Amazon drones could deliver packages for just $1, says study

Amazon has pushed the US government for permission to test unmanned aircraft as it seeks to develop drones to deliver products

Amazon.com Inc's proposed use of drones could drive down the cost to deliver small packages crosstown to about $1 - a fraction of existing same-day delivery options, according to a study by a financial research company.

The report from New York-based ARK Invest also suggests deliveries may arrive in as soon as 30 minutes. The research tried to quantify the savings from the use of drones compared with delivery trucks and couriers.

Amazon has pushed the US government for permission to test unmanned aircraft as it seeks to develop drones to speed shipping products. The Federal Aviation Administration gave the Seattle-based online retailer a waiver allowing flights as fast as 100 miles (161 km) an hour and as high as 400 feet off the ground, according to a letter from the agency dated Wednesday.

Amazon charges $7.99 for one-hour delivery of shampoo, paper towels and thousands of other products in some cities, including New York, Baltimore, Miami and Dallas, through its Prime Now programme started in December.

"The breakthrough is the value that drones offer customers, in terms of the cost and the convenience," said Tasha Keeney, an ARK Invest analyst who wrote the report. Barring regulatory obstacles, Amazon would face an upfront cost of about $100 million to buy tens of thousands of drones.

The company also would see expenses of about $300 million to deploy them to deliver 400 million orders annually, according to the report, which based its findings on existing technology and prices.

Amazon would need to hire thousands of operators, each capable of monitoring multiple drones simultaneously, to ensure safe takeoffs and landings, according to the study, which included the personnel cost in its calculations. Most of the drone flight would be automated, according to the study, which assumes each package weighs as much as 5 pounds and each delivery is no more than 10 miles.