A few years ago, if you’d asked Glen Lynch what he thought about the business of owning and operating drones, he’d have been quick to tell you: not much. Lynch, who grew up around aircraft, is a pilot. He’s also worked as an airplane mechanic and flight instructor, before discovering an aptitude for business, and going on to run companies in aircraft manufacturing and jet charters. In short, everything he knew about what makes an aerospace company successful involved having a human sitting in a cockpit with hands on the yoke.
So when he got a call in 2018 from his friend and business partner Ian McDougall with the idea of creating a drone-company incubator, he scoffed. “My first reaction was why? Drones were weapons of mass destruction at one end and toys at best at the other,” he says. His skepticism seemed justified. The commercial drone industry had already gone through one hype cycle as giant retailers like Amazon and Walmart talked up plans to plop packages off at customers’ homes using aerial drones, only to see those proposals hit stall speed.
Then Lynch began speaking with companies in oil and gas, utilities and engineering, which were clamouring for ways to make some of their more routine, human-intensive inspection work more efficient and reliable. The result of those discussions was Volatus Aerospace, a small but fast-growing drone-services company that grew out of 18 merger-and-acquisition deals, with Lynch as CEO and McDougall as chair.
Volatus has found success in the grittier, less sexy side of the drone business, away from the cargo-delivery headlines, racking up contracts in Canada, the U.S. and Europe. Last year, Volatus generated revenue of $34.9 million, up 17% from 2022 and nearly triple the year before, while reporting a loss of $9.4 million—though Lynch says the company has been “focused like hell on getting to profitability.” Volatus’s operators carry out inspections on infrastructure like power lines and towers, construction sites, mining operations, solar farms, and building and infrastructure facades, to name just a few sectors. It’s work that was traditionally done using piloted aircraft or crews using lifts. “Drones are effective at replacing aircraft and people in environments that are dull, dirty or dangerous,” says Lynch.
Earlier this year, Volatus announced a merger with Drone Delivery Canada Corp. (DDC), which now provides Volatus with a central operations centre from which it can remotely pilot drones in the field.
The company also has smaller segments that focus on the sale of equipment, primarily in the civil space, but also for the defence industry in the form of surveillance drones—it has supported Ukraine in its defence against Russia and has shipped drones to humanitarian organizations on the front lines, though Lynch grows noticeably uncomfortable when the topic of military drones comes up. “I have a son serving in the military,” he says, “and I don’t like talking about it because I struggle emotionally with war profiteers.”
But Volatus’s largest business segment doesn’t actually rely much on drones, at least not yet. The company operates piloted airplanes and helicopters to conduct inspections on oil and gas pipelines, carrying out surveys on roughly 1.7 million kilometres of pipeline a year, looking for leaks or encroaching hazards. Piloted aircraft account for about a quarter of its revenue, Lynch says. In time, however, that work will also be done by drones, though there are critical technological and regulatory barriers that must be overcome first.
To help it get there, Volatus—which now has 150 employees—has embarked on its most ambitious transaction yet. Earlier this year, it announced a merger with Drone Delivery Canada Corp. (DDC) in an all share-swap deal finalized at the end of August. The combined company goes by Volatus Aerospace; the DDC brand will continue for its cargo operations.
The deal fills several gaps that Lynch identified at Volatus. For one, it greatly expands the shareholder base—both companies traded on the TSX Venture exchange, but shares in Volatus were tightly controlled by insiders, making it difficult to raise capital. Volatus was also “technology agnostic,” selling services around equipment from third-party drone manufacturers, which kept margins slim. Over the years, DDC and its 30 employees developed their own in-house drones, a flight management system, and secure DroneSpot depots for launching and landing drones.
Most of all, Volatus lacked a central operations centre from which it could remotely pilot drones in the field, something DDC now provides. “Drone Delivery Canada built its entire ecosystem around the narrow focus on cargo delivery, but I’m more interested in their capability and experience operating drones anywhere around the world from a central location,” says Lynch. “It was very hard to unlock the value of the two companies separately, but together, it’s a strong model. Drones are the future, and Volatus is the future of drones.”
It’s bold talk, and as companies rush to embrace drones, Volatus has positioned itself to take advantage of that. But it’s also a sector where regulators are scrambling to keep pace with rapidly changing technology, and that means Volatus and its rivals must navigate an evolving patchwork of safety rules before the commercial industry can achieve large-scale adoption and truly take off.
On a recent weekday morning, Lynch stood outside DDC’s unmarked office in a Vaughan, Ont., industrial plaza, buzzing with excitement about what would unfold within. In a large, windowless room that serves as the company’s mission control centre, employees were preparing to remotely pilot an aerial cargo drone that would lift off several times that day from the edge of Edmonton’s busy international airport. But since the control centre functions like an oversized commercial airline cockpit, access is tightly restricted, with three layers of heavily secured doors. Which left Lynch awkwardly waiting on the sidewalk for someone to let him in, since the merger with DDC had yet to close.
Eventually, a DDC employee opened the first door, then another and another, revealing mission control. “We can scale the hell out of this,” said Lynch, looking around.
The control centre was clearly built for bigger things. On that day, two operators worked at desks under a large screen displaying a satellite map of the Edmonton airport, but two dozen other workstations sat empty. Even so, DDC has operated roughly 10,000 remote flights as far away as Vancouver from the site. It has secured a number of agreements with customers to test its technology—delivering blood samples between hospitals in southwestern Ontario, for instance, and carrying cargo from Edmonton’s airport to nearby Leduc in a partnership with Air Canada.
The plan, now that DDC is combined with Volatus, is to fill those stations with employees remotely operating drones on Volatus’s inspection contracts, with each operator simultaneously overseeing multiple vehicles as they dart about on their largely automated flight paths.
“When we get to scale, we can do close to 2,000 flights simultaneously,” says Greg Colacitti, director of operations with DDC. The company is also able to pursue more ambitious contracts that would entail keeping vehicles in the sky for hours on end, such as marine traffic monitoring of whale migration routes, since operators in Vaughan can switch out after their shifts.
Still, if the concept of drone delivery became synonymous with unfulfilled potential, DDC was the Canadian poster child for it. While the company has developed three separate delivery-drone models, including two battery-powered quadcopters about the size of large coolers and a gas-powered helicopter-style drone capable of carrying 400 lbs of cargo, it has struggled to commercialize its technology.
A Volatus quadcopter drone, piloted by an operator in Vaughan, Ont., makes daily deliveries of medical samples between hospitals in Oakville and Milton. When it lands, a human technician takes the packages the final distance.
Since 2014, DDC racked up nearly $100 million in losses on total revenue of just $2.7 million, burning through money it raised in a series of financings. As such, since the company’s share price hit around $2 in 2018, it has mostly spiralled down, except for a jolt of interest during the pandemic when it reclaimed the $2 mark. It fell below 20 cents this year.
DDC’s dismal showing reflects the regulatory challenges facing the industry. Drone use in North America exploded midway through the last decade, when low-cost devices flooded the market, and businesses and consumers began to embrace the tech in growing numbers. By 2015, Amazon CEO Jeff Bezos, who’d first floated the idea of using drones to deliver small packages to consumers two years earlier, predicted the company’s drones would be “as common as seeing a mail truck.” Its Prime Air service was expected to take off in 2018, but the hype collided with reality, literally and figuratively. In 2017, a nine-passenger charter plane preparing to land at Jean Lesage International Airport in Quebec City was struck by a drone.
The plane landed safely, albeit with a dented left wing, but the collision, along with similar incidents in the U.S., prompted regulators to crack down. In Canada, regulations released in 2019 imposed a licensing system for any drones over 250 grams (about half a pound) and capped their weight at 25 kilograms. No flights are allowed above 400 feet, and drones can’t be flown over populated areas. Operators can get exceptions to these rules on a case-by-case basis, and both Volatus and DDC have done so for various contracts.
But for Lynch, the “holy grail” is operating what’s called beyond visual line-of-sight (BVLOS). As it stands, drones must operate within view of the pilot. DDC has obtained exceptions for some routes, but it must still dispatch observers on the ground every few kilometres who are in constant contact with the operation centre in Vaughan. “That makes it cost-prohibitive and not scalable,” says Lynch.
The slow pace of regulatory change has left many in the industry frustrated, says Declan Sweeney, executive director of the Aerial Evolution Association of Canada, a not-for-profit that represents organizations with a stake in the sector. “The regulatory environment is extremely slow and frustrating because it’s very hard to get investment into companies that want to grow when it’s uncertain,” he says.
However, Sweeney notes that Canadian regulators have been more adaptive than many other countries, a point Lynch agrees with. For instance, in 2024 Canada ranked second along with Spain on the Drone Readiness Index, an annual scorecard produced by research firm Drone Industry Insights that ranks various countries on their commercial drone regulations. Australia claimed the top spot. And there are promising changes on the horizon that could put Canada at the forefront of the sector.
Next spring, Transport Canada is expected to finalize new rules that would enable more widespread BVLOS flights by larger drones over sparsely populated areas. “We’re hoping that with the beyond visual line-of-sight regulation, we’re going to see more international investment into the Canadian system,” says Sweeney.
But the rules will also require drones to be able to detect and avoid other aircraft, so Volatus and DDC are testing and integrating detection technologies like ground radar and on-board cameras to spot hazards and guide drones to safety. Once the technology is perfected and approved, Volatus should be able to deploy drones along oil and gas pipelines, replacing piloted aircraft. In September, Transport Canada approved DDC to operate BVLOS flights carrying medical samples between hospitals in Milton and Oakville, Ont., without visual observers, using ground-based radar—though for now, safety pilots are required at either end. “It’s a matter of crawl, walk, run,” says Lynch.
Solving the line-of-sight challenge will also move DDC’s cargo delivery business closer to reality, particularly for remote communities. As a step in that direction, the company signed a deal earlier this year to test the delivery of prescription medications from Leduc to Montana First Nation, which sits roughly 90 kilometres south of Edmonton. The closest pharmacy is around 15 clicks away, and while that doesn’t seem far, Chief Ralph Cattleman says most adults in the community don’t drive or have access to a vehicle. “This isn’t just about my community, it will be beneficial to a lot of remote First Nations communities that are two or three hours away from hospitals,” he says.
Meanwhile, the integration of Volatus and DDC continues. While Volatus had focused on providing drone services using only third-party equipment, it has its own proprietary technology in the form of the Aerieport, a nesting station designed to be deployed near remote oil and gas pump jacks to conduct inspections. Resembling a large, cylindrical barbecue, the steel top rolls back, allowing a drone to launch and land autonomously, before resealing to protect it from the elements while it recharges. An Aerieport has been installed at DDC’s testing facility, which sits amid farmland north of Toronto, and each day operators at mission control dispatch drones to test the tech and demonstrate it for potential customers.
Still, given the staggering losses DDC has experienced in the past and the slow pace of regulatory change, can Volatus avoid falling into the same quagmire? In announcing the merger last May, the companies said they expected combined revenues in 2025 to hit $70 million, thanks to “near-term revenue opportunities,” while generating $10 million in adjusted earnings as a result of cost synergies.
Those are ambitious targets, but Lynch insists Volatus’s focus on improving the bottom line will carry over to the combined drone company. “For the whole industry the days of grow, grow, grow at any cost are over,” he says. “You need to demonstrate growth, but you need to do so profitability. That’s our focus in everything.”