Drone Delivery for Defense

Regulatory Gridlock in the U.S. Risks Losing the Drone Arms Race

TL;DR:

Civilian markets are an economic engine to reshape America's defense industrial strategy. Europe's proactive regulations have enabled drone startups like Ireland’s Manna to build robust, scalable commercial industries that inadvertently prepare them for wartime. By contrast, America's FAA has constrained drone innovation through outdated rules designed for traditional aviation. The U.S. risks falling behind in a crucial technology that could economically transform defense capabilities. Allowing drones to scale commercially would reignite the competitive economics that once powered America's wartime industrial dominance, revitalizing manufacturing, driving innovation, and breaking free from reliance on entrenched, government-dependent defense contractors.

Last week, I listened to Ben Thompson interview Bobby Healy, the founder and CEO of Manna Drone Delivery, an Ireland-based startup using autonomous drones to deliver everyday items directly to suburban homes.

At one point during the conversation, Ben remarked, half-jokingly, "It sounds like you’re accidentally making the next defense contractor underneath the guys delivering coffee." Bobby brushed this off, responding, Yeah for sure, these drones have all sorts of roles. We’re focused on commercial use cases because it’s straightforward. But look, Ukraine are producing two-and-a-half drones a day now. There’s definitely a market and that market’s not getting any smaller, but we’re focusing on commercial use cases."

This got me thinking: this company is actively developing swarms of domestically produced drones that operate autonomously, communicate through sophisticated software, and coordinate flight paths via a decentralized network to ensure safe airspace management and prevent mid-air collisions. They're moving everyday goods at speeds far exceeding traditional infrastructure. If you take a step back, this sounds less like a logistics company and more like an emerging military program.

A key reason this drone innovation is thriving in Europe and not the United States is, ironically, Europe's propensity for regulation. The European regulatory environment, typically criticized for stifling innovation, has paradoxically created the necessary conditions for drone use by clearly defining operational guidelines early on. Even some of the more onerous regulations around the reliability of parts have had the effect of creating a fairly comprehensive drone supply chain primarily within Ireland to ensure this regulatory approval - rather than relying on readily available Chinese components.

Meanwhile, the United States—a nation that theoretically should lead in defense innovation but instead unfortunately leads in defense spending as a percentage of GDP—remains bogged down by entrenched legacy primes. We’re entering a new era, exemplified by contested battlefields and new warfighting methods in Ukraine, highlighting that drones aren't merely consumer gadgets; they represent a major shift in how the physical world operates.

The FAA and other U.S. agencies must create a regulatory environment conducive to large-scale commercial drone operations. Only then can America establish a robust commercial drone manufacturing base capable of building the infrastructure, on-shore expertise, and supply chain necessary to unshackle ourselves of the existing defense-first industrial complex.

Why Civilian Markets Matter for Defense Innovation

In December 1926, Allan Loughead, John Northrop, Kenneth Kay, and Fred Keeler founded the Lockheed Aircraft Company with the intention of producing a passenger plane—the Vega—for commercial airlines. It was fortuitous timing: Lockheed’s commercial operations put it in a strong position when, in 1938, Britain urgently ordered 250 Hudson bombers, an order accounting for nearly all of Lockheed’s revenues at the time. Lockheed’s pre-war commercial foundation was critical to America producing over 320,000 planes during WWII—more than all the Axis powers combined—and helping the US achieve unmatched air dominance.

After the war, however, many of the companies that emerged as major defense suppliers—Lockheed, Boeing (started in 1916 as Pacific Aero Products Co., building commercial seaplanes), Raytheon (founded in 1922, originally making refrigerators), General Dynamics (began in 1899 as Electric Boat, building commercial submarines)—either spun off units or transitioned entirely into dedicated military contractors. Over subsequent decades, these purely military-focused firms became increasingly dependent on government contracts, losing their original commercial dynamism in the process.

When the Soviet Union collapsed in the early 1990s, defense spending cuts hit these companies hard. Defense Secretary Les Aspin and Deputy Secretary William Perry actively encouraged major defense contractors to merge or vanish at the infamous Last Supper. Without commercial revenue streams to cushion the blow, Lockheed merged with Martin Marietta, Boeing with McDonnell Douglas, Northrop with Grumman, and so on. 1993’s 51 prime defense contractors shrank to 5 in the following years, establishing and entrenching today's "big five" in procurement.

At the time, this consolidation seemed rational—why subsidize redundant suppliers in a post-Cold War world, with America so clearly ahead as a global unipolar power? Yet, this strategy locked the defense industry into a slow moving, government-first and government-only innovation pipeline.The result today is pretty unflattering for many of these defense giants: costs are sky-high, product cycles are painfully slow, and the entire model revolves around wringing every last dollar from the Pentagon.

But history also shows a different, more optimistic path: companies can still thrive commercially and transfer their innovations back into military applications. When AWS introduced EC2 and S3 in 2006, it created a fundamentally different economic model for computing. Instead of large enterprises paying upfront for siloed infrastructure, AWS let companies pay incrementally, dynamically scaling usage based on actual demand. This shift unlocked massive private-sector investment—billions spent optimizing data centers, developing custom silicon, and building out global infrastructure—that government-only efforts could never replicate.

The result is that federal agencies today gain access to infrastructure hardened by continuous, real-world usage from millions of companies. The lesson is clear: innovation emerges more reliably and rapidly from commercially-driven enterprises than from purely government-funded contractors.

The Limited TAM of Military-Only Drones

Here's a striking irony: defense-focused companies like Anduril are currently building some of America's most advanced unmanned aerial vehicles (UAVs)—remarkable systems, without doubt. But the key constraint is obvious: peacetime defense budgets only stretch so far. The Department of Defense is never going to buy 50 million drones before a war breaks out. Even with heightened awareness of Ukraine’s success deploying inexpensive drones, there’s only so big that total addressable market can get.

Contrast that with a genuinely open commercial market. There’s room to build 100 million drones if every neighborhood in the U.S. might one day be served by short-hop autonomous flights delivering, Starbucks lattes, Amazon packages, and groceries. Compared to defense budgets, the long-term upside of delivering cups of coffee (or medicine, or spark plugs, or burritos) dwarfs the market for purely military UAVs.

The Opportunity (and the Best Way to Undo the 1990s Decision)

A thriving commercial manufacturing industry can scale quickly and flow technological benefits and manufacturing capacity back into defense when needed. After WWII, U.S. factories that had churned out military trucks and bombers were able to return immediately to building consumer cars and washing machines. Lockheed resumed production of civilian aircraft, as well as military planes. The advantage was that those factories and engineering teams, once mobilized, could pivot back to defense if required.

Today, building tens of millions of small drones — U.S. made, running American software — for commercial delivery offers that same advantage. You get the cost efficient economies of scale, competitive technological advancements driven by consumer markets, and critically, a readily available industrial base able to produce these drones in wartime.

Consider this scenario: If we deploy 100 million commercial drones nationwide for routine deliveries, we've inadvertently created an immense, ready-made fleet that could, in an extreme case, swiftly pivot to national defense—imagine Taiwan's defense bolstered by an army of repurposed consumer drones. This mirrors what's already happening in Ukraine, where consumer-grade drones have quickly evolved into essential military tools. Historically, America excels at mobilizing industrial capacity—but today, we’re held back by regulations and haven’t built the requisite commercial infrastructure. Instead, we're stuck relying on a defense-industrial complex intentionally designed to never achieve consumer-scale production.

Commercial Drones as a Weapons Platform

Interestingly, the most promising drone swarm technology from the West is arguably emerging from Ireland. The mesh network developed by Manna and Google enables decentralized drone operations, dynamically negotiating air corridors to avoid collisions and achieve efficient delivery. While American firms like Anduril provide advanced drones and operating systems, and Palantir supports back-end defense analytics, the drone platform with the fastest potential for mass deployment might currently be delivering coffee to suburban Dublin homes.

A drone platform like Manna’s (referring to the vehicle, in the military sense) is capable not just of suburban deliveries, but also navigating complex environments, gathering intelligence via computer vision and lidar, and even potentially carrying weaponry or explosives.

What’s remarkable is the speed and payload capacity of the Manna drones themselves. They can fly at around 50-80 kilometers per hour (30-50 mph), carry a few kilograms of cargo—enough for multiple drinks, groceries, or small packages—and operate on air corridors autonomously and quietly. In a commercial setting, this means a coffee delivery takes just a few minutes. But in a defense scenario, it could mean a low-cost, easily deployable system for reconnaissance, small-scale resupply, or even weapons systems. And the same technology and supply chain behind these drones, with a few tweaks by the existing teams, could be repurposed for interceptions and air combat.

Regulation as Innovation

Ironically, one of the primary reasons drone innovation is thriving in Europe—and specifically Ireland—comes down to Europe's desire to shoot themselves in the foot enthusiasm for regulation. The European regulatory environment, typically derided as overly burdensome and innovation-stifling, has paradoxically accelerated drone adoption by actually allowing the drones to operate, albeit very locked down. Specifically, the European Union Aviation Safety Agency (EASA) established three tiers of drone operations—Open, Specific, and Certified—each with progressively stringent safety, reliability, and operational requirements.

In 2021, Manna Drone Delivery became the first company in Europe to secure a Light UAS Operator Certificate (LUC) from the Irish Aviation Authority (IAA), enabling the company to self-authorize its operations under EASA’s Specific category. Some of the particularly stringent parts quality regulations even drove Manna and other drone operators to establish robust domestic supply chains. Because the Specific category demands rigorous quality assurance, reliability, and component traceability, Manna built local manufacturing ecosystems to guarantee compliance. Rather than relying on readily available but harder-to-certify Chinese components, companies like Manna have created comprehensive, highly-controlled manufacturing processes entirely onshore.

In the U.S., one reason drone delivery remains more concept than reality is that the FAA's primary certification pathway—Part 135—was never designed with drones in mind. Originally crafted for manned aircraft, Part 135 subjects drone operators to requirements that range from irrelevant (like carrying flight manuals onboard) to financially and logistically onerous. The certification typically takes between 12 and 18 months to obtain, often involving significant legal costs and extensive administrative overhead. This complexity might be manageable for massive incumbents, but it’s devastating for smaller, agile startups—precisely the companies most likely to innovate quickly.

Bobby Healy, CEO of Manna, has highlighted exactly this regulatory quagmire, observing that some companies in the U.S. have been "making no progress for eight or nine years," largely due to uncertainty around FAA requirements. As Healy puts it, while there are drone trials scattered across American suburbs, these pilots haven’t translated into meaningful scale or clarity on when widespread deliveries could actually become routine. In contrast, Manna operates comfortably at scale in Ireland, precisely because European regulators provided clear, achievable pathways early on.

China presents a different but highly instructive contrast. While Ireland’s approach shows the power of a well-structured regulatory roadmap within a smaller market, China’s Civil Aviation Administration (CAAC) has taken an even more proactive stance on drone integration—particularly around beyond visual line of sight (BVLOS) operations and designated “pilot zones.” Cities like Shenzhen have full-fledged drone corridors, allowing tens of thousands of urban deliveries per year. The Chinese government’s coordinated approach, combined with heavy state support and a massive domestic market, means firms like Meituan and JD.com can deploy drones at scale in a way that dwarfs even Europe’s programs. This regulatory permissiveness—plus strategic industrial policy—helps explain a part of China’s lead in commercial drone manufacturing globally.

The FAA’s forthcoming Part 108 regulation promises to standardize Beyond Visual Line of Sight (BVLOS) drone operations—a crucial milestone for advancing the U.S. drone industry. However, despite an explicit mandate from the FAA Reauthorization Act of 2024 to release a Notice of Proposed Rulemaking (NPRM) by September 16, 2024, the FAA has already missed that deadline, pushing expectations toward early 2025 at best. This delay underscores a deeper issue: a sprawling bureaucracy of 45,000 employees tasked with meticulously interpreting aviation law, a structure explicitly designed around minimizing risk through exhaustive stakeholder consultation.

Indeed, the FAA's reliance on NPRMs and advisory committees, while valuable in theory, is precisely why progress has been so painstakingly slow. The agency’s institutionalized caution—born from an American aviation culture historically obsessed with safety—results in prolonged timelines and regulatory ambiguity. The absence of finalized rules leaves drone manufacturers in limbo, hesitant to scale operations or confidently invest in domestic production. Until Part 108 is fully implemented, the industry will remain trapped in uncertainty, and the U.S. risks falling behind precisely at the moment clarity could unlock meaningful innovation.

The U.S. is losing the race. If Manna can deliver coffee in two minutes to a suburban cul-de-sac in Dublin, there is no reason the same can’t happen in Austin or Nashville. And subsequently, there is no reason that this same manufacturing infrastructure, coordination software, and on-shore institutional knowledge would not also be helpful to defense down the line.

Why We Need the FAA to Act

The FAA has unintentionally become the biggest obstacle to large-scale drone innovation in America—not due to malice, but because its regulatory frameworks were never built with drones in mind. Instead of modernizing, the agency continues to shoehorn drone delivery into outdated regulations designed for manned aircraft. As a result, each drone operator is forced through the cumbersome, costly gauntlet of Part 135 certification, or an endless maze of ad hoc exemptions.

Safety concerns around crowded airspace and mid-air collisions are legitimate, but clearly solvable—after all, Ireland and other European countries have already demonstrated as much. The technology exists, and proven regulatory blueprints are readily available. What's missing is regulatory clarity and the willingness of the FAA to shift its posture from cautious incrementalism to proactive enablement.

This matters beyond simply getting coffee delivered faster. Without a viable commercial drone ecosystem here at home, America risks outsourcing its drone manufacturing base entirely—likely to countries whose technology and software layers we'd prefer to avoid for obvious national security reasons. Banning Chinese drones also won’t work - we need positive, proactive creation of an economic market here in the US to drive a real flywheel of incentives. There’s no reason American companies can’t dominate every part of the value chain, from hardware manufacturing to software coordination platforms.

If the FAA clears the runway—perhaps with a new drone-specific regulatory framework akin to a Part 108 (the current leading proposal to enable Drone operations) —we unlock massive opportunities for domestic innovation, supply-chain resilience, and economic growth. And it also positions us far better for future national security challenges.

I’m not saying that if we allowed the FAA to act, Anduril would start serving you coffees from Starbucks down the street. But it would enable an industry we desperately need on-shore - a commercial drone ecosystem thriving at scale, ready to pivot seamlessly into defense when and if the moment arises.

That’s how we undo the 1990s. By enabling a robust commercial market for drones, we won’t need to rely exclusively on the handful of defense primes that consolidated at the Pentagon’s urging decades ago. Instead, we get a new ecosystem that’s cost-driven by actual consumer demand, with a pipeline of new technologies that, yes, can translate into new kinds of warfighting capacity if the moment calls for it. Instead of building 50,000 drones for the Air Force, we’re building 50 million for Uber Eats. Then, if the worst happens and the world needs drones for a conflict, the supply, manufacturing knowledge, and operational expertise exist.

This is an extraordinary opportunity. It’s also a rare chance to rectify the legacy of post-WWII defense-company splits and 1990s consolidations. America has the talent, the capital, the entrepreneurial spirit. All we need is to actually allow ourselves the courage to compete. Let the FAA clear the way for fully autonomous, at-scale delivery across the country, and we might just find ourselves with the best commercial drone industry on the planet. That would be good for commerce, good for consumers, good for innovation, and frankly, good for national defense.

If you have questions, comments, or feedback, please reach out: sobannon6 [at] gmail [dot] com.

Thanks to Aldrin Clement and Max Minsker for their feedback on this article.