Blockchain Technology in the Airline Industry: Opportunities and Benefits
The airline industry, although growing, is facing various challenges, including legacy processes, fragmented distribution channels, and minimal innovation. However, with the advent of new technologies, such as blockchain, there is an opportunity to address these challenges and transform the industry. This article will discuss the potential impact of blockchain in the airline industry and the areas where it can deliver the greatest value.
Assessment of the Airline Industry’s Relevance to Blockchain Technology
The airline industry is complex, with a network of players that do not always trust each other, and must rely on intermediaries to engage in contractual transactions and exchange data. With blockchain’s ability to manage and share data and facilitate digital transactions, it has the potential to resolve current issues of trust, security, control, and transparency in the airline industry.
The four areas where blockchain has the greatest potential to deliver value are customer-related activities, maintenance, repair, and overhaul (MRO), ground operations, and revenue accounting. These areas meet the criteria for blockchain relevance, which includes the need for multiple parties to share data, critical data security, and the requirement for a complex ecosystem that requires intermediaries.
Understanding Blockchain Technology
Blockchain technology is associated with cryptocurrencies, but it is essentially a ledger that securely records transactions across a network of participants. It has four key characteristics: decentralized, driven by consensus, immutable, and secure. The decentralized computer system captures, encrypts, and time stamps each transaction made by any member of the network, and then packages the transactions into data blocks that are continuously recorded in a shared digital ledger. A consensus mechanism ensures that all parties agree to any changes and updates made to the led16ger, making it immutable and secure.
Benefits of Blockchain Technology in the Airline Industry
The current systems landscape in the airline industry is outdated and siloed, hindering the fast and seamless exchange of data. Blockchain technology, with its shared nature and decentralized approach, can address these issues and improve speed, transparency, and responsiveness. This will lead to significant time and cost savings and pave the way for new business models.
Some of the benefits of blockchain technology in the airline industry are:
1. Automation of Repetitive Processes and Payments: Blockchain enables the creation of smart contracts, electronic agreements that self-execute according to predefined rules. This can be used for a wide range of transactions, including billing among airlines, billing between travel agents and airlines, determining loyalty settlements, purchasing travel insurance, and paying airport and authority taxes, fees, and charges.
2. Improved Customer Experience: Most airlines are focusing on using blockchain to improve the customer experience. By reconciling miles or points flown on partner airlines, members of an airline’s loyalty program can have a seamless travel experience. This can also lead to increased customer satisfaction and loyalty.
3. Increased Operational Efficiency: Blockchain technology can be used to streamline ground operations and maintenance, repair, and overhaul processes. This can lead to reduced turnaround times, improved supply chain management, and lower maintenance costs.
Blockchain technology has the potential to transform the airline industry, addressing current challenges and providing opportunities for growth. By automating repetitive processes and payments, improving the customer experience, and increasing operational efficiency, the technology has the potential to bring significant time and cost savings and pave the way for new business models.
Exploring the Applications of Blockchain in the Airline Industry
The advancement of technology has brought about innovation and new opportunities for various industries, including the airline sector. One of the most promising developments in recent years has been the emergence of blockchain technology. Despite its relative youth, its full potential has yet to be realized, and current challenges related to performance and governance are still being addressed. Nevertheless, airlines are urged to explore the various applications of blockchain and prioritize those that bring the most significant business value.
Leveraging Blockchain for a Competitive Advantage
One of the most straightforward approaches to leveraging blockchain in the airline industry is to apply the technology within a closed, private network of players. The advantage of this model lies in the potential for increased efficiencies and profits, as well as the ability to steal business from other members of the ecosystem. Large industry players are particularly well-positioned to take the lead in the development and adoption of these blockchain platforms.
Advantages of a Public-Permissioned Blockchain
Another approach to leveraging blockchain in the airline industry is through the adoption of a public or public-permissioned blockchain. In this scenario, industry players agree to share data, often guided by specific business rules and governance. The benefits of this model are numerous, including the creation of applications that leverage shared data to create value. To achieve this, consortia, alliances, and regulation can play a significant role in enabling the blockchain platform.
Forming a Consortium: Unlocking the Benefits of Blockchain
Many experts believe that forming a consortium of partners to run a blockchain is the most effective way to harness the technology’s real benefits. Despite its complexity, this shared approach is critical in overcoming the trust barrier and enhancing information sharing. The airline industry is already well-positioned for this approach, given the existing alliances and joint ventures among players.
For instance, Air France is part of the SkyTeam alliance, which comprises 20 airlines that leverage the flights and connectivity of its member network to offer a seamless travel experience. Airlines also form joint ventures to provide customers with more options, and the industry as a whole relies on the trusted services of IATA.
Building on the Foundation of Cooperation
The airline industry should build on this foundation of cooperation and extend it to blockchain technology. To do so will require broad-based discussion and agreement among industry players and significant changes to industry standards. No airline can successfully implement blockchain on its own, and a trusted governance structure must be established to make key decisions in a fair and equitable manner.
The recommended approach is to start small, testing the waters with existing joint ventures, and then scaling up as needed.
Leveraging the Power of Synergies
Finally, the industry should consider how combining blockchain with other digital technologies, such as predictive analytics, robotics, and the Internet of Things (IoT), can create even greater value. For instance, in industries where health and safety are critical, such as airlines, food, and pharmaceuticals, the combination of blockchain and IoT can improve quality assurance and proof of provenance throughout the supply chain.
Blockchain technology offers exciting opportunities for the airline industry, but it is essential to proceed with caution and explore its potential thoroughly. Airlines that embrace blockchain and other digital technologies and fundamentally rethink how they do business will reap the greatest benefits. The combination of blockchain with other cutting-edge technologies, such as predictive analytics and IoT, has the potential to bring about significant disruption and create a competitive advantage for those that are forward-thinking and innovative.