Alva Review-Courier -

Wichita, Kan. (AP) — A group of young military veterans with background in unmanned aircraft thought their services would be in demand when they formed a company in Kansas in 2014 to operate commercial drones. The company, Blue Chip UAS, was the first company in the area to receive an exemption from the Federal Aviation Administration to legally operate commercial drones while waiting for the federal agency to develop regulations for the new industry.

But three years later, changes in the drone industry led the group to put its activities on hold and those involved in the company have taken other jobs, The Wichita Eagle reported .

Jim Ballard, a key investor in Blue Chip UAS, Ballard said he initially thought the FAA would have stricter rules for commercial drone operations that would require someone with experience in operating unmanned aircraft to help companies provide imaging, three-dimensional mapping and other aerial services to the agriculture, oil and gas, construction and filmmaking industries.

Most of the contracts the company hoped to get didn't pan out, and companies that might have hired the group bought their own drones and trained their employees to fly them.

"The only reason I've got is they decided to do it themselves," Ballard said.

And a drone service company based in McPherson, Saxon Remote Systems - formerly Skynet UAVs - changed to manufacturing fixed-wing drones and accessories because of intense competition in the field.

"I just didn't want to be fighting for table scraps," said John Ferguson, CEO of Saxon. "I know service companies are not . making money unless they have a large contract, a very large contract. We realized if everybody wants to own a drone, why don't we be a manufacturer?"

Saxon makes three types of fixed-wing drones and "we've managed to grow," Ferguson said.

Bob Brock, director of unmanned aerial systems for the Kansas Department of Transportation's division of aviation, said evolution is common in new industries, with some businesses struggling and others succeeding.

He said his hope is the state is helping the drone industry expand in the state, citing the transportation department's partnership with AirMap, announced earlier this week.

The partnership establishes a network to manage drone traffic in the Kansas skies and also enables the state and AirMap to develop the country's first statewide infrastructure to support the testing of technologies to enhance data exchange and air traffic control for drones.

Having that infrastructure should make Kansas attractive to the broader drone industry and convince companies in related businesses to locate in the state, Brock said.

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Information from: The Wichita (Kan.) Eagle, http://www.kansas.com