Drone business changes as Kansas tries to make state more attractive

Jim Ballard had hopes for Blue Chip UAS, an area drone service company that the former EagleMed owner is a key investor in.

Formed in 2014 by a group of young military veterans with extensive backgrounds in unmanned aircraft, Blue Chip aimed to provide imaging, three-dimensional mapping and other aerial services to the agriculture, oil and gas, construction and filmmaking industries, using commercial grade fixed-wing and multi-rotor drones.

It was the first company in the area to receive an exemption from the Federal Aviation Administration to legally operate commercial drones while waiting for the FAA to develop a set of permanent regulations governing the fledgling drone industry.

But Ballard and others said what at first appeared to be a new industry full of promising business opportunities turned out to be an industry that was still evolving and one that was extremely competitive. That experience prompted some companies like Blue Chip to put their activities on hold, while pushing others to remain in the industry but participate in an entirely new way.

“The drone business wasn’t going well,” Ballard said. “All the contracts we were looking to hopefully get … they just didn’t pan out.

“We’ve put it on hold right now,” Ballard said of Blue Chip. “More or less, the guys (at Blue Chip) are taking other jobs.”

Andrew Fawcett, Blue Chip’s CEO, couldn’t be reached by phone or text message.

Ballard said he initially thought the FAA would have stricter rules for commercial drone operations, like it does for aircraft charter and air taxi services. That would require the services of experienced drone operators such as the group at Blue Chip.

In some cases, companies that previously would have hired Blue Chip for a project bought their own drones and trained their own people to fly them.

“The only reason I’ve got is they decided to do it themselves,” Ballard said.

The evolving industry also prompted another drone service company, McPherson-based Saxon Remote Systems – formerly Skynet UAVs – to dramatically change its business model to a manufacturer of fixed-wing drones and accessories.

“I just didn’t want to be fighting for table scraps,” said John Ferguson, CEO of Saxon. “I know service companies are not … making money unless they have a large contract, a very large contract.

“We realized if everybody wants to own a drone, why don’t we be a manufacturer?” he said.

Ferguson made the change to his business in late 2015. His family owns Ferguson Production, a plastics manufacturer in McPherson, “so it was just a natural shift for me” to transition from a service business to a manufacturer.

Saxon’s offerings include three different types of fixed-wing drones, including the model M-10, which has wing spans from 10- to 12-feet-long and are powered by either an electric or gas motor.

And “we’ve managed to grow,” Ferguson said.

Bob Brock, director of unmanned aerial systems for the Kansas Department of Transportation’s division of aviation, acknowledged that the drone industry is a dynamic one, but it’s really no different than any other emerging industry.

“The beginning of any industry is ambiguous,” he said.

Brock said he’s seen a number of businesses in the industry struggle but an equal number of businesses start up and succeed.

“There’s a balance in all that,” he said.

He said his hope is the state is putting things in place to help the drone industry expand and grow in the state. One way it can do that is through KDOT’s partnership with AirMap, announced earlier this week.

Besides establishing a network to manage drone traffic in the Kansas skies, the partnership enables the state and AirMap to develop the country’s first statewide infrastructure to support the testing of technologies aimed at enhancing data exchange and air traffic control for drones.

Having that kind of infrastructure in place should make Kansas attractive to the broader drone industry and convince companies involved in the manufacture of drones and related systems to locate their operations here, Brock said.

It “makes the state a safe place to operate and do things they can’t do elsewhere,” Brock said.

Jerry Siebenmark: 316-268-6576, @jsiebenmark

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