Security, Loyalty Programs and the End of Overbooking: How Blockchain Could Help Airlines

Airlines and airports are functioning on outdated methods of information collection and distribution, using many isolated operating systems where data exchange can be timely and unsecure — despite a reported 170 percent increase in the past 20 years of U.S. outbound trips abroad.

Major competitors have recognized how the characteristics of the aviation industry align with blockchain, which has the potential to streamline data sharing among information silos in airports — and with ancillary travel enterprises more broadly — to create a seamless and secure travel experience.

Lufthansa Industry Solutions, a subsidiary of the largest airline in Europe, launched the initiative Blockchain for Aviation (BC4A) in an effort to compile potential applications of the technology and create industry standards for its use. Air New Zealand, Lufthansa, Eurowings, Austrian Airlines and Brussels Airlines have partnered with the Swiss-based non-profit Winding Tree, which is using blockchain to power a decentralized travel distribution network to make travel more cost effective and profitable for customers and providers.

The world’s airlines carry over three billion passengers annually and contribute $664.4 billion to the global GDP. Airlines must be flexible — yet systematic — to compete in the aviation industry, where the efficiency of their chain of operations determines their bottom line.

Smart contracts to improve customer experiences

Airports are microcosms of data storage. From the moment a traveler arrives at an airport to the time they depart, an enormous amount of secure data must be collected and shared among internal and external airport operations. The biggest obstacle for airlines lies in the decision making processes when travels plans change on a moments notice.

Each task within an airport may operate using different software, so the data reconciliation process is often timely and frustrating for both flight agents and travelers. Smart contracts can improve the customer experience and cost effectiveness of service by automating time consuming tasks.

Commonplace mishaps like flight delays and overbooked flights are costly to airlines when data is not shared quickly between decision makers. Currently, there is little cohesion among the mixed data and multitude of systems used at different checkpoints in airports.

The world’s leading airport communications and information technology specialist, SITA, has tackled the simple and prevalent issue of corresponding flight delay information in airports. SITA used the Ethereum protocol and smart contracts to create a blockchain platform that reconciles conflicting information about flight delays and communicates “a single source of truth for flight data.”

SITA Lab designed a private permissioned blockchain — named Flightchain — to conduct trials and track over two million flight changes between British Airways, Geneva Airport, Heathrow and Miami Airport. Their findings suggest that smart contracts could be effective at mediating conflicting data and communicating industry standards, but they require governance and operational oversight. So as of now, cloud-based data sharing services are easier to arbitrate and manage.

A 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.

Russia’s biggest domestic airline, S7, partnered with Alfa Bank to launch a blockchain platform to issue tickets. The private blockchain, built using the Ethereum protocol, uses smart contracts to exchange data between contracting parties and will reduce the settlement time between the airline and agents selling the tickets from 14 days to 23 seconds.

In a news release from S7, the airline stated that the technology “gives agents the ability to work directly with the airline without providing additional financial guarantees, reduces volumes of circulation of documents and guarantees the safety of operations.”

An Atlanta-based airline software company, Volantio, piloted a new program for United Airlines in lieu of an overbooking debacle that resulted in a passenger being forcibly removed from a flight. The “Flex-Schedule” platform uses AI to identify flexible passengers and target them with flight options to help airlines fix miscalculations in their booking processes.

The fully automated service compensates passengers and reassigns them to new flights, while maximizing profits for airlines by allowing them to sell open seats to “high-yielding,” last minute passengers. Volantio is also partnered with Emirates, Alaska Airlines, Ethiopia Airlines and Jetstar, among others — and its innovation may prove to be essential in eliminating last-minute negotiations at the gate, which inevitably delay flights and are costly to airlines.

Monetization of frequent flier loyalty points with digital currencies

Delta Air Lines is reportedly the first 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” tokens, which will cut out American Express as the middleman, enhance the security of the exchange and allow passengers to see their loyalty points accrue instantaneously.

Similarly, Singapore Airlines announced it will launch a blockchain-based passenger loyalty app that will allow customers to digitize their frequent flier awards and spend them at Singapore Airline-based merchant partners.

Transparency in luggage tracking

In partnership with Winding Tree, Air New Zealand is researching how blockchain may improve cargo and baggage tracking.

While still in the developmental phase, the application of blockchain could potentially allow passengers to track their own baggage in order to provide full transparency throughout the transfer process. Further, smart contracts could be deployed to automate insurance claims on lost baggage and instantaneously compensate customers.

Under-wing efficiency for the maintenance of aircrafts

Air France-KLM’s engineering and maintenance division is experimenting with potential uses for blockchain to record aircraft maintenance and service processes. Much of the data that is routinely collected on aircraft maintenance exists non-digitally, like service records, aircraft components and systems. A spokesperson for the airlines admitted a fully digital system would not be an easy transition but that blockchain could drastically improve “maintenance processes and workflows.”

Avoid airport queues with ‘gateless’ passport checks

The Safety and security of passengers and flight operations is above all else in the aviation industry, but creating a more effortless airport experience for travelers is another major goal of airlines. A United Kingdom-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 in Dubai and verify their identities against a digital passports. Using blockchain, the digital passport is created as a ‘self-sovereign identity,’ ensuring the owner has singular control of their own data.

Paperless identification for effortless travel

Similarly, SITA Lab is experimenting with its own digital identity card built on a blockchain platform called the SITA Digital Identity Traveler app. In partnership with ShoCard, SITA plans to improve how travellers are identified at various points within airports by creating a mobile token that stores biometric and personal information. SITA has also begun other projects to enable mobile phone self-service of visa verification and border control.

Safety in small airports and accountability of private pilots

A blockchain startup named Aeron reported that 57 percent of aviation accidents are due to human error. Aeron created a mobile app designed to record and verify a pilot’s qualifications in an effort to reduce accidents due to poor record keeping. The app, which operates using blockchain, stores all necessary pilot data in digital form — data which largely exists in traditional, paper pilot logbooks. The company is further developing a global database for the storage of aircraft information, pilots and flight schools. Aeron’s developments are geared toward private flights and accounting for private pilots, and it launched an online marketplace for booking private charters.

The need for further development

The capacity of blockchain to quickly reconcile conflicting data and verify consistency of information among various stakeholders in airports is a promising innovation for the aviation industry. The immutable and transparent nature of distributed ledger technology can provide greater security of flight operations, but many data collection processes still remain undigitized and isolated from one another. Smart contracts 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.

Blockchain has an application in a multitude of airport information niches, but further development by industry leaders is needed to create viable and cost effective uses of the technology.