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Last year global GDP reached over $100 trillion, and 90% of all manufactured goods traveled by sea. Every single one of those individual items — Peletons, iPhones, and KitchenAids — shared something in common: they moved around the world in a container, or to be specific, a twenty-foot equivalent unit (TEU).
Containerization began in Newark, New Jersey in April 1957, and quickly spread to the rest of the world. This simple innovation, which made it easier to load and unload a ship at port, enabled globalization throughout the late 20th century. It’s hard to imagine our modern, technology-drenched world without the TEU.
Today, the TEU is an international standard; a global language of commerce. It’s universally recognized, highly efficient, and — if I might add — a sizable victory for the imperial system (we don’t, after all, call it a six-meter equivalent unit).
Dave Merrill, CEO of Bay Area aerospace logistics company Elroy Air, is working on his own standardized shipping container called a cargo pod. Compared to the TEU, it’s much smaller (it has a max payload is 300 pounds), sleeker, and instead of being put on a ship, it’s attached to the bottom of an unmanned aircraft.
If things go his way, Dave may be on the verge of his own 1957 moment. Like him, I’m hoping Elroy Air’s little container changes the way goods move around the world.
Elroy Air is having a great year: product advances, customer orders, and extensive testing of their aerial cargo platform. Just last week, Bristow Group, one of the largest helicopter operators in the world, placed deposits for early deliveries on five of the company’s Chaparral vehicles.
I connected with Dave to hear about the future of Elroy Air. Read our discussion below.
So first, autonomy: how important is autonomy to Elroy? What does it mean in your case?
Autonomy is important to us. What it means for Elroy Air is something usually referred to as automation, meaning the aircraft's behavior will be predictable in all situations.
Chaparral is an eVTOL hybrid electric aircraft built for cargo logistics. We're building it to serve middle-mile express commercial shippers like FedEx, humanitarian shippers like the World Food Program, and defense logistics customers. We work with the Air Force, for example, but the need for distributed logistics in battlefield environments spans the branches of the armed services.
If you know two things about the vehicle—aside from being an autonomous eVTOL aircraft that will fly from A to B without a person inside—it’s these:
First, we’ve built it for long range. The hybrid electric powertrain is a key part of that because it doubles or better the range versus what a battery-electric aircraft this size could do.
Second, we've automated cargo handling — the pickup and drop off of cargo pods — so that you don't need people on either end of the mission pulling boxes out of the vehicle one at a time.
Chaparral is built for efficiency: it picks up a container, flies it from A to B, deposits the container, picks up another container, and takes off, and carries it to the next location.
So when I think about autonomy, I think about it more of automation. The two pieces of our mission that will be automated are the ground operations — where the aircraft locates the right cargo pod, navigates to the pod, gets aligned, picks it up robotically, and latches the container to the bottom of the fuselage.
For the flight portion, we're going to start with an operator “on the loop” with a one-to-one relationship to the vehicle, and then ultimately move to a one-to-many relationship where one operator supervises a fleet of vehicles.
But nobody is piloting the aircraft with a joystick, right? It’s more about setting parameters for the mission.
Correct. When I say “on the loop,” there's no joystick where the pilot has a stick-to-surface control input. If you talk to somebody in the Air Force and they say “remotely piloted,” they're actually in a virtual cockpit with a joystick flying an aerial system as if they were in the vehicle. That would be “in the loop.”
“On the loop” means the pilot is supervising the mission. Our pilots will set up the mission, identify the route, and press go. The aircraft will then be able to take off, transition, go into cruise flight, and navigate itself through a set of waypoints that have been identified. That pilot will be getting information back throughout the flight continuously: vehicle health, battery engine health, airspeed, altitude — all the telemetry will be coming back, but they don't need to control it on a second-to-second basis. Of course, if anything needs to change about the mission, they can do that.
Our model for integrating the vehicle into the airspace is that Chaparral will look like a standard general aviation aircraft to everybody else. What that means is that our pilot will be able to talk to air traffic control through the vehicle with voice relay. The vehicle is going to have ADS-B on board. The pilot will file a flight plan and then monitor it throughout so that if air traffic control tells them to change altitude or heading, they can do that.
So are you certifying the Chaparral aircraft as more of a general aviation aircraft or more of a drone?
In the first chapter of our business, we're building around deployments with customers that don't require full FAA certification. That’s our pragmatic response to the fact that the path to certification still holds some unknowns, particularly for a system that doesn't have a pilot on board. So we’re starting with defense customers, humanitarian customers, and commercial shippers that are outside of the U.S. airspace that don't need FAA certification. We expect things to be different for each scenario: with the military, we'll get a military flight release and then subsequent expansions of scope for what we can do with the vehicle. Predator drones, for example, didn't have type certifications for years as they were pushed into service because of urgent operational needs.
For commercial and humanitarian shipping, certification will depend on where we're operating. It could be a SORA-style approach for permission to fly in the airspace. There are various ways to do it.
Ultimately it looks like we'll certify the certified Chaparral under Part 21.17(b) — like a passenger eVTOL.
Despite airspace challenges, the most complicated part of your mission seems to happen on the ground. Would you agree?
That may be the most unique and differentiated part of the mission, but we're aiming to make it very simple for operators — whether that’s FedEx, Bristow, or any of our other commercial, humanitarian, or military shippers.
Our operators will have a map of the terminal location where they're operating and a software tool to assign a cargo container to a vehicle. There is an authorization process to allow the vehicle to move. We'll do the walk-around and any other inspections that are needed, and then the vessel can pick up the cargo pod and go.
It will be seamless and easy by the time we're done, but there is a ton of work ahead of us to make it look that way.
Is the pilot or aircraft sensing visual markers on the ground? What type of technology are you using?
We use GPS and Ultra-Wideband (UWB) positioning beacons. It’s similar to the technology in Apple AirTags which allow you to locate your luggage; we’re using the same underlying technology on our cargo pods as we are on the vehicle. If you tell the vehicle to pick up cargo pod number 486, the vehicle can — within a couple of hundred meters of radius — figure out where the cargo pod is and navigate itself over to it. If anyone walks in the way or there's a car parked, the vehicle can stop until it's clear. We've demonstrated the technology recently at Travis Air Force Base, where we showed the ground navigation and cargo pod movement capabilities.
Safety is really important — as much on the ground as in the air — so we have automotive-grade LiDAR on the vehicles for ground navigation so that if any obstacles get in the way, the vehicle can stop, wait until the obstacle is cleared, and then continue on.
When it comes to beyond visual line of sight (BVLOS), it sounds like your current customers don't need certification or permission for BVLOS operations.
We're in the evaluation process of several systems — of different levels of completeness — that will enable us to do BVLOS missions. We've been very focused, up until recently, on core vehicle functionality: autonomous flight, system integrity, powertrain, hybrid electric propulsion, structures, robotic cargo handling, etc. There are parts of our BVLOS concept of operations that we will not reinvent from scratch, but rather adopt from partners. There are companies that have been working on the BVLOS problem for 10-plus years, so we don't need to reinvent that here. I can't say exactly where the boundaries are going to be drawn between what we do and what we adopt, but we're talking to partners now.
Can you compare Chaparral to some other common forms of cargo transport that the casual observer may be familiar with? What does “300 pounds and 300 miles” mean in context?
In the journey of logistics, the last mile is like that last step where there's an Amazon truck driving around your neighborhood and throwing boxes on front porches. That’s not what we’re doing. Some drone companies like Amazon, Wing, Matternet, and Zipline are doing that last mile.
What we're doing is the middle mile, which moves cargo between industrial logistics facilities. There’s often this multi-step process in the middle mile of express shipping where groups of boxes will go from a sorting facility, onto a truck, and to an airport where they are loaded onto a Cessna Caravan. The Caravan gets loaded up and flies a couple hundred miles to another airport, where the cargo is offloaded onto a truck and then out to the local facility. Only then are those boxes ready for last-mile shipping. The problem with this is that you lose a lot of time at all these interfaces where you're offloading out of one vehicle and boxes are waiting around until they’re loaded onto another vehicle.
What our customers like FedEx know is that time is the enemy. There's an incentive to do more express in more places and serve more people with same-day and next-day shipping. What our customers will be able to do is create fast lanes from one warehouse to another. From the sorting facility to the local facility, you will have a direct flight. Not all of the parcel flow is going to go that way because Chaparral is not as big as a truck, and it's not as big as a Cessna caravan. A Caravan will often carry anywhere from 1,000 to 2,000 pounds of cargo. Sometimes it’s a lot less; Caravans can go pretty underutilized. But that's what a Caravan can do: up to 2,000, even 2,500 pounds per flight if it's really loaded up. A lot of times for express parcel, things don't weigh that much (e.g. small Amazon or FedEx boxes), so you may “dimension out” before you “weight out.”
We’re enabling a fast lane for most express packages (again, not all of them, just the ones that need to be same-day or next-day), to move from one facility to another without having to go through all those intermediate steps and transfers that eat time and prevent a high level of performance logistics.
We’ve calculated that a Caravan is about 50% more costly per pound-mile than what Chaparral will enable. It's hard to know with 100% certainty before you're operating, but you build something transformational, do your best work to estimate what it's going to cost, and work hard to make it insanely valuable.
That's the opportunity for a shipper like FedEx: to create a new network overlay that enables them to do express for a lot of new places, people, and communities. That’s good for people because it's great to be able to get things the same day or the next day. It improves quality of life. It’s also good for the shipper because it opens up a high-margin business.
The cost of flying a Chaparral, if you normalize by how much weight it's carrying, is more affordable than other cargo aircraft. It’s also about 50% more affordable per pound-mile than a Cessna Caravan. And it’s a lot more affordable than a helicopter.
Chaparral is not, however, cheaper than a truck. Aircraft are almost never cheaper than trucks because that's a very low-cost, large-volume way to ship stuff. So if you’re thinking about how Chaparral fits in and creates new capabilities within logistics, it’s not that we’ll be taking trucks off the road and putting all of that volume of cargo into Chaparral. You will still have the network of trucks and the Caravans. It's just that this express network of point-to-point cargo enabled by Chaparral enables a lot more same-day and next-day in a lot more places.
Are you targeting certain unit economics measured by cost per pound-mile?
We are, and it's lower than today's air cargo. We’ve calculated that a Caravan is about 50% more costly per pound-mile than what Chaparral will enable. It's hard to know with 100% certainty before you're operating, but you build something transformational, do your best work to estimate what it's going to cost, and work hard to make it insanely valuable.
Can you tell me about Chaprral’s hybrid electric propulsion?
It's a series hybrid electric powertrain, meaning that all the propulsion is electric: all eight vertical rotors and the four forward propulsors are all electric.
The turboshaft engine takes jet fuel, which we’re optimizing for below 10 gallons per hour — and more like eight. It's a low-emission vehicle with a turbo generator that takes jet fuel.
What was the biggest discovery that allowed you to start Elroy?
I think it was the hands-on experience that my co-founder Clint and I had building drones. We were both working at this early drone company called 3DR that was building consumer and enterprise drones at the time. It was a moment of wild experimentation with smaller drone systems and we both got very interested in new use cases for drones. We saw a few companies building smaller delivery drone systems like Zipline and Matternet, and we just started thinking, “What are the possibilities for bigger systems and what could they be useful for?”
We did the technical diligence at a high level to figure out whether our batteries were the right power density, whether there was enough of a supply chain for motors and controllers, and whether we could build the right structures.
After 20 minutes of talking him through it, he said, “If I had this, I would take it back to Afghanistan immediately because it would solve a lot of these risky and difficult resupply missions that were causing loss of life.”
We just ticked through the technical diligence to convince ourselves that it could be done. We then had some key conversations early on, including a large commercial shipper who said that if we could build a drone that could carry a couple of hundred pounds over a couple of hundred miles, it would start to get really interesting to them.
Then I went to the Pentagon and talked to a captain in the Marine Corps who had just come back from Afghanistan and was trying to learn about everything about drones so he could figure out what would be valuable back in Afghanistan. I was still in the first six months of starting Elroy, and so we didn't have anything yet, but I had a render and a story about what we were planning to build. After 20 minutes of talking him through it, he said, “If I had this, I would take it back to Afghanistan immediately because it would solve a lot of these risky and difficult resupply missions that were causing loss of life.”
And then I had another conversation with a person in charge of aviation for a major humanitarian aid provider, and he said, “We're looking for alternatives for helicopters to carry food and food supplements and shelter and other needed goods to a lot of really difficult to reach places, and if you had a big delivery drone, I am sure we would put it to work in a lot of different ways.” So it was this nexus of the technical investigation, checking that with customers who were expressing urgent needs, and that convinced us that there was really something here. We got to work building.
Is there an opportunity to standardize the Elroy cargo pod in the same way that we’ve seen standardization in container shipping?
Yes, I think there's an opportunity to standardize our container so that it can be hooked into other forms of transport, for example, taking it off of our aircraft and then sticking it on a truck for the last mile. Our containers stack nicely, so they could be packed into a shipping container. I think we can define a standard of middle-mile aerial cargo in terms of the container.
What motivates you to keep working on Elroy Air?
Better logistics is good for people, and we have all of this enabling technology that is ready to be put to work. In the eVTOL space, I think cargo is going to scale first, before passenger air taxi because it poses no risk to people and cargo doesn't care about turbulence. You can actually build a business in places that aren't right over busy downtown areas. We can start the business in places that are more remote, easier to get a “yes” from authorities, and so this is the wedge where you start. Hats off to Joby and Archer — I really hope those guys succeed, but I think we're doing the thing that has the early scale potential.