The fact that airlines function at all is incredible for those who know how they work. Airlines are hubs of communication in a way, as they are involved with maintenance, security, reservation details, baggage, flight delays, passenger logistics, and cancellations. They track baggage, travel arrangements, as well as passenger loyalty points. Distributors and tourist agencies, for instance, need to track airline details, too, and if information goes afoul, travelers and airlines can lose hundreds to millions of dollars, at best. At worst, cracks in data protection can lead to a disaster.
Luckily, blockchain technology (with its transparent ledger and smart contracts) shows potential in helping each of these different layers of communication know exactly what’s going on moment to moment. It can collaboratively update important information, keep airline and passenger data secure, contract ticket conditions for smooth flow, and refund money if any of the conditions are broken.
The Problems
Airlines have several problems, foremost of which is that there is no single source of truth about flight data, and the data that does exist is not easily accessible by all parties. This is known as the “flight data problem.”
While there are many cases of airlines and airports collaborating to share flight data, this data still resides in separate silos. The result is that when there are flight delays, passenger apps, airport flight information display systems, airline websites, their telephone reservation systems and agents give contradictory information. This may result in a loss to the airline’s reputation, the loss of time and money for that airline, travellers, and stakeholders, and it can result in costly litigations. USA Today, for instance, cited the database website masFlight.com and highlighted that cancelled flights cost airlines, stranded passengers, and corporate companies millions of dollars.
The existence of fractured, centralized information also leads to other problems, like websites shutting down or becoming hacked, airlines unable to track their maintenance needs, and the struggle to track passengers and baggage.
That’s where the blockchain comes in with its developing technology that’s slanted to help airlines improve customer experience and safety.
Blockchain solutions: For the airline
With 3.8 billion air travelers in 2016, as well as air travel projected to double over the next 19 years, according to the International Air Transport Association (IATA), the airline industry has its work cut out for them. They need to provide maximum security and safety, show responsiveness and care, display efficacy, and communicate with their stakeholders and travelers in a timely manner.
And it’s with the following areas where the blockchain is about to take off:
- Ticketing — Most airlines provide the option of e-tickets in order to smooth over the passenger’s flight. E-tickets are, in essence, the customer’s travel details that are stored in and retrieved from a massive database. The blockchain can use smart contracts to add business logic and terms and conditions around how that ticket is sold and used, which can help the tickets be sold by different partners, and in real time from anywhere in the world.
- Passenger information — The amount of data shared in real time is enormous. Forget about coordinating flights. Even when tracking passengers on a single flight, each airline has to, at the bare minimum, keep track of when a passenger has checked in for their flights, when their tickets are scanned as they board, and where their bags are in reference to their final destination. Airlines do not want another PR disaster like United’s Dr. Dao incident, where a man was forcefully dragged from an overbooked United flight in Chicago. Once the decentralized ledger achieves the same data speed as centralized websites, the blockchain can use its unique qualities of transparency and collaborativeness to prevent overbooking and revenue loss.
- Cancelled or delayed flights — Airlines have to notify passengers of scheduled changes at least 14 days before they occur, otherwise passengers receive compensation or a refund. Recently, India proposed higher compensation for flight delays. Understandably, the airlines were none too pleased, but they are not always able to know or prevent changes in time, aside from which flight data resides in different silos (folders, categories, different IT processes or systems) so travelers tend to receive contradictory information. In time, the blockchain could present this single point of truth, with stakeholders providing up-to-date and verified information that saves airlines both money and stress.
- Maintenance — In 2017, IBM proposed the blockchain as a digital ledger shared by airlines, MRO teams, and OEMs to record flight events, operation conditions, and scheduled aircraft maintenance checks. Airlines have to ensure that all data about the status of an engine or other parts are up to date and securely shared by all interested parties. At the moment, airline maintenance logs are in cumbersome databases or, at worst, in paper binders. The blockchain can collate all of that information and verify that all parts are legitimate, while offering a real-time record of repairs, purchases, construction, and maintenance checks. This visibility can take aircraft security to whole new levels.
- Security and identity — Airlines have the crucial responsibility of protecting passenger records, flight manifests, and crew information. In May 2018, the digital security company Dashlane tested the password of 55 airline websites and found that only six scored a perfect ranking. Most airlines, including Delta Airlines and Southwest Airlines, achieved an average rating. Data protection in today’s insecure world cannot be understated. Blockchain technology with its high resilience to hacking can provide a far less risky method of storing and sharing information through the use of authorized access requirements.
- Resilience to hacking and glitches — Because airline industries are centralized, they are vulnerable to hacking, crashing, or computer outage. For a full five days in 2015, Russia crashed Sweden’s air traffic control system to allegedly test electronic warfare capabilities. In 2016, Delta experienced a computer outage, cancelling more than 650 flights and delaying many more in the US, Japan, Italy, and the UK. With a decentralized blockchain, however, airlines, travelers, and stakeholders can rely on an uninterrupted flow of credible, up-to-date information.
Blockchain solutions: For the traveler
Airline travelers can find that the blockchain has solutions for them, too, for the following reasons:
- Loyalty — Loyalty points, offered by frequent flyer programs, save you money on air travel, or they could offer you other rewards. Usually, you have to wait until loyalty points settle in order to use them, and you are limited on where you can spend them. By tokenizing loyalty points on the blockchain, you can get instant value by redeeming them on the spot.
- Cost — Airlines tag all sorts of fees on top of their already high expenses. Given meager competition, certain companies have a monopoly on the industry and set their own fees. On top of that, airlines charge fees and taxes for the airport, distributors, local, state, and federal governments. Blockchain technology short-circuits some of these fees by bringing other players into the field and eliminating third-party intervention.
- The flight data problem — Since data resides on different silos, passengers tend to get conflicting information on their flights. In 2017, IT firm SITA announced the results of its FlightChain project, which investigated the potential use of the blockchain for flight information storage and management. It found that since the blockchain presents a single source of truth for flight data, it can save passengers considerable time, stress, and money.
In short, blockchain technology can revolutionize the airline industry in four major ways:
- It provides access to cryptographically fixed updates/information that is distributed to all participants in the network, so everyone knows that the record of transactions (i.e., the details of flight change or cancellation) is true and consistent for all participants.
- The blockchain provides a mechanism for several people to update a common data set, where that data set is visible to all participants on that ledger (primarily all stakeholders of that particular airline).
- With centralized systems, you don’t know what to believe aside from what the system could crash or be hacked. The blockchain has the trust aspect since all records are immutably recorded and collaboratively shared, so all participants see them and can contradict them if necessary.
- A centralized database is controlled only by one authority, which opens it up to mistakes. The ledger, however, works through smart contracts where not only do different organizations share control of the data, but they also implement an approved and shared set of business rules through smart contracts. This gives the data credibility, since it makes errors far less likely to occur.
Blockchain Services for Airlines
The three blockchain platforms for airlines are Further Network, Fizzy, and Winding Tree.
Further Network
Further Network is launching a decentralized billing, settlement, and payment (BSP) model for safer and more convenient traveling, as well as other options to meet all travel needs. It achieves these developments through its smart contracts (called Smart Travel Records [STR]) and its digital currency, Aton. Further’s innovations help airline industries improve their services, visibility, and profitability.
Airline are barely able to function, let alone innovate, with their 2.5%-5% profit margins. A decentralized BSP model hacks settlement and payment costs, enabling airlines to increase their profits. Further accomplishes this by removing third parties and by accomplishing uninterrupted, real-time P2P communication.
Further offers airlines and travelers the following:
1. The decentralized billing, settlement, payment (BSP) process: Further Network helps airlines reduce operational costs (by eliminating third parties), so airlines can focus on customer-centric experiences, consequently increasing their profits.
2. Passenger wallet with biometric ID: Further gives users an Individual Customer Wallet for managing their travel assets and Aton transactions. Also adds the biometric identification to their wallets to help improve the “customer’s journey” by reducing the multiple ID data points into a single point that is under control of the traveler.
3. P2P Travel Product Distribution: Since the International Air Transport Association (IATA) serves as a liaison between airlines and travel agencies, non-IATA airlines lack visibility. Further’s blockchain not only helps such airlines promote themselves, but they also help these companies transmit their inventory over the distributed ledger.
4. The blockchain-based passenger service system: Further’s blockchain gives airlines a secure decentralized data management system. The ticket must do more than just record flight information. It should also be customizable for the travelers’ needs and preferences. Tokenizing these tickets (through STR) help stakeholders and travelers change, sell, add options, and customize their tickets.
5. Open network standards and P2P exchange market: Airlines, hotels, car rentals, cruise and railroad operators, and stakeholders alike could use Further Network’s blockchain to build their own technology, helping them expand and innovate their systems.
In short, Further’s blockchain technology helps airlines improve all components of their business including customer service, inventory management, transportation, storage and materials handling, marketing, information processing, demand forecasting, and other activities. Blockchain technology also helps airlines boost their direct channel sales, cross-selling, and dynamic pricing. The shared ledger provides a closed decentralized cloud system for secure data management and cost cutting. With all stakeholders sharing real-time communication through Further’s ledger, airlines can prevent security problems, boost their appeal, and increase their profits.
Fizzy
Fizzy, rolled out by French insurance company AXA, is another blockchain platform that promises customers instant and conflict-free refunds on airline delays longer than two hours.
Airline passengers subscribe to Fizzy and enter their ticket numbers on Fizzy’s shared ledger. Fizzy’s smart contracts record traveler details and the condition that whenever an airline has at least a two hour delay, payment is automatically triggered and the traveler receives compensation. Fizzy’s smart contracts are connected to global air traffic databases, so passenger compensation is automatic. Customers do not need to file claims and the smart contract minimizes discrepancies between the insurance company and customers.
For now, payouts are issued in fiat currencies, although AXA aims to eventually use Ether. Fizzy, too, only covers US transatlantic flights and Charles de Gaulle Airport in Paris. By the end of 2018, it plans to cover the rest of the world.
Winding Tree
Winding Tree uses the Ethereum network as a decentralized travel platform that minimizes transaction costs between suppliers and end users, including hotels. Winding Tree levels the field by allowing travelers unmediated interactions with all distributors, not just those who monopolize the industry, so that travelers can get the lowest costs. Since the blockchain is transparent, participants can also follow what’s going on.
The platform uses an ERC20 token, Lif.
Other benefits include the following:
- Suppliers distribute inventory directly to points of sale, skipping costly intermediaries and bottlenecks.
- Sellers access inventory from all suppliers from a single platform with no markup fees and no barriers to entry.
- Travelers use Lif to directly pay for travel needs.
The result? Air travel and airline operations becomes cheaper, smoother, and more reliable for all parties and the airline industry becomes more democratic.
Air New Zealand, Swiss Air, and Lufthansa are three of many airlines that use Winding Tree.
Conclusion
Blockchain technology for the airline industry is a perfect match. Multiple actors depend on timely, coherent, consistent, and thoroughly accurate data for not only making and implementing plans but also for sharing traveler and operation information, among other aspects.
At the moment, airlines have a problem with communication discrepancy resulting in impaired airline reputation, costly litigations, and the loss of time and money for the airline, travellers, and stakeholders.
The blockchain technology can help solve this problem with its transparent, distributed ledger that is both permanent and secure. Airlines can use blockchain technology to manage their massive amounts of data on flights, baggage, passengers, and weather. They can use it to track maintenance needs and to improve ticketing services by using smart contracts. Passengers can use the blockchain for managing loyalty points, for coordinating their flights, and for cutting costs, among other things. Both airlines and travelers can use blockchain services like Further Network, Fizzy, or Winding Tree to integrate airline touchpoints, get refunds, and minimize transaction costs.
By adopting blockchain technology, airlines can create more efficient service models and provide better customer service and security.
About the author:
Kirill Shilov — Founder of Geekforge.io and Howtotoken.com. Interviewing the top 10,000 worldwide experts who reveal the biggest issues on the way to technological singularity. Join my #10kqachallenge: GeekForge Formula.