haven’t been able to make it to the recipients in time.

And when you think about the Greater DC Area, which is where this took place, just outside of DC, to go seven miles in a car might take you 45 minutes to an hour and 15 [minutes], whereas by drone, that same distance you can do just in a matter of minutes. And so, with the amount of investment and, obviously, the life-saving ability of doing organ transplants, the criticality of time is really of the essence.

And so, looking for a new way to do that was a great opportunity, again, for us to work with the University of Maryland Hospital, University of Maryland Test Site and Dr. Scalea. And, by the way, the recipient is doing just fine.

Christopher Kane: That’s awesome. Well, that’s a good — look, if I can let my daughter know that she can’t get an American Girl doll, but we can save lives, that’s a good story to take home.

So, look, guys, we’re wrapping up on our time here. I want to thank you both. This has been just a really exciting topic; it’s more than impactful, it is the future. And to learn about it and understand it and the more I learn about it just tells me that we have a world ahead of us that we can’t imagine what it’s going to look like, and we really do appreciate you educating us and telling us about both the regulatory side and some of the industry examples and life-saving examples that are underway.

So, thank you both, Ken and Grant, for your time and for being guests and thanks for listening and we’ll see you next time.