This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

The Truth About Amazon's Drones

The best example probably comes from Amazon's Prime Air promo clip shown on 60 Minutes: Amazon and the FAA both confirmed that Amazon's drones are currently illegal here at home, so the firm had to shoot its video clip overseas.

Will the System Work?

All of the regulatory challenges assume that Amazon's Prime Air will work as advertised in the first place.

Amazon's presentation gave us a pretty good idea of the niche that Prime Air would be used for: shipping small items under five pounds within a 10-mile radius of a distribution center within 30 minutes. It certainly sounds like an attractive service, especially when you consider the fact that it covers around 86% of the items Amazon delivers.

But the logistics seem a little questionable.

>>Sell These 5 Toxic Stocks to Avoid a Christmas Crash

For an Amazon drone to make the 10-mile trek one way in 30 minutes, it would need to be traveling at a brisk 20 miles per hour, and that assumes a direct flight path from the distribution center to the destination. If the FAA allows drones to fly "highways in the sky," it could add significant mileage to a trip. That also doesn't factor in shipment preparation times. If it takes 10 minutes for Amazon's teams to prepare an order, we're talking about a 30 mile-per-hour ground speed to make a 30-minute delivery.

For a two-foot-square aircraft, that's a scale speed of around 300 miles per hour for a full-scale helicopter. On a breezy day, scale speeds of 500 miles per hour may be necessary to hit that same 30-minute delivery time.

We don't know how much Amazon's drones are going to cost. Package delivery firm DHL is testing drones of its own that currently run $54,900 each -- and that's for a vehicle with half the payload of Amazon's octocopters. It's reasonable to think that Amazon will be able to acquire a fleet of octocopters in a few years for much less than that -- until you amortize R&D costs for FAA certification across each aircraft.

Because Prime Air can only carry one item at a time, Amazon needs at least one aircraft for every order that it receives from the time one drone gets sent out to the time it returns for another pickup (longer if we add recharging to the equation).

2 of 4

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,159.93 +128.79 0.76%
S&P 500 2,001.17 +17.04 0.86%
NASDAQ 4,550.9590 +32.0570 0.71%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs