Blockchain technology is seen as the answer to many operational questions but the application is not without its challenges

Blockchain is a means of establishing trust. Essentially, the integrity of a data chain is established at every link. And because it is both decentralized and secure, it could apply to any number of aviation operations.

But the technology is divisive. Though some see it as the answer to many legacy system ills, others reject the hype and the concept’s seeming complexity.

According to Alexander Gorelik, Co-Founder and CTO at VChain—which is working with IAG to streamline airport processes by verifying identity—the truth lies somewhere between the two extremes.

“Putting aside the hype, the majority of blockchain use cases out there would probably be better solved using traditional system architecture,” Gorelik admits. “However, within complex, multi-stakeholder and trustless environments, blockchain, applied well, really is superior.”

“Blockchain allows digital assets to float across the value chain unlocking retail opportunities, efficient operations and a seamless passenger experience”

Gorelik notes that there is nothing inherently difficult in applying blockchain to such environments, as it is simply a better way of recording and sharing data. It could make siloed flight, operational and terminal data instantly and globally available, for example.

Take airport processes, one potential application of the blockchain concept. “A passenger could be checked and re-checked throughout the airport, on any flight, and only have to present their data once,” suggests Gorelik. “They would glide through the airport without their passport leaving their pocket. Effectively, it’s a full realization of IATA’s One ID concept.”

Unlocking value

Blockchain is already in action in aviation. Singapore Airlines is using blockchain in its KrisFlyer program. KrisPay is a digital wallet that helps to unlock the value of KrisFlyer miles to enable everyday spend at retail partners.

“Blockchain maintains transactions in an immutable ledger, thereby establishing accountability and transparency in all transactions,” says Nicholas Ionides, Divisional Vice President Public Affairs at Singapore Air. “As there are no intermediaries involved, partners can come on board KrisPay quickly at a lower cost and be assured that transactions on KrisPay are secure. We continue to remain open to the use of blockchain in other areas of the business.”


2.8 - In late 2018 bitcoin hit about 2.8 transactions per second (/sec) while Vitalik Buterin—founder of decentralized platform Ethereum—announced an improvement that could allow Ethereum to reach 100-150/sec. All this needs to be compared with a Visa transaction rate of 24,000/sec


Meanwhile, Brussels Airport’s BRUcloud data-sharing platform is enhanced by blockchain’s decentralized nature. Within BRUcloud, a set of collaborative apps aim to make the cargo landside process paperless and future-proof. The Freight Management App, for example, uses blockchain to provide tamper-proof evidence of the handover 
of freight between stakeholders.

Complex interplay

Such innovation is paving the way for more pervasive blockchain uptake. Smart contracts and the travel grid are two areas that might benefit.

Blockchain can ensure the various agreements between multiple entities in aviation—airports, travel agents, ground handlers, caterers etc.­— are encoded in smart contracts. Service delivery, including service level agreements, can be verified and payment triggered.

“Think of a smart contract as a vending machine,” explains Eric Leopold, IATA’s Director, Transformation, Financial and Distribution Services. “You enter your item number, insert the correct money and the requisite product is delivered. The process is autonomous, and the contract has been pre-defined in the algorithm of the vending machine.”

Smart contracts are one of the platforms for another blockchain-inspired IATA initiative, IATA Coin. This is a digital currency that leverages the blockchain technology in IATA Settlement Systems, in particular the IATA Clearing House. IATA Coin has already been used in transactions by airlines.

The travel grid, meanwhile, is a blockchain-based network for the entire industry set up by IATA and industry partners. Much as Apple provides a platform for developers to build apps, so the travel grid will facilitate real-time digital interactions between industry partners.


Discussion on…  GDPR

The EU General Data Protection Regulation (GDPR) is seen by some as a driver for blockchain. Alexander Gorelik, Co-Founder and CTO at VChain, says GDPR is an overarching framework of how systems dealing with personal data should be designed and behave. But it is down to the airlines to implement change.

GDPR does advocate privacy by design, however. So, systems are built to secure data by design, rather than built first and data secured separately later. “The aviation industry has to make its own decision to stop storing data in risky centralized data warehouses and explore the ways in which blockchain could help with that,” says Gorelik. “Some airlines are leading the way on privacy by design and are at the frontier of adopting the capabilities to enable the shift.”

Gorelik believes airlines must explore better ways to secure data. Because the aviation industry deals with highly sensitive personal and payment data, and given that airline passengers statistically have a higher-than-average income, it has become a target for hackers, “which explains why we've seen more incidents in this industry recently,” he says. “National flag carriers are even more of a target due to the challenging geo-political climate.”


“The travel grid could significantly simplify procure-to-pay end-to-end processes, such as managing agreements, monitoring and enforcing delivery, reconciliation, corrections, invoicing, and settlement,” says Leopold.

“It allows digital assets to seamlessly float across the value chain unlocking new retailing opportunities, more efficient operations, and a seamless passenger experience.”

Challenges remain

There are challenges. Blockchain’s decentralized nature—one of its advantages—is also one of its drawbacks. In essence, it slows things down and means transaction speeds may not meet the level required.

The cryptocurrency transaction rate compared with credit card provider Visa illustrates the point. In late 2018 bitcoin reached about 2.8 transactions per second while Vitalik Buterin, the founder of Ethereum—a decentralized platform—announced a performance improvement could allow Ethereum to reach close to 100-150 transactions per second. All this needs to be compared with a Visa transaction rate of 24,000 per second.

Not only can it be slow, but also costly. In 2017, bitcoin transaction fees peaked above $50 per transaction. “The volatility in the transaction fee may be one of the reasons why mass adoption has not happened yet,” admits Leopold.

So, is blockchain a force for good or not? The IATA Director is confident that blockchain could be a transformative technology for the industry.


Blockchain explained 

Blockchain is perhaps best explained as a series of boxes, each with valuable content inside. The first box has multiple locks and one of the keys is thrown into the next box, which in turn is locked and one of its keys is thrown into the third box and so on. In other words, access to any individual box is dependent on the rest of the boxes. So, if a box is taken out, the chain breaks.

Aviation areas where blockchain may prove beneficial include:

  • supply chains
  • loyalty programs
  • aircraft maintenance and repair
  • cargo and baggage
  • removing intermediaries
  • financial settlements
  • distribution

“IATA has been conducting research and development on this technology for the past five years,” Leopold says. “In parallel, several airlines and their partners have been experimenting with the blockchain technology on a variety of use cases. The initial progress is tangible enough to encourage further developments and to look beyond prototypes.

“The rise of new technologies often comes hand in hand with hype. To some extent, blockchain is showing signs similar to the start of the internet, and the potential to have a comparable disruptive impact as it gains maturity.

“Whereas the promise of the web was to enable sharing of information across the world, the promise of blockchain is to enable the exchange of value and data across digital channels without friction.”

 


Nicholas Ionides,

Divisional Vice President Public Affairs at Singapore Air

“Blockchain maintains transactions in an immutable ledger, thereby establishing accountability and transparency in all transactions”

Alexander Gorelik,

Co-Founder and CTO at VChain

“Within complex, multi-stakeholder and trustless environments, blockchain, applied well, really is superior”

Eric Leopold,

IATA’s Director, Transformation, Financial and Distribution Services

“The travel grid could significantly simplify procure-to-pay end-to-end processes”


 

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