It’s December 18th and you’re at Toronto Pearson International Airport waiting for your flight to go home for the holidays. You are waiting patiently in the slightly uncomfortable chairs in boarding area for gate 68. The class division is visible as crowds begin to form in clusters for their appropriate boarding zone lines – 5 minutes till boarding. You look out the window to the ramp that descends from your gate, and it leads to … where art thou plane? 10 minutes pass. 15 minutes pass. 30 minutes pass and you are still in the boarding area waiting for an announcement. The elitists Zone 1 boarding gets a bit unruly. Ding from you phone – your flight is delayed by 50 minutes.
This scene may be all too familiar to too many. The airline industry and its hyper fragmentation within the value chain have created a ballooning problem of being able to deliver a quality product that provides them with brand equity. From the vast amount of products and services that can be added on (such as seat selection, wifi, upgrades), to the number of distributors of single seat on a plane (travel agents, online discounters, vacation packages, the airlines themselves), at each step of the value chain there are multiple stakeholders managing and storing the same type of data. This is everything from passenger information, loyalty program, ticket number, ticket type, whether the customer pre-purchased their seat, the list goes on. With the information being stored in disparate systems, data can often fall out of sync, leading to miscommunications between customer facing staff, operational staff, and the passenger. This creates the frustration that is experienced by passengers.
There are numerous benefits to implementing blockchain at various points of the airline value chain. In this post, we will dive into the strategic benefits that an airline can achieve by adopting blockchain as their ledger for all flight data. By leveraging blockchain with smart contracts, airlines can achieve operational efficiencies that will drive down costs and improve customer experience, providing them a potential source of competitive advantage.
Collecting and sharing of flight data information into a single, general ledger, can provide significant benefits to all parties involved with a flight itinerary. The immutable nature of a blockchain provides a single source of truth; this enables all relevant parties to make business decisions around a flight itinerary with confidence. Airlines can significantly optimize their operations, passengers can receive relevant updates that empower their decision making, and third parties can improve the delivery of their services.
Using smart contracts, certain processes can even be automated, such as rebooking of a passenger on a delayed flight to the next available flight. This can reduce the administrative cost associated with having to rebook everyone (and ensuring their bags make the rebooking) onto another flight. Push this information to the passenger through their smartphone, this can improve their experience while also preventing a long line at the customer service desk. This information can be shared with other parties, such as the airport, so that they can prepare expedited transportation for passengers who are making a tight connection.
Having a single source of truth also enables airlines to relevant information to passengers. This includes everything from their flight delays to whether or not their bag has arrived with their flight and is on its way down the belt. By providing passengers with relevant information in a timely fashion, they are empowered to make decisions surrounding their itinerary, including whether to wait to head to the airport or whether to head to the their hotel as their bag is delayed but will be delivered in 4 hours on the next flight. As a result, the customer may be less frustrated with a delay as they are able to make decisions on how to use their time.
Operationally, blockchain and smart contracts can also be applied to managing the distribution of revenues to various stakeholders. Revenue from the sale of a single seat is often distributed among a number of parties for the various fees. Using smart contracts can automate this process, reducing the cost and management required to process these transactions. With the IATA as the current trusted payments clearing house for airlines, the implementation of blockchain with smart contracts would dramatically alter their role as an intermediary. Airlines would also reduce their dependence on such intermediaries to validate such transactions.
Finally, third parties such as food vendors and or the airports themselves can access the information to make decisions on how to deliver against their service level agreements with the airlines. A delayed flight can trigger the request for additional staff to help unload a flight. Information on the manifests of a flight can allow food vendors to stock planes with the appropriate amount of food, reducing food waste. The ability for third parties to finetune their delivery of services opens up the door for vendors and airlines to rethink their service level agreements and how they pay/charge for such services.
All in all, blockchain’s ability to provide a single source of truth for the airline industry provides many opportunities for operational improvements that can lead to increased customer satisfaction. This radical innovation can reshape how airlines empower their customers and engage with their third party partners and or vendors, ultimately providing them with a source of competitive advantage, so that the next time AC033 from Pearson to Vancouver to Sydney is delayed, instead of being in the boarding area waiting for the plane to be pulled in, you will be sitting at the airport bar, having a cocktail of your choice, on a meal voucher that the airline sent you for the delay.
Strategy in the Age of Decentralization 