Walmart continues to expand its drone-delivery program

If you live in Arizona, Arkansas, Florida, Texas, Utah, or Virginia, your recent online Walmart order may have been delivered to your home by a drone.  In May, Walmart announced that it completed hundreds of drone deliveries.  By this time next year, Walmart hopes to complete over a million drone home deliveries in these states. 

In the May press release, Walmart announced that its drone delivery program was made possible through its partnership with DroneUp, a company that offers drone flight services through a network of single pilots and pilot organizations. Through close consultation with DroneUp, Walmart is now able to deliver packages weighing less than 10 pounds, in as little as 30 minutes, between the hours of 8am and 8pm.  While Walmart believed most customers would use its drone-delivery service for “emergency items,” it turns out that the top selling item in one hub location is Hamburger Helper. 

This demonstrates that consumers quickly become comfortable using drone delivery service for all kinds of goods, including food and everyday household items. 

According to recent press releases, Walmart’s delivery process is as follows:  a DroneUp delivery hub, with a team of certified drone pilots, is tasked with the safe delivery of packages within the confines of FAA guidelines.  When a customer places an order, the item is fulfilled from the store, packaged, loaded into the drone, and delivered to the customer’s home using a cable that gently lowers the package to the ground. 

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‘Rules of the Air’: EASA Publishes World’s First Air Taxi Rules

Hail a black cab on a busy London street, and you can assume that the driver will follow the ‘rules of the road’ to your destination. However, what can a commuter expect when taxis begin to take flight?

With Airbus, Boeing and even Uber, amongst others, developing and investing in electric take-off and landing (eVTOL) aircraft, the concept of flying taxis is quickly becoming a reality rather than a concept relegated to Sci-Fi. Test flights are currently being conducted on eVTOL aircraft, and while estimations for their commercial roll-out vary, it is likely we will see flying taxis in the next few years. One market research company has estimated that 430,000 air taxis will be in operation by 2040. As such, ‘rules of the air’ are in order for the safe operation of air taxis.

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Vertiports 2022: The story so far

We wrote earlier this year about vertiports as an asset class, and a perceived potential lag in the development of these assets compared to that of the eVTOL aircraft that vertiports are designed to support (you can read that piece here).

This now seems to be changing, and there has been a real sense of momentum building in this space over the last few months – so much so that it can be difficult to keep up, which is why we set out here a few of the key developments shaping vertiports and eVTOL support infrastructure to be aware of.

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SC-VTOL confirmed as basis for eVTOL certification in the UK

The UK Civil Aviation Authority (‘CAA’) announced last week that it will use the certification standards informing the ‘Special Condition for small-category VTOL aircraft’ (the ‘Special Condition’ or ‘SC-VTOL’), developed by the European Aviation Safety Agency (‘EASA)’, as the basis for the certification of new models of electric vertical take-off and landing (‘eVTOL’) aircraft in the UK.

What is SC-VTOL?

EASA pioneered VTOL certification through the issuance of the Special Condition on 2 July 2019, which sets out the technical specifications and requirements developers must meet to achieve certification for new models of VTOL aircraft intended to carry passengers.

In doing so it recognised that VTOL aircraft are an entirely new category of vehicle for regulators, noting in the preamble to the Special Condition that ‘despite having design characteristics of aeroplanes, rotorcraft or both, in most cases EASA was not able to classify these new vehicles as being either a conventional aeroplane or a rotorcraft as covered by the existing certification specifications.’

The Special Condition applies to small rotorcraft with:

  1. a passenger seating configuration of nine or fewer; and
  2. a maximum certified take-off mass of 3,175 kg.

It is now confirmed that the CAA will use SC-VTOL as a basis for the certification of eVTOL aircraft in the UK.

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Learn to fly: eVTOLs and autonomous flight

“Fly along with me,” sings Dave Grohl, “I can’t quite make it alone.” We can imagine eVTOL developers singing along to this as they work towards autonomous flight, as so many of the vehicle models will have to commence operations – however briefly – with a pilot onboard.

But the ultimate viability of the eVTOL proposition relies in no small part on achieving certification for (and confidence in) autonomous flight as quickly as possible. It will take time for aviation authorities, local councils and the travelling public to get comfortable with this, but the economic reality is that the industry will only be able to operate at a sustainable scale if each vehicle’s full capacity is available for paying passengers or revenue-generating cargo. We need to find a way to facilitate safe pilot-free flight while also managing the technological and operational challenges autonomous flight presents – as Dave sings, hook me up a new revolution.

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Distressed Assets: JOLs and JOLCOs

As a result of the COVID pandemic, with the resulting payment defaults amongst several airlines , the past few years have seen a surge in interest in distressed debt opportunities within the aviation sector. One particular area which has seen a lot of attention has been Japanese tax leasing – namely the Japanese operating lease (“JOL”) and Japanese operating lease with call option (“JOLCO”) products.

JOLs and JOLCOs have been staples of the aviation market for many years. Both are essentially operating leases with an investment of Japanese equity, typically provided by a Japanese corporation with tax capacity. This is usually twinned with limited recourse senior debt from a Japanese bank or a Japanese branch of an overseas bank, such that the credit of the underlying lessee is integral to the transaction as the revenue flowing from the lease would be used to pay the debt.

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Hop to it: Vertiports as an asset class

Hop to it: Vertiports as an asset class

The sums invested in the development of electric vertical take-off and landing (‘eVTOL’) aircraft have been well publicised. It seems that not a week goes by without a new partnership announcement, a new SPAC combination, or another large investment being reported in the press – such as the additional $450 million being invested by Boeing in Wisk, announced at the end of last month. The Financial Times recently referred to a McKinsey finding that ‘investors have bought into the dream, pumping more than $7bn into such projects, mainly through special purpose acquisition vehicles (Spacs) listed on US stock markets,’[1] The article goes on to note that ‘while all kinds of vehicles are planned, from cargo planes to surveillance drones, almost 75 per cent of the money went to companies developing manned electric vertical take-off and landing (eVTOL) craft.’[2]

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Flying into the future of global air freight

As the global economy becomes more interconnected, aviation takes on an increasingly central role in our collective economic growth. The aviation industry supports 65 million jobs and enables the best part of $3 trillion in global GDP annually. If aviation were a country, it would rank among the world’s largest economies.

With the loss of nearly two years of passenger traffic, however, the COVID-19 pandemic has hit aviation harder than nearly any other industry. Yet there are reasons for optimism as the industry looks to emerge from the crisis stronger than before. In this report, Reed Smith’s aviation team examines how the industry can reconfigure itself and continue to connect the people and economies of the world, long into the future, with a much different footprint.

The report explores the dynamics in four key areas for the aviation industry:

  • Tomorrow’s world
  • Business continuity – ensuring a solid business model
  • Avoiding unnecessary disruption (increasing number of disputes)
  • Navigating the given external considerations

We hope you enjoy reading the report and as always, we welcome your feedback and questions. Please feel free to reach out to any of the authors, or to your usual Reed Smith contact.

Please see link to site: Global Air Freight

Unruly passengers are on the rise

Unruly passenger numbers have been on the rise, with many of these incidents related to compliance with COVID-19 mask-related regulations. There are concerns of further issues during the holiday period with Omicron on the rise and an increase in travel as people visit family.

Our U.S. litigation team have set out some of the considerations for airlines in dealing with these potential issues.

Supporting the African aviation market to recovery

As with the rest of the world, the Covid-19 pandemic has not been kind to African aviation industry stakeholders. To paint a broad picture of market performance, the African Airlines Association’s (AFRAA) recent report noted a 50% drop in capacity since April 2019 with the continent facing greater declines in 2020 in passenger numbers, seats offered and aviation-related jobs than the worldwide average[1]. The continent also faces the twin challenges of limited financing options and difficulties with current policies. However, despite these challenges, there are positive aspects to the market’s recovery and opportunities for sustainable growth. There are several initiatives available to market participants and governments to counter the difficulties in the current operating environment, if these are adopted. Opportunities also abound in this unsaturated market for regional growth and in air cargo. Continue Reading

FAA and Homeland Security issue warnings as unruly passenger incidents increase

According to the Centers for Disease Control and Prevention (CDC), those who are fully vaccinated with an FDA-authorized vaccine or a vaccine authorized for emergency use by the World Health Organization can now travel safely within the U.S.  Face coverings, however, must still be worn at the airport and during flight. Continue Reading

U.S. Court refuses to dismiss indemnity claims against U.S. Government in Kobe Bryant helicopter crash lawsuit

On Monday May 3, 2021, the California federal district court judge handling the Kobe Bryant helicopter crash lawsuit denied the United States Government’s motion to dismiss claims made against it by Island Express Helicopters, Inc.—the helicopter charter company operating the fateful helicopter flight—for indemnity. Continue Reading

Connected Aircraft: modernising technology in the skies

It is still remarkable when you board a flight, after trying to squeeze a few final minutes out of the airport WiFi connection, when you see that your aircraft has its own internet connection. Although the technology to connect an aircraft to wireless internet-providing satellites has been around for the best part of the last ten years, the global fleet rollout is less than half of global seat capacity, yet the in-flight connectivity market is set to increase from US$1.5bn in 2020 to over US$5bn by 2027. However, evolving technology is taking the concept of a ‘connected aircraft’ further and deeper than simply allowing passengers to scroll through their Instagram feed at 35,000 feet. Continue Reading

Aviation manufacturers take note as the U.S. Supreme Court rules on the extent of specific personal jurisdiction under the Due Process Clause and opens the door to future suits

On March 25, 2021, the U.S. Supreme Court handed down a decision which rejected a narrow construction of specific personal jurisdiction under the Due Process Clause. In Ford Motor Co. v. Mont. Eighth Judicial Dist. Court, the Supreme Court clarified the limits of specific personal jurisdiction and litigants’ due process rights and held that Ford Motor Co. can be sued in Montana and Minnesota over accidents involving used cars in those states even though the cars were not designed, manufactured, or sold in those states. The decision has significant implications for the scope of personal jurisdiction under the Due Process Clause, including for aviation manufacturers in product liability actions that are filed outside of their home jurisdiction.

The court’s ruling was 8-0, with Justice Alito filing a concurring opinion and Justice Gorsuch filing a separate concurring opinion that was joined by Justice Thomas. Justice Barrett did not participate.

In 2017, the Supreme Court held in Bristol-Myers Squibb Co. v. Superior Court of California, 137 S. Ct. 1773 (2019), that specific personal jurisdiction can be exercised over a defendant pursuant to the Due Process Clause only when (1) a defendant “ha[s] purposefully availed itself of the privilege of conducting activities within the forum state” and (2) when the plaintiff’s claim “arise[s] out of or relate[s] to” the defendant’s forum conduct. The Supreme Court’s decision in Ford Motor Co. examined the limits of the second prong—that a plaintiff’s claim must “arise out of or relate to” the defendant’s forum conduct. Continue Reading

Hoping for the best but preparing for the worst

It is now a unanimous conclusion that the COVID-19 pandemic has resulted in the worst ever crisis in the history of the aviation industry. In 2020, we saw major airlines such as Avianca, LATAM, Thai Airways, Virgin Atlantic and Virgin Australia enter into formal insolvency or restructuring proceedings, with the majority of other airlines being kept afloat by a combination of government aid, cost-cutting measures and concessions from shareholders, employees, bondholders, lessors and other creditors. As we enter the spring of 2021, the inevitable question is: what will happen next? Which airline may fail and which will be well-positioned to benefit from an eventual recovery in international air travel? Continue Reading

Greening pains: How are we going to finance sustainable aviation fuel?

In an article a few weeks ago on ‘How tech went big on green energy’, the Financial Times referred to a report released in February by Lancaster University and Small World Consulting, which found that the information and communication technology sector (i.e. IT)  ‘is estimated to form ca. 1.8-2.8% of global GHG emissions in 2020’[1]. That, the FT noted, ‘is roughly the same as emissions from the aviation sector’[2]. Continue Reading

Masks but no tests: U.S. CDC requires masks but will not require COVID-19 testing for domestic travel

After considering whether to implement a COVID-19 testing requirement for domestic travel, including air travel, the United States Centers for Disease Control and Prevention (“CDC”) recently stated that it is not recommending point of departure COVID-19 testing for U.S. domestic travel. Federal officials had indicated that the CDC was considering a rule that would require all U.S. domestic flyers to test negative for COVID-19 prior to boarding a domestic flight. However, following industry opposition, including opposition from U.S. based air carriers, the CDC stated that it was not recommending point of departure COVID-19 testing prior to domestic travel. The statement by the CDC follows its January 29, 2021 Order which requires the wearing of masks by travelers. Continue Reading

U.S. DOT issues new final rule on bumping

On January 13, 2021, the Department of Transportation (DOT) issued a new final rule amending its rules regarding oversales and compensation due to passengers who are denied boarding involuntarily — a practice known as “bumping”. The final rule was issued in accordance with the Transparency Improvements and Compensation to Keep Every Ticketholder Safe Act of 2018 (“TICKETS Act”)[1] which required the DOT complete a rulemaking to clarify that:

  1. there is no maximum level of compensation an air carrier or foreign air carrier may pay to a passenger who is involuntarily denied boarding as the result of an oversold flight, and
  2. the denied boarding compensation levels set forth in DOT regulations are the minimum levels of compensation an air carrier or foreign air carrier must pay to a passenger who is involuntarily denied boarding as the result of an oversold flight.

The final rule prohibits airlines from involuntarily denying boarding to a revenue passenger after the revenue passenger has checked-in for the flight and the passenger’s boarding pass has been collected or scanned and the passenger has been “accepted by the gate agent”, subject to safety and security exceptions that may require removal of the passenger. In addition, the final rule states that the passenger can be removed if the passenger is engaging in behavior that is “obscene, disruptive, or otherwise unlawful.” The final rule also makes clear that it does not limit the authority of the pilot of the aircraft provided for in 14 CFR 121.533. Continue Reading

The return of the MAX…once again

2020 was a challenging year for the aviation industry as a whole due to the COVID-19 pandemic, but for Boeing it has been an even more challenging time as it has also had to deal with the global grounding of its flagship product, the 737 MAX, since March 2019.

The 737 MAX was launched with the intention of becoming Boeing’s market-leading narrow-body aircraft, trying to break through the stiff competition in the narrow-body market from its main competitor, Airbus. However, that aspiration has so far failed to materialise due to the global grounding of the aircraft in March 2019 following two catastrophic incidents. At its peak, with over 750 MAXs grounded and unable to generate revenue, Boeing faced a significant challenge to return the MAX to the skies and restore the confidence of regulators and safety authorities, its customers and the flying public around the world. Continue Reading

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