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Drone Delivery Canada Forms Blockbuster Partnership With Air Canada!

|About: Drone Delivery Canada Corp. (TAKOF)
Summary

Partnership with Air Canada is a game changer for Drone Delivery Canada (TAKOF).

The Agreement is a tremendous vote of confidence in Drone Delivery Canada.

This opens doors, not just in Canada, but around the world.

Drone Delivery Canada Corp. (TSXV: FLT, OTC: TAKOF) announced blockbuster news, it has entered into an agreement with Air Canada, whereby Air Canada Cargo (“ACC”) will market & sell DDC’s drone delivery services in Canada using ACC’s marketing & sales platforms. THIS IS HUGE. The biggest news in the Company’s 5-yr.+ history. Securing Air Canada, a C$10.5B market cap company and industry leader, as an EXCLUSIVE partner (exclusive for Air Canada, DDC can work outside of the agreement) is a tremendous achievement and a win-win for both companies.

Talk about De-Risking, talk about a Vote of Confidence, Proof-of-Concept, ramping up revenue, expanding the universe of prospective customers; it’s all here in this one Major agreement. This is perhaps North America’s biggest drone sector news of the year. Please note, I’ve followed DDC for nearly 2 years, I don’t believe I’m exaggerating in my description of this latest development. IT’S HUGE. Congratulations to the team for all the hard work.

From the press release,

“….subject to DDC obtaining regulatory approvals, DDC will build & operate up to 150,000 drone delivery routes in Canada. Routes will include timetables, flight schedules, payload capacities, type of drones to be deployed, and payment terms. DDC’s services will be marketed as a premium offering, and ACC has agreed not to use or engage with any other drone delivery service providers. ACC has agreed to sell, market & promote DDC’s drone delivery services on the agreed routes, leveraging ACC’s expertise in the cargo world, brand presence and sales network.“

Why am I so excited? This opens doors, lots of doors, not just in Canada, but around the World. If Air Canada has effectively signed off, that means Canadian regulators have largely agreed, they have agreed to let Air Canada help commercialize DDC’s business model! This accomplishes a lot of important things. It lights a fire under other country’s air transportation / drone delivery regulatory bodies to perhaps move faster. DDC becomes a case study in how to design, develop & deploy a software platform for drone delivery services. I can’t stress enough how scalable this service is, or how many countries could adopt DDC’s paradigm in coming years. DDC, with this tremendous stamp of approval, can save companies & government agencies several years and millions of dollars, in getting to market with drone delivery services.

Again from the press release, CEO Tony Di Benedetto commented,

This agreement greatly accelerates our commercial roll out in Canada, our drone delivery services will be extensively marketed as we work to establish operations across Canada leveraging ACC’s brand presence and their established sales network and marketing reach. DDC will benefit from ACC’s expertise and ability to promote and sell DDC services through ACC’s industry leading marketing & sales technology channels, which will support our efforts to establish DDC as Canada’s first national drone cargo solution. Next, DDC hopes to pursue even larger markets in the U.S. & Europe.

Although revenue will not pour in this week or next month, this greatly enhances revenue projections from 2020 on. If the high end of the revenue range was, say, C$20M in 2020, and there was thought to be a 20% chance of achieving that figure, now, I would put C$20M as the mid-point of the range, and say there’s an 80% chance of hitting it! But forget about 2020. Revenue estimates for 2021, 2022, 2023… can be thrown out the drone window (if drones had windows). Why? The likelihood of long-term, high-margin licensing revenue from abroad just soared overnight.

And, the size & number of revenue streams could be significantly larger. DDC’s first mover advantage just became even more important because it can now be a first mover sooner, in more jurisdictions, than previously expected. Is this a game-changer for DDC? YES. Some might believe that a deal with Air Canada was inevitable. Even if true, it could have happened in 12 or 18 months. So, yeah, this is HUGE NEWS.

Now we know why the Company prudently raised capital earlier this year. They have a strong treasury to fund working capital & growth initiatives. For instance, they will need to buy more phones to field all the calls that will be coming in!

From the press release,

“The initial term of the Agreement is 10 years from the effective date of May 29, 2019. The routes to which the Agreement applies shall be agreed by the parties and shall be subject to DDC obtaining required regulatory approvals. Once routes are approved by the applicable regulatory authorities, the particular terms of the routes, including payment terms to DDC, will be determined in the context of each applicable route and disclosed in subsequent press releases.”

A 10-yr. Agreement from the start. WOW. But wait, there’s more… I haven’t even mentioned the ACC sales force selling DDC’s drone delivery services. Again, a stamp of approval, but also a highly experienced marketing effort to be undertaken.DDC’s own sales staff can learn a lot from ACC’s expertise. Readers, let’s not take for granted that Air Canada chose DDC as their sole drone logistics provider. It could have developed drone delivery capabilities in-house and bypassed DDC altogether.

Tim Strauss, VP, Cargo at Air Canada commented,

Air Canada is pleased to partner with Drone Delivery Canada, a leading player in today’s emerging drone industry. We believe drone technology has the potential to offer the cargo community cost-effective solutions to complex issues related to supply chain distribution in non-traditional markets, including remote communities in Canada. It is another way Air Canada Cargo is innovating and engaging with new technologies…

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Disclosure: I am/we are long TAKOF.