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Blockchain and the aviation industry: fasten seatbelts for take off

My wife and I recently returned from our trip through South Africa and Namibia. It was great again. All went very well except our flight back to Amsterdam. That was cancelled because of fleet shortage at the airline company. The result was that we were offered a flight two days later. At the counter in Joburg International Airport it took us more than three hours to arrange something. What could have been the outcome if blockchain technology had been used?

Last year I wrote a blog “Blockchain and the airline industry: ready for take-off?”(FINEXTRA May 24, 2017). My conclusion at that time was that it would still take a number of years before a real take off would be seen in the airline industry! Now we are 1 ½ year later and things have fundamentally changed. Blockchain is clearly on the aviation industry’s radar and has started gaining significant traction worldwide. Airports and aviation platforms all over the world are looking at blockchain technology for ways to improve processes, and better customer experience. So, let’s have a look!

Blockchain insight research for the aviation industry

This year a number of interesting research reports were released by airline and aviation companies including SITA, IATA and Accenture to give insights in blockchain and its possible applications for the aviation industry.

The 2018 SITA Air Transport IT Insight Report
According to new research released by SITA, the industry information technology company, blockchain is fast emerging as the priority technology for future exploration among airport and airline CIOs globally, “attracting the most research attention in 2018”. The 2018 SITA Air Transport IT Insights report shows that almost 60% of airlines have blockchain-based  pilot or research programmes for implementation by 2021 (up from 42% last year). Airports are also experimenting with this technology, with 34% planning R&D projects by 2021.

One of the key benefits of blockchain technology is the ability to have multi-enterprise applications. These work across multiple organizations “locking data immutably into the blockchain rather than having individual applications running separately and exchanging data on a case-by-case basis”. This is how this technology can provide a ‘single source of truth’ to all stakeholders. Blockchain offers multiple use cases, according to the report, ranging from passenger identification to ticketing, asset tracking and managing frequent flyers programs, “all of which help the various stakeholders in the industry work better together”.  

Many airlines now see blockchain technology as an opportunity to realise efficiency savings out of their operations. 40% of airlines and 36% of airports state that blockchain could streamline the passenger identification process. While the focus in the industry is predominately on passenger identity management, both airlines and airports also see that blockchain could have major benefits across several other use cases. Almost one third of airlines believe that the technology could assist with launching passenger tokens for frequent flyer programs. The same size feel that it could help with the launch of e-tickets. And about 30% of airport ICOs said blockchain could benefit custody change tracking (such as luggage), while a quarter stated that the technology could assist with operational efficiency.

IATA study “Blockchain in Aviation: Future of the airline industry 2035”
In the IATA study “Blockchain in Aviation: Future of the airline industry 2035”, that was published in December blockchain has been identified as one of the technologies that may have a major impact on the future of aviation.

This first IATA blockchain white paper is introduced to raise awareness on the potential of this technology for the aviation industry and to guide the industry towards the most promising business opportunities. The key word thereby is: collaboration.

The value chain across the aviation industry is inherently very collaborative with many partnerships between providers to collectively orchestrate the delivery of travel products and services. It is therefore not surprising that several airlines and their partners have been experimenting with the blockchain technology on a variety of use cases.

Accenture Aerospace & Defence study
Research from the global professional services company Accenture reveals aviation companies are “buying into the concept of blockchain” at a faster rate than previously thought. Blockchain has been tipped by Accenture as a key emerging technology for the past two years running.

According to the Accenture Aerospace & Defensc study at least 86% of Aerospace and Defense companies will implement blockchain into their systems by 2021. The sector has the third highest level of expected blockchain adoption across the 18 industries polled, coming marginally behind the semiconductor and health payment industries.

“It’s very rare that we talk about something two years in a row but this technology is taking off much faster than we thought it would. We estimate that more than half of companies are already actively working with the technology and predicts it will soon become a game-changing innovation for this sector.” John Schmidt, Accenture’s managing director of Aerospace and Defence

Some Interesting Blockchain initiatives in the aviation industry

This interest in blockchain technology by the aviation industry is not that strange. Major competitors are recognizing how the characteristics of the aviation industry align very well with the capabilities of blockchain. The commercial aviation industry is a highly collaborative but complicated space. Many of the industry’s processes remain paper-driven today and with so many systems in play data exchange is not always smooth. In such an ecosystem the potential for blockchain is great.

But what is the aviation industry really doing? During 2018 we have seen a growing number of blockchain-based initiatives across the aviation industry around the world to create awareness and search for applications in the industry.  Most interesting examples are Lufthansa’s Aviation Blockchain Challenge, SITA’s Aviation Blockchain Sandbox, Winding Tree and more are expected to follow.

Lufthansa /SAP – Aviation Blockchain Challenge
In July, Lufthansa and software company SAP launched the global Aviation Blockchain Challenge, to support its blockchain R&D efforts within the aviation space. This Challenge project aims to find use cases for blockchain technology, eventually develop joint standards for use and support the development of the supporting infrastructure to actualize the use cases.

Main goal is to bring together all areas in the industry, collectively investigate the potential of blockchain and prompt entrepreneurs for practical, commercial applications across the full range of aviation processes. The likely participants for this initiative include aircraft manufacturers, software developers, logistics providers, MRO service providers and regulators.

"By combining our aviation industry expertise with the blockchain technology of a world market leader [SAP], we are creating the ideal worldwide framework for addressing blockchain entrepreneurs with an affinity for travel and mobility". Thorsten Dirks, Lufthansa Group Executive Board Member in charge of Eurowings and Aviation Services

Both organisations are thereby seeking ideas from entrepreneurs for blockchain-based solutions in three main areas: the passenger experience (flight booking services), airline operations and processes, and maintenance (internal data systems) and the aviation supply chain (third party supply chains).

SITA – Aviation Blockchain Challenge
Last October, SITA, the world's leading specialist in air transport communications and information technology owned by more than 400 airlines, started its Aviation Blockchain Sandbox project.

This major industry research project, aimed to explore the potential applications of blockchain in aviation, shows that there is growing consensus in the industry that the potential benefits of blockchain cannot be get in full until the air transport industry works together more closely.

The Sandbox project looks to facilitate this intra-industry collaboration, accelerate the understanding and drive the exploration of blockchain in the air transport industry. This by building a fully managed cloud-based blockchain infrastructure for airlines, airports and other industry stakeholders to use and to accelerate industry-specific research into the viability of running multi-enterprise apps using distributed ledger technology. Participants can join existing dApps (such as Flight Chain), collaborate on new dApps that SITA will be building or deploy their own.

“Through this collaborative innovation we will accelerate the learning for all and have already significant interest in pursuing cross-industry initiatives through the Aviation Blockchain Sandbox initiative. This platform will make use of smart contracts known as FlightChain, which has already been used by British Airways, Heathrow, Geneva Airport and Miami International Airport”.  Gustavo Pina, Director of SITA Lab

Aviation Blockchain Sandbox, that will be led and managed by SITA Lab, SITA’s technology research team, will develop in three stages. To start, SITA will open the access to the FlightChain smart contract on the Sandbox, allowing allow airlines and airports to solve the issue of flight status data quality. It stores flight information on the blockchain to provide a single source of truth. For the second stage of this collaborative innovation, SITA will work with organisations that wish to test the use of smart contracts in specific airline and airport operational use cases. The third phase will enable participants to participate in the running of the network.

Air France – KLM Winding Tree
Another compelling initiative is Winding Tree. Air France - KLM and the Swiss blockchain-based travel booking platform Winding Tree recently have partnered, to develop customer-focused travel solutions. Thereby they follow earlier steps by Air New Zealand, Lufthansa, Eurowings, Austrian Airlines and Brussels Airlines.

The Swiss-based non-profit Winding Tree, is using blockchain to power a decentralized open-source blockchain-based travel distribution network to make travel more cost effective and profitable for B2B customers and providers. The concept is envisaged to create a channel  in which there is direct access to the inventory of travel product and service providers.

“We are proud to be one of the first airline groups to join Winding Tree to develop blockchain technology. With a long-standing commitment to innovation with start-ups and partners, Air France-KLM is constantly creating the future of travel and devising solutions to make the travel experience easier and more personalized. With blockchain technology, we aim to revolutionize exchanges within the travel industry for our customers, companies and start-ups”. Sonia Barriere, EVP Strategy and Innovation at Air France-KLM, 

While Winding Tree will be responsible for developing the products in question, this partnership will enable Air France-KLM to test and develop the company’s blockchain technology with the hope of eventually turning it into an enterprise-level solution for the company to benefit their customers. These solutions should offer better and more personalized travel experiences for customers on not only flights but also hotels and other services will be available for customers.

 

Blockchain trials and experiments in the aviation industry

Blockchain holds many capabilities for applications in the aviation industry. It can streamline and facilitate the many processes across the aviation industry’s ecosystem, bringing trust, reduce costs, improve transparency, provide critical security while improving the customer travel experiences.

The biggest opportunity that blockchain may offer in the aviation industry is serving as a single source of truth. One of the most interesting use-cases for blockchain in the aviation industry around the world is its potential for storing and processing very large amounts of information in real time across a decentralized network, that can be tracked at all times by all the parties participating in the network in a secure way.

This technology may as a result allow easing many functions like data management, passenger identity management, ticketing, asset tracking (luggage, parts), flight operations, monitoring, maintenance and repair overhaul etc. As blockchain matures, it will provide the means for allowing greater collaboration across a range of airports and airlines. There are nowadays a multitude of blockchain initiatives, looking at specific areas for blockchain's possible application in the aviation context.

Here are some other examples.              

Security and Identity Management
Block chain’s promise in security and identity management for the aviation industry is worth looking at. This technology could be of great help to address cybersecurity and privacy concerns. Blockchain could streamline the identity management of passengers, thereby enhancing the experience, protecting privacy, and also enabling airlines and the wider value chain to do business in digital environments. Blockchain technology with security wrappers protects the information stored in the system authentic and secure, and creates a safer way of managing and sharing this information through the use of authorized access requirements.

Managing identity with passports by airlines can be much approved by using blockchain. Blockchain technology provides the opportunity to allow secure biometric authentication of passengers throughout the journey across borders. Blockchain – biometric ID management trials have demonstrated how the industry could eliminate the use of paper passport, visa and other document checks across the whole travel journey. This helps eliminate many inefficiencies faced in airports.

By validating identities with the help of biometrics, blockchain could realise that we get to a point where instantaneous transactions at all identity check points become the norm. Another potential benefit of using blockchain as the basis of identity management is that airports will be able to allocate resources more intelligently and manage the flow of passengers on a more nuanced basis.

SITA Lab is experimenting with its own digital identity card built on a blockchain platform called the SITA Digital Identity Traveller app. Thereby passengers can cross border control, undergo biometric checks and effectively leave the airport without disruption. 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 that stores biometric and personal information on mobile and wearable devices. This could reduce complexity, cost and liability around document checks during the passenger journey, and improve how travellers are identified at various points within airports.

UK-based tech firm, ObjectTech, signed an agreement with Dubai’s Immigration and Visa Department to test its ‘gate-less’ border program that uses biometric verification and blockchain technology to skip the passport process altogether. The pilot program will use facial recognition technology to identify travellers arriving at Dubai airport and verify their identities against a digital passport. Using blockchain, the digital passport is created as a ‘self-sovereign identity,’ ensuring the owner has singular control of their own data.

Luggage tracking
The application of blockchain could potentially allow passengers to track their own baggage in order to provide full transparency throughout the transfer process. Blockchain enforces efficiency by recording all the transactions happened with the particular baggage at the origin location along with the security documents, that cannot be forged. This eliminates the need to recheck the valid documents enabling the trust of moving a cargo from a country to another.

This is something that Air New Zealand is currently looking into. In partnership with Winding Tree, the airline is researching how blockchain may improve cargo and baggage tracking. Automation of compensation for lost luggage could also be implemented into this process. Smart contracts could thereby be deployed to automate insurance claims on lost baggage and instantaneously compensate customers

Loyalty schemes
Blockchain has the capability to significantly streamline the earning, spending, accounting and reconciliation of frequent flyer points, in particular across alliances.  This by tokenizing these assets into becoming digital and pervasive. When tokenized loyalty points and schemes can provide immediate value to the users as it would be possible to use them instantly in real-time. Points accepted as “currency” among more providers, will allow travellers get an easier and faster-to-use program that is more relevant to their personal preferences.

Singapore Airlines has adopted blockchain technology to issue loyalty points which can be converted to airmiles powered by the miles based digital wallet called Krispay, developed by Microsoft and KPMG. This blockchain-based passenger loyalty app will allow travellers to digitize their frequent flyer awards, and convert air miles into cryptocurrency, which can be used to pay for services at  Singapore Airline-based merchant partners in sectors that include petrol, retail and beauty services.

Delta Air Lines is another major global carrier to be replacing their passenger loyalty program, Skymiles, with digital currency. The airline will reward frequent fliers with Ethereum tokens dubbed “SkyMirage”, enhance the security of the exchange and allow passengers to see their loyalty points accrue instantaneously.

Delay compensation
While blockchain may not put an end to all the reasons for today’s flight delays, better handling of these massive amounts of data can make the processes much faster. By distributing the ledger containing data and information about the passengers and aircraft’s security details, this may enhance processing speed. Some insurance companies are already using blockchain to connect to air traffic data bases, issuing automatic payments when flights are delayed over a  certain length of time.

The French insurance company, AXA, is utilizing smart contracts to automate compensation to passengers whose flights are delayed. When a customer subscribes to coverage on their flight-delay insurance platform, Fizzy, a smart contract is created and connected to global air traffic databases. If a delay over two hours is registered on the ledger, compensation is automatically transferred to the customer, which eliminates the need to file a claim or dispute any discrepancies with the insurer.

Managing flight operations
Flight information is another blockchain use case that could transform the current status quo. Flight operations such as checking the functions of aircraft components, engines, monitoring overall performance and a few others needed to be done by the crew and it is a time-consuming process. Since those processes should be treated with great significance, enabling IoT devices to execute these activities can effectively make the process much easier by sharing those data in a blockchain.

The SITA FlightChain trial has demonstrated the viability of blockchain for providing a single source of truth for real time flight data/information with shared control of data and improved trust by airlines and airports using smart contracts. This six-month blockchain pilot project in partnership with a number of airlines and airports including BA, Heathrow Airport, IAG, Geneva Airport and Miami International Airport, was carried out to examine the safe use of blockchain technology for managing real time flight information for storage and retrieval using a shared ledger.

Maintenance
Blockchain has the potential to revolutionize the maintenance process of airlines, driving down the huge costs of plane maintenance and increase safety. Blockchain can store all the information relating to any modification, repair or change in an airplane. From maintenance repair and overhaul suppliers to flight operations performance monitoring, blockchain could benefit each of these sectors.

Air France-KLM is working on a blockchain-based system to improve aircraft maintenance procedures and records. Much of the data that is routinely collected on aircraft maintenance exists non-digitally, like service records, aircraft components and systems. Air France-KLM’s Engineering & Maintenance division is experimenting with potential uses for blockchain to record aircraft maintenance and service processes. A fully blockchain based digital system using smart contracts could drastically improve “maintenance processes and workflows.”

Parts tracking
Recording maintaining parts records has become a complex process. Blockchain facilitates tracking of the status and location of valuable assets such as aircraft spare parts in a very reliable and immutable manner as these change custody. The blockchain can offer a “virtual copy” immutable record of the provenance of every part on the plane, every time it has been handled and by whom, from the beginning of the aircraft’s existence. This provides an opportunity to enhance visibility and transparency as these items move across the value chain. Not only of their provenance, but of the entire maintenance history of these parts.

PartsBase, the world’s largest aviation marketplace and the world's leader in internet-based part locator services, will be discussing AeroCoin, the first aviation industry-specific cryptocurrency. AeroCoin is designed to be a “smart currency” for buying and selling aviation parts, tracking supply chain and traceability, and managing vendor reputations – all long-term pain points that have hampered the aviation industry. Accenture is working with aerospace company Thales to track aircraft parts and materials.

Smart contracts
Airlines and other actors across the value chain trade products and services and spend significant efforts on contracts, execution of contracts, monitoring the fulfillment stage, reconciliation, invoicing and settlement. All these efforts can either be eliminated or considerably simplified leveraging the concept of smart contracts. Smart contracts have a high potential to enable streamlining of B2B interactions. These could drastically improve customer experience and replace timely and costly services, but would require central governance by an accredited organization, along with a lot of maintenance and oversight. Also leasing opportunities could be expanded through smart contracts that use blockchain to self-execute transfers of value.

SITA is working with a strategic partner on a use case for cargo solution that tracks ULD (unit load device) containers and records data on a blockchain. The solution improves process efficiency and cuts down on handling costs and lost cargo by giving stakeholders visibility of ULDs status and location. Smart contracts will be integrated into the solution enabling payment to be triggered once a ULD is delivered, optimizing the shipping journey.
 

Energy company Gazprom Neft and Russian airline S7 Airlines have announced the successful development and implementation of a blockchain-based system for handling aviation refueling using smart contracts. This system, called the Aviation Fuel Smart Contract (AFSC) system has improved the speed and efficiency of two-way settlements in the “highly precise and time-sensitive activity” of aviation refuelling. It has also effectively automated the process of planning and accounting for aviation fuel supplies. With the new AFSC system, airlines and aviation companies can now effect instant payments for fuel right at the point of refuelling, removing the need for pre-payment or bank guarantees, and vastly reducing financial risk to both airline and fuel supplier. This results in substantial speed, efficiency and cost savings in the process of managing an air transport operation.


Blockchain will continue to take flicht

Blockchain has begun to invade the aviation airline industry too. This technology will continue to take flight in airlines in the coming years. Though, there is still much to explore for now and identify the possibilities, this technology holds the potential to become a disruptive and creative technology force that can fundamentally transform the aviation industry and revolutionize the way we travel by air, globally.

These examples described in this blog are only a small number of illustrations of the way the aviation industry is actively seeking to embrace blockchain technology. They represent only some of the possibilities, and each airline should identify the opportunities “that offer the right fit for its needs”.

Full scale adoption of blockchain across the aviation industry within the next couple of years could become a reality. But further development by industry leaders in the aviation industry is needed to create viable and cost effective uses of the technology. And for the maximized benefit blockchain must be adopted by all parties of the process ecosystem.

One thing is certain: fasten your seatbelts for take off.

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