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admin | Jul 01, 2019

How Blockchain Can Drive Transformation In Business Aviation

Background: Digital revolution has transformedthe way we engage and consume products and services from retail,entertainment, hospitality, transportation and several other sectors. Aviation sector, for varied reasons, has been a laggard in adopting new technologiesto immensely improve customer experience.  While airlines have now started digitizing the entire customer journey, i.e. from booking tickets, delivering customizedon-board experience to managing loyalty programs, business aviation has still a far way to go in taking digital initiatives to improve the journey experience of its customers who pay the most premium of all services. Primarily the reason is that business aviation companies are numerous, have relatively small number of customers as compared to airlines (with few exceptions such as NetJets) and operate in highly fragmented and competitive markets.  Hence they have low motivationto invest in technologies that would create a marked change in the way they manage and operate aviation business.  However, few technology companies led by aviation professionals are bringing one of the most talked about technologies, i.e. blockchain, to business aviation.  Blockchain is one of the most interesting technologies that has seen application in wide variety of industries.  In this article we will understand what blockchain is and how it can be and has been innovatively applied to business aviation.

Blockchain – what is it? A blockchain is a digital ledger that records transactions on a decentralized platform. Each block contains a cryptographic hash of the previous block, a timestamp and transaction data, which cannot be altered. The transactions could be done between two parties efficiently and in a verifiable and permanent way. For the uninitiated, the technology powers the most popular cryptocurrency i.e. the bitcoin. Blockchain is structured as shown in the below figure.

The technology is now widely adopted across industries due to its four core characteristics:

1) Decentralized: It doesn’t rely on a central point of control. A lack of a single authority makes the system fairer, considerably more secure and adaptable for various stakeholders to transact transparently.

2) Immutable: Once data has been written on a blockchain, no single authority can change it and no single point of failure can bring it down. The data is permanent, indelible, and unalterable in the history of transactions.

3) Consensus driven: Several consensus driving mechanisms such as proof of work, proof of stake etc. exist to ensure that all parties agree to any changes and updates made to the system.

4) Secure:  The decentralized nature of the platform ensures that the data can’t be altered without the need for the third-party intermediaries that many value chains rely on. Secured access can be provided to only authorized personnel or agencies.

Using the above principles, the blockchain system has several applications in business aviation.

Smart contracts:  Currently a charter broker has to carry out several set of complex activities such as negotiating contracts, payments and communications to fulfill charter orders. These problems increase for international charters that are several weeks or months away and involve international currency exchange. If any payments are required to be settled after the charter is completed then these transactions add to the complexity of processes and could undermine the security of transaction.These problems can be solved transparently through smart contracts– electronic agreements that self-execute according to predefined rules – that involve the charter broker, operators and customers through a single decentralized blockchain platform.  Once the smart contract is signed, the payoffs can be automatically calculated, invoices generatedand payments can be distributed automatically to the relevant stakeholdersthrough security enabled transactions. Similarly, if the flight is cancelled for any reason, the smart contracts can be automatically triggered, thus eliminating the entire manual payments reconciliation process.

Private aircraft transaction history:  Determining an aircraft title and ownership rights areessential for aircraft transactions especially when business aircraft have undergone several ownerships since they were manufactured.  Per estimates, as many as 20 to 30 percent of aircraft title titles are opaque in some form. For example, for a particular aircraft, theengines may have been leased whereas airframe may be under a bank lien.  When purchasing the aircraft, a thorough inspection of aircraft history requires involving specialist agencies and several weeks of due diligence before the aircraft’s ownership rights can be fully ascertained.  A blockchain ledger based system can document, update and track the ownership rights of airframe and engines in concurrence with FAA or International Registry of Mobile Assets.  Thus the historical ownership data of the aircraft can be legibly confirmed through a trustworthy source.

Pilot flight records: Aviation is a highly regulated environment andauthentic documents are essential for creating reliable records. One such problem is with pilot log book, which provides flight records and other relevant information, and is an evidence of pilot’s experience. The log books are one of the main verification methods used by the aviation authorities for issuing licenses and ratings to individual pilots. Currently, thepaper copies often get damaged and are difficult to recover when demanded. An existing solution from Aeron blockchain technology allows storage of all necessary log book data in digital format and allows for quick and easy access to necessary information about the pilot’s flight hours, when needed by the authorities.   Such universally adaptable databases provide secured storage of credible information which is transparent and impacts safety of operations.

Maintenancetransparency: Well maintained, clearly documented and up to date maintenance records are essential to assess the airworthiness of any aircraft.  Missing documents damage the integrity of airplane maintenance and undervalues the asset significantly. Further, recreating the documents of aircraft maintenance is an expensive and sometimes impossible process.  An aircraft undergoes maintenance through several facilities over its lifecycle and all of them may not have the best documentation processes.  Further, it is important to identify the components’provenance to ensure airworthy components are installed.  Blockchain technology can store aircraft service records and information in a digital distributed ledger. The records can be stored indefinitely in a trusted environment and integrity of the records can be guaranteed.  Authorized access can be provided to relevant people as and when required.  Such system provides transparency to the regulatory agencies and aircraft owners as they are able to see the complete history of aircraft maintenance with proper authorization andthe data cannotbe tampered.  This saves maintenance time, ensures safety of the assets and provides a reliable and probably one stop source of all the maintenance events occurred on the aircraft at any point in time.

Customer loyalty programs:Althoughrarely used by private aviation operators or brokers, generating loyalty of premium private aviation customers is essential for any business aviation company.  Often private aviation companies partner with airlines, hotels, credit card companies, clubs etc.in offering value added services to their clients.  A loyalty program in which the points can be easily redeemed across multiple partners becomes appealing to private aviation customers.  Loyalty points and schemes when tokenized through blockchain can provide immediate value to the users as it would be possible to use them instantly in real-time. Blockchainsystem allowsseamless transactions across multiple partners.  As an example from the airline industry, Singapore Airlines has developed a digital wallet that allows customers to use frequent flyer miles at participating retail merchants.

Thus blockchain has incredible use cases in business aviation and provides a structured, secured, and reliable platform for carrying out business. We do have to note that at the core, blockchain is a repository of data and a means to automate transaction.  Hence this technology needs to be combined with other technologies such as internet of things (IoT), predictive analysis etc. for greater effect in business aviation.

Final note:  Although blockchain technology could have a revolutionary effect in the way business aviation transactions are carried out, country specific regulations often are the main roadblocks in successful implementation of such technologies.  For example, systems such as smart contracts may invariably require the use of cryptocurrency as a means of transaction.  This could represent a problem in countries such as India where Government promotes blockchain technologies across industries but implements a blanket ban on usage of cryptocurrencies.  Hence any new technology needs to be assessed not only from the perspective of benefits, but also from the framework of regulations to ensure that its implementation serves the overall purpose of efficiency and security of transactions and ultimately, delivers superior customer experience.