Blockchain: Unlocking the Potential for the Airline Industry
The airline industry has always been dependent on intermediaries to provide critical services like settlement, distribution, and maintenance among others. Airlines depend on the various intermediary agencies to manage and share a lot of passenger and operational data with them. As the various intermediaries do not necessarily talk to each other, the multiple data points such as passenger data, sales data, reconciliation, and baggage end up in silos. As a result, the data that airlines could leverage has become very fragmented and spread across many independent IT systems. When multiple disparate IT systems enable the numerous day-to-day operations, they bring multiple systems and processes along with them. In addition, the intermediaries could impose their own rigid processes backed by undue reliance on older technology making things non-homogeneous and complicated. Lack of transparency and management complexities are unfortunate outcomes of the above scenario. To add to this, a plethora of intermediaries also brings a multitude of reconciliation and processing steps, thereby increasing the overall cost per transaction. It is imperative that airlines focus on technology as an enabler and make their systems and processes more homogeneous, transparent, accessible, and usable. Blockchain has the potential to churn in dividends such as faster and automated transaction processing, smarter real-time sharing, and minimal maintenance.
Does Blockchain Hold the Key?
According to the World Economic Forum “Blockchain Technology also called Distributed Ledger Technology uses cryptography to keep exchanges secure. Blockchain provides a decentralized database, or “digital ledger”, of transactions that everyone on the network can see. This network is essentially a chain of computers that must approve an exchange before it can be verified and recorded.”
Blockchain technology has several key features that result in unique advantages for the Airline industry.
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- Validation and Verification: Involves validation and verification of the user and the transaction using contracts, records, and other information
- Block Creation: Allows creation of a new block for a verified transaction and then the transaction will be added to the ‘Digital Ledger’
- Secure transaction: Ensures the new block added to the Blockchain will be secure and permanent
Data recorded in a Blockchain is decentralized, where each set of the data record is termed as a Block. Each Block is permanent and is secured with a timestamp. Sharing of information is within the pre-defined network. Blockchain provides tamper-free transaction recording and utilizes Smart Contracts (digital contract) – a code which will execute, based on pre-defined triggers.
Benefits of Blockchain
Benefits and Advantages
- Greater transparency: Once a block has been created with the validated and verified transaction, it is added to the ‘Digital Ledger’. The Ledger is visible to the parties involved in the Blockchain, providing greater transparency and visibility of the transactions
- Security: cryptography ensures security and integrity
- Improved Trust: ‘Digital Ledger’, ‘Smart Contracts,’ and secure transactions give rise to increased trust among the parties involved in the Blockchain
- Decentralization: Reduces excessive dependency on intermediaries and increases operational efficiency
Blockchain will help in streamlining multiple processes by removing or reducing the role of intermediaries and providing more control directly to the airlines, its customers, and other suppliers. This can enable the Airline Industry to find and implement better, more efficient, and cost-effective ways of doing business by innovating new processes or improving the existing processes.
How and where can Blockchain be used?
While not all the processes of the intermediaries can be replaced by Blockchain, however with its inherent advantages and benefits, Blockchain could still be utilized in multiple business areas to solve the industry’s problems. Airlines across the world have already started experimenting with and implementing Blockchain to help improve their operations.
- Simplified Accounting and Reconciliation:Blockchain could be used to increase transparency and trust between the multiple parties and enable automation, especially with respect to the reconciliation of payments.
- Frequent Flyer programs: Blockchain-based loyalty programs allow customers to use airline loyalty points with multiple retailers. Networked Loyalty Programs with various partners are based on outdated systems that take months to award points after the completion of the eligible transaction. Speeding up this process and making it accurate improves customer satisfaction. For instance, the Singapore Airlines implemented the world’s first Blockchain-based airline loyalty digital wallet.
- Baggage Handling: Blockchain is used for baggage tracking and tracing by using the Digital Ledger to make the information easily available to multiple parties.
- Identity Management: Blockchain can be used with biometrics and mobile devices to verify the identity of the passengers. This could enable a smoother experience for the passenger, as compared to the verification of physical IDs at multiple checkpoints.
Cargo: Blockchain could be used to track and
trace shipments. The Digital Ledger would
allow the multiple parties involved in the
Export/Import/transshipment of goods to easily
keep track of the goods. Blockchain will enable
easier overall supply chain management.
- Walmart and IBM are working together on a pilot project to apply Blockchain technology to Walmart's global supply chain management system.
- Brussels Airport (BRU) recently launched a Blockchain-enabled application, to work in conjunction with its cloud-based data management platform. Blockchain will centralize client communication.
- Air New Zealand is exploring the uses of Blockchain in its cargo management.
Passenger Compensation: Blockchain, through
the use of Smart Contracts will enable faster
processing of passenger compensation in case
of delayed flights/canceled flights/missed
- AXA has a Blockchain-based insurance product that automates the payment of late flight compensation for air passengers.
Apart from the above-stated examples, Blockchain can also combine with other emerging technologies like IoT and Industry initiatives like NDC and ONE Order to bring about even greater efficiencies to the airline industry operations.
The other potentially significant area to use Blockchain is the Global Distribution System. However, with millions of transactions happening on a daily basis and with millions of agents/customers across the world, infrastructure and technology have to mature significantly for Blockchain to be effective.
However, Blockchain exhibits a lot of promise to solve numerous challenges faced by agents, airlines, and customers during the distribution and fulfillment processes.
The NIIT Technologies Thought Board:
Blockchain: Unlocking the Potential for the Airline Industry
Where can Airlines Start to Harness Blockchain Technology?
The Airline industry has already started exploring and adopting Blockchain and this will continue to increase as the understanding of Blockchain technology increases with time. There is a lot of potential for Blockchain in the business areas where ‘Private Blockchains’ can be utilized. Private Blockchains are cost-effective and faster with smaller networks and require fewer coordination efforts.
Blockchain can help streamline processes and offer more value to the industry and its customers. While adopting Blockchain, it is essential for the Airline and and the Travel industry to focus on the following key points:
- Understand the business areas where Blockchain has the maximum potential and identify the best business use cases to start with.
- The approach of Proof of Concept followed by Proof of Value will help identify and target the best use cases for development and implementation.
- Industry partnerships and collaborations will help bring about greater synergies.
- Technology partners will play a key role in enabling Blockchain for business. The right technology partner with the requisite technical and domain understanding will help ensure smoother implementations and generate more value.
Blockchain definitely has the potential to revolutionize the Airline industry. Instead of eyeing it as a disruptive technology that brings about radical changes quickly, it appears that its adoption will be more phased and sustained. Blockchain, with its benefits of transparency, trust, security, and efficiency is earning a lot of attention from the airline industry. However, it is just the right time for airlines to cut through the hype and use this technology to change the way they do business.
About the Author
Kanishka Sharma is Senior Business Consultant at NIIT Technologies. He is working with the Travel, Transport and Logistics Practice and specializes in the Airlines and Travel Distribution sub verticals.
Anil Batra: SVP, Global Delivery Head,Travel and Transportation brings over 25 years of experience in IT and Business Management. Being one of the longstanding travel sector experts in the company, he has been instrumental in incubating and growing the travel related services portfolio. He has handled global engagements for some of best logos in the industry. His in-depth knowledge of the domain coupled with a strong grasp of IT fundamentals has helped clients achieve expected business outcomes through timely and process-centric intervention of technology.