The Fifth Mode of Transport

Ankit Kumar on the drone delivery industry in India and his company, Skye Air.

Author

Gowtham Ramachandran
August 13, 2024

Last week, I read an article on TechCrunch titled “Amazon is fumbling in India”.

In the article, the author argued that Amazon ignored the burgeoning quick-commerce trend in India, and as a result, it’s losing market share to firms such as Zepto, Blinkit, and Instamart.

My biggest takeaway from the article was that to win in the Indian e-commerce market, delivery speeds matter… a lot!

Photo: Flipkart

1-2 day deliveries used to be considered ‘fast’, but with quick commerce companies promising deliveries in as fast as 10 minutes, consumer expectations are changing.

However, companies seem to be hitting a cap on delivery speeds, as traffic worsens in Tier 1 cities. According to a recent study by the Boston Consulting Group, road congestion in just four Indian cities costs $22 billion annually.

So, where’s the next leap in last-mile delivery speeds going to come from?

Logically, the only answer is to drop packages from the sky — using drones.

And it turns out, the drone industry in India is having its moment.

I sat down with Ankit Kumar, founder and CEO of Skye Air Tech, a drone logistics startup based in Gurgaon, India, to understand the industry more deeply.

Skye Air is already using its drones to deliver orders for major logistics companies like Flipkart and Blue Dart, and recently raised $4 million in Series A funding to accelerate growth.

In this piece, I’ve written about three “other” tailwinds driving drone adoption in India that I was surprised to learn about, how Skye Air is approaching this market, their fulfillment process, and more. 

Let’s dive in. 👇

Three “non-obvious” tailwinds

I started my conversation with Ankit by asking about various market trends in India pushing the nation towards drone adoption. 

He mentioned many obvious trends — India’s e-commerce boom, consumers expecting faster deliveries, and increasing traffic and pollution in cities.

But three other trends stood out to me: government regulations, a fragmented last-mile delivery market, and apartment living in cities.

1. Government regulations 

India has one of the most progressive regulatory frameworks for drones globally, aiming to make India a global hub for drone technology by 2030. 

Here are key regulations and announcements over the last five years:

  • Drone Regulations 1.0 (2018): Categorized drones into five categories based on their weight and allowed closely supervised pilot projects.

  • UAS Rules (2021): Added requirements for paperwork, mandatory permissions for each flight, and limited “free to fly” zones. The rules saw pushback from all major stakeholders.

  • Liberalised Drone Rules (2021): In response to the feedback, the government quickly simplified the rules to promote drone use across various sectors.

  • Drone (Amendment) Rules (2022): ​​The government further amended the drone rules to include provisions for drone certification and to promote the use of drones in agriculture, healthcare, and other sectors.

  • Drone (Amendment) Rules (2023): This amendment focused on enhancing the safety and security of drone operations, including stricter guidelines for drone manufacturing and operations.

Besides just making it easier to operate drones, Ankit mentioned that the Indian government is pushing companies like Skye Air to expand horizontally across various sectors.

"In India, the government is pushing people like us to do much more than what we are doing today. 

There are drone companies doing hundreds of crores of deals every month. That's the size of the industry, which is expanding because there's a lot of push from the government. 

It's a mandate given to the civil aviation ministry to push drones into every sector, whether it's agri-commodity, whether it's e-commerce and quick commerce, and other things which are happening.”

Ankit Kumar, CEO, Skye Air

2. Fragmented last-mile market

The last-mile delivery market in India is highly fragmented. 

Thousands of small and medium-sized players operate independently, including traditional courier services, e-commerce delivery arms, and local delivery startups. 

This has led to a lack of integration and data sharing between entities, limiting the delivery ecosystem's ability to achieve economies of scale.

Ankit compared India’s system to China’s unified logistics network:

“If you look closely, the whole piece of logistics today in the country [India] is very fragmented from east to west to south to north. There's not one system that exists. 

It's not like China, where everything is consolidated into one system, and you know exactly what's happening and which is connecting to what. Air, sea, and road connectivity all go through one particular uniform channel, which doesn't exist in India. 

The National Logistics Policy aims to achieve that, but it is far off in terms of enabling connectivity or a bridge between the road, sea, and air."

Ankit Kumar, CEO, Skye Air

India is developing policies and infrastructure to unify the logistics sector, but it will take time before the industry sees benefits.

3. Urban apartment living

Apartment and high-rise living have become increasingly popular in urban India. 

According to the 2018 National Sample Survey (NSS), about 31.3% of urban dwelling units are flats or apartments. This trend is not confined to large metropolitan areas but is also visible in smaller cities with populations under a million, where 24% of the dwelling units are flats.

Source: India housing report

This trend presents unique opportunities for drone delivery companies. 

By concentrating multiple deliveries within a small geographic area, drones can batch several packages for a single flight, optimizing costs and delivery times. 

This aggregation allows drones to make fewer trips compared to traditional delivery methods, where a single delivery person might handle only one or two packages per trip.

As a result, apartment living in densely populated areas helps streamline operations and improve the economic viability of drone logistics.

Skye Air’s Approach

Ankit founded Skye Air in 2019 to capitalize on this opportunity.

Beachhead

Initially, Skye Air focused on healthcare delivery in remote locations in India where road access was poor. Ankit said they started here because the need was the highest and the willingness to pay was strong:

"We started with healthcare because predominantly healthcare is one sector that values time more than money and life more than money. 

Globally, drone deliveries have been more prevalent in the healthcare sector. India has challenges with respect to road connectivity, rail connectivity, and bus connectivity only in limited areas, such as highly hilly terrains that are hard to reach, like in Northeastern India, or in contexts of disasters. So, you deploy drones to connect when the road is gone, there is a flood, etc. Those are the specific use cases where healthcare goes in.

So very early on, we started with healthcare. The adoption was good, but we realized that it was not a scalable solution. How do we make it scalable? Last-mile logistics in cities are very downtrodden. It is very time-consuming and very expensive."

Ankit Kumar, CEO, Skye Air

However, he always knew the big opportunity was in e-commerce and quick commerce.

Skye Air used the healthcare industry as a launchpad to build up their product capabilities and have now launched next-day e-commerce deliveries in Gurgaon, a city that averages about 2,000,000 deliveries per day.

Market Approach

From the beginning, Skye Air aimed to differentiate themselves in three ways: become an aggregator, build on top of existing tech, and focus on delivery to people living in high-rises.

Aggregation: Most drone companies in India are either owned by incumbents, like Amazon and Reliance, who use them just for their orders, or by startups who typically sign exclusive agreements with one large company. 

Instead, Skye Air decided to position themselves as a drone delivery platform - working with several logistics providers to aggregate orders and unlock economies of scale.

Product focus: In today’s nascent drone industry, it’s commonplace for companies to build the entire stack - from developing the drones to the software that interfaces with customers.

Instead, Skye Air decided to partner with drone makers and focus on developing the infrastructure required to successfully make drone deliveries.

This model has helped them go-to-market faster and iterate PMF with their customers - the logistics providers.

"A lot of companies, in my opinion, were not able to take off or scale to a large extent in logistics because they were doing too many things at the same time. They were manufacturing drones, flying drones, operating drones, creating the software for them, and developing a piece of autonomy for them.”

We don't make drones. We buy drones from different OEMs. 

That's what makes us very unique because our system is built in such a manner that it can integrate with any of these drones. So, for me to expand to any country is very quick because I just need to collaborate with the company that has a type certification approval in that country and buy or lease the drones from them and start flying them using my software platform."

Ankit Kumar, CEO, Skye Air

Market focus: Skye Air decided to focus on delivering to people living in apartments and high-rises in Gurgaon. 

This strategy, of partnering with logistics companies and delivering to high-density locations, has helped them achieve better unit economics than status-quo road deliveries.

Skye Air’s fulfillment process

Skye Air doesn’t work directly with the end consumer, but partners with other logistics companies to complete just the last-mile delivery.

Here’s their fulfillment process:

  1. Customers place an order on an e-commerce platform like Flipkart.

  2. Skye Air receives shipments from their partners at their central warehouse.

  3. Shipments are sorted and batched based on delivery destinations.

  4. Batched packages are loaded onto drones.

  5. Drones fly to designated drone pods located within apartment complexes.

  6. A walker retrieves the packages from the pod and delivers them to the customers' doorsteps.

Skye Air already has six warehouses in Gurgaon and delivers about 3,000 shipments per day. 

Efficiency gains

Drones offer efficiency gains both in terms of speed and better unit economics.

First, drones deliver faster because they don’t have to navigate road traffic. 

Second, drones offer better unit economics, with many factors contributing to it:

  • Higher delivery capacity per operator: One pilot can manage 3 drones simultaneously today. This number is expected to increase to 20 over time.

  • Batching deliveries: Drones can carry multiple packages in one flight, aggregating orders from different clients and delivering them in a single trip.

  • Reduced labor costs: The cost of operating drones is lower than maintaining a fleet of road vehicles and their drivers.

  • Scalability: Drones can easily scale operations up or down based on demand without the significant infrastructure changes or additional personnel.

"I may have 20 shipments from Flipkart. 

It may be possible that only three or four shipments are going to your apartment complex or nearby, say, a 50 to 100-meter radius of that pod. We might have four or five shipments going there. Now, if I send my four or five shipments through one drone, I'm burning the same amount of cost to do that versus batching it with any other customer who is there. Let's say, for example, EcomExpress has two shipments and Shiprocket has four shipments.

So what we do is aggregate and batch different clients together into one drone flight because for e-commerce, what is required is same-day delivery, not next-minute delivery.”

Ankit Kumar, CEO, Skye Air

Ankit estimates drone delivery will cut last-mile costs by about 10% compared to status quo. Ankit also estimates drones offer indirect cost savings of 25% by preventing issues like packages being stolen by delivery personnel, which are prevalent in India.

Pushback

While the adoption of drone technology has generally been positive, there have been concerns, primarily related to privacy and security. 

Initially, there were issues due to cameras on drones. Residents and authorities worried about potential privacy violations, especially when drones flew close to balconies and residential areas. 

So Skye Air removed cameras from their drones and instead developed a comprehensive 3D map to guide their drones. 

Despite these measures, Ankit said that people have other concerns such as the impact of drones on bird populations, and said that Skye Air takes proactive steps to minimize this impact:

“What they have been concerned about is the bird population and the ecosystem being endangered. We have explained how this is not impacting the bird population to a large degree, though we do want to avoid impacting it. 

Birds can impact drones, so we want to avoid any amount of bird interaction. We do not fly through any bird sanctuaries or other sensitive areas.

We have the whole city 3D-mapped, so there's a good amount of control on data and things we have done on the mapping front as well. We have our own maps for Gurgaon that we operate on."

Ankit Kumar, CEO, Skye Air

What’s next

Ankit shared that Skye Air is focused on scaling their Gurgaon operations in the coming months. 

They plan to increase their daily shipments from 3,000 to 40,000 within the next 12 months, and are expanding their infrastructure by increasing the number of hubs and drone pods. 

Besides India, they are looking to expand in the Middle East, starting with Dubai. In fact, they’ve already completed pilots there and are working towards getting a license to operate there.

They intend to follow the same playbook internationally — partnering with local drone makers with licenses to fly and integrating their delivery platform and partnerships to scale quickly.

“We became the first company to do drone deliveries in the UAE, specifically in Dubai. Very soon, we will be getting the license to operate in Dubai, and that becomes the second city, where we want to expand and operate on a larger scale.

In Dubai, you have very structured villas and communities. You can go and deliver to one of the households, each with structured addresses, unlike the complicated address system in India. This allows for straightforward deliveries to the backyard of a particular household.”

Ankit Kumar, CEO, Skye Air

At this point, drones are inevitable for last-mile delivery in India. 

Drones can efficiently navigate traffic, reduce delivery times, and access remote locations that traditional vehicles struggle to reach. With advancements in technology and evolving regulatory frameworks, the cost-effectiveness and reliability of drones are becoming more apparent.

Drone adoption is not just a trend but a necessity for the future of India's last-mile delivery supply chain.

PS: Do you have any questions for Ankit? Reach out to me at [email protected] and I can pass it on.

 

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