Blockchain and the airline industry: ready for take-off?

Last Sunday I was visiting a hockey match here in the place where I live. Near the playing field, I was drinking a beer, discussing with a friend of mine who worked at a big international airline company about the role blockchain could play in this sector. This triggered me to write this blog. By the way, our team lost!

Let’s first look at where the airline industry is now

For every traveller’s ticket, airlines conduct various business-to-business (B2B) transactions that touch other business and government entities. From booking to arrival, players include online travel platforms, government agencies, airlines, card providers, airports, car rental agencies, immigration hotels and more.

The industry is powered by data sharing among multiple actors and touchpoints. Information both on the traveller and overall operations is continually collected, stored and “disseminated” by each of the actors involved at some point. They will need to go through complex data reconciliation processes between a multitude of systems to ensure operations and security and facilitate the successful departure of the traveller.

Airlines alone house data in numerous siloed systems from passenger service to crew management Each airline system is characterized by a mix of data that it stores to facilitate a travel. It may vary from crew departments, to passenger services. With multiple systems in play  and massive data stored in multiple single systems makes the exchange at times difficult. For airlines, not only operational integrity and revenue generation may be endangered when something goes wrong, but also safety and security.

Accenture: Why blockchain for the airline industry

According to Accenture in its report “Beyond the Buzz: The potential of Blockchain Technology for Airlines”, there is a very strong similarity between the airline industry operations and what blockchain technology has to offer. Therefore “it is fair to say that blockchain and other distributed ledger technology has the ability to improve transactional flows, improve trust and provide immutable record retention”.

With the complexity of information and the delicate state of affairs in the airline Industry, block chain technology incorporation for comprehensive data sharing and reconciliation may prove to be very beneficial. One of the advantages is cutting down complexities associated with cross-enterprise business processes. Use of blockchain techniques can help enhance reconciliation and data sharing.

 “Using blockchain technology for enhanced reconciliation and data sharing is a compelling value proposition for this industry. The most creative and disruptive possibilities go beyond pure financial transactions,” Accenture 

Blockchain technology can also create new efficiencies and services models for airlines.

 “On a basic level, interoperability between programs and partners that use the same dataset to record and transfer value will result in enhanced efficiencies in transaction processing and invoice reconciliation” “For travellers, this will result in quicker availability and better usability of their points and miles”, Robert Moerland, EVP – Global Business Development, Loyyal

Another attraction of blockchain technology for the airline industry is that it allows “privacy by design” so that passenger data can be secure, encrypted, tamper-proof and unusable for any other purpose. Once information has been entered, it cannot be changed. At the same time, it eliminates the need for a single authority to own, process or store the data.

Capco –IATA Research

Capco, the global business and technology consultancy for the financial services industry, has conducted a report on behalf of the International Air Transport Association (IATA), to determine how blockchain will impact the airline industry and how this technology can be used to benefit them. Key findings include blockchain’s potential to make the industry faster and more cost efficient, and enhance customer experience, as well as a number of uses of blockchain and its value.

One area IATA is currently exploring refers to how this technology can help optimize the money flows between partners in the travel industry value chain. 

“Blockchain is a disruptive technology and represents a great opportunity for digital innovation. Every single industry, from the financial sector to aviation, is trying to understand where this technology will best fit and where to start the innovation journey. Distributed ledger technology – including blockchain – is already proven to reduce transaction fees when transferring money across borders and currencies,” “That represents a great promise, particularly for global businesses and industries.” Assad Mahmood, senior consultant, Capco.

“The value of having a single ’source of truth’ that all business partners trust can dramatically simplify reconciliation, invoicing and settlement in our industry,” Juan Iván Martín, IATA head of Innovation, Financial and Distribution Services. 

Lufthansa introduces Blockchain for Airlines Initiative (BC4A)

German airline company Lufthansa has introduced the BC4A, or Blockchain for Airlines initiative. Main goal is to bring together all areas in the industry and collectively investigate the potential of blockchain. Potential participants are software developers, aircraft builders, MRO (Maintenance, Repair and Overhaul) service providers, logistics, leasing companies or regulators. Aim is to collect use cases of blockchain in the airline industry and come to common standards for its use.

Where can blockchain be used in the airline industry?

There are a  large number of promising cases where blockchain technology could be used in the airline industry.

“The most creative and disruptive possibilities go beyond pure financial transactions.” “They may include use cases in ticketing, loyalty schemes, security and identity, as well as maintenance”, Accenture

• Identity Management

Blockchain technology could solve the problems related to identity management. It could even revolutionise identity management in combination with biometrics technology. Once validated on the blockchain, it would make it harder to “impersonate” or commit fraud. Companies such as uPort4 are designing systems to allow users to create digital verification of individuals on the blockchain. This would drastically reduce the current friction and burden of processing paper passports and relying on human checks to validate passenger identification.

• Security

The security and privacy of information in all Industries is vital, in particular for the airline industry. Data privacy is a critical issue for passenger records, flight manifests and crew information. There are also security implications if this data is not properly protected. Security and privacy can be significantly enhanced by using blockchain technology. Blockchain technology with a security wrapper (that requires security authorisation to access and even disseminate information) creates a very different and safer way to manage and share this information through authorized access requirements.

• Ticketing.

The blockchain can tokenize the present e-ticket and further dematerializing these tickets. Through the use of smart contracts associated with the tokenised tickets, airlines can add business logic and their terms and conditions for how the ticket will be sold and used by different partners across the value chain, and in real time, from any location in the world in a secure and efficient manner. This opens the possibility of one purchasing airline tickets from a host of partners from any part in  the world.

• Loyalty

By tokenizing loyalty points on a blockchain, travellers get immediate value as they can redeem and use the points instantly on the spot. They can also use them more broadly through a user community of partners (marketplace or exchange model). With points accepted as sort of “currency” among more providers, travellers have a faster-to-use, easier and more extended spending program that is better suited to their personal preferences.

 “One example is the possibility of multi-branded points that have a special value or benefit associated with them, potentially for a limited period of time. This means for travellers that more relevant targeted offers with an increased value will become available in a higher frequency,” Robert Moerland.

•  Luggage custody-change tracking

Luggage change custody through their journey between airlines, airport, and ground handlers. When something goes wrong with a passenger’s luggage it is important to have a log of custody changes to be able to determine who is responsible. A (semi-private) blockchain can cater for this as a neutral ground for reporting custody changes throughout the value chain. A blockchain-based solution for tracking luggage would smooth the hand-off points where different teams take over responsibility for passenger items. All airlines could track luggage handling on a single blockchain which is readable by the passenger. The traveller could even be able to see if their luggage is on the plane.

• Maintenance

Another case study would be aircraft parts as they change custody between manufactures, traders, maintenance service providers, and airlines. Blockchain technology can move maintenance logs out of existing “bulky” cumbersome databases and paper binders. This may enable airlines to safeguard the validity of procured parts. It can ensure that parts procured are legitimate and can provide a “virtual copy” immutable record of the provenance of each part on the plane, every time it has been handled and by whom, from the beginning of the aircraft existence. This would mean that the provenance of every part of the aircraft is instantly available and would speed up due diligence around future lifecycle events. Maintenance events could be set in advance and non-conformity would appear within the aircraft maintenance record. This visibility can firmly improve maintenance, safety and security.

• Air cargo

The air cargo industry could benefit from Blockchain both as a tool for saving money and offering monetary protection, and could transform, how cargo is nowadays managed. Blockchain technology could increase efficiency, cut down on costs, and reduce fraud.

In addition to reducing costs and time, blockchain would allow for complete consolidation of air cargo records, with verification. Blockchain would remove the need for costly and inefficient paper work and for the various and multitude time-consuming verification steps. In order to verify the origins and legitimacy of the products taking on board, blockchain could be used to track every step of the process: from origin, through shipping, all the way to the arrival at the airport. Blockchain also could protect against any alterations, additions, or subtractions to the products in the meantime, cutting down on smuggling and theft. This transparency and validation will allow for faster processing and a reduction in paperwork. It might be possible to speed customs clearing with any import duty paid via the blockchain.

• Other use cases

Apart from these applications blockchain technology can also be used for other cases. These may include Airport Collaborative Decision Making (ACDM),  In-flight entertainment, traveller compensation, flight planning etc.

SITA Project

Travel technology provider SITA is exploring the potential of blockchain technology as part of its single token efforts. This technology provides the opportunity to allow secure biometric authentication of passengers throughout the journey across borders, which could help eliminate the need for multiple travel documents without passengers having to share their personal data.

“Now blockchain technology offers us the potential to provide a new way of using biometrics. It could enable biometrics to be used across borders, and at all airports, without the passenger’s details being stored by the various authorities.” Jim Peters, SITA’s Chief Technology Officer

SITA Lab, along with blockchain start-up ShoCard, is now researching how using virtual or digital passports in the form of a single secure token on mobile and wearable devices could reduce complexity, cost and liability around document checks during the passenger journey.

What the SITA Lab team is looking at is how the air travel industry – airlines, airports and government agencies – can take advantage of blockchain technology where the underlying blockchain provide trust so that individuals or authorities don’t have to.

“If this new approach to identity management and passenger processing gains the support of the wider air transport industry and government agencies, it would make sense for the technology to be trialled as a next step” SITA

Blockchain may revolutionise airline industry

Blockchain technology may become a disruptive force that may revolutionise the airline industry. Blockchain has the potential to play a leading role in disrupting many facets of the way they nowadays do business. Airlines – a data intensive industry with complex procedures and requirements – will certainly benefit from paying attention to the new potentials available and therefore have to reckon with this new technology.

“Blockchain technology will continue to take flight in airlines over the next decade. Use cases not even conceived of today will become every day, reducing complexity and costs while improving the travel journey with real-time travel experiences,” Accenture

Accenture sees an opportunity for major expansion. But it will still take a number of years before a real take off will be seen in the airline industry!