How Blockchain Technology Is Changing Air Travel


Complaining about the airline industry has become something of an international pastime. From shrinking legroom to strict refund policies to bans on pets , the commercial aviation industry has given consumers a lot to resent in recent years.

But there may be some hope, thanks to blockchain technology. While blockchain technology can't resolve every inconvenience or harsh policy faced by air travelers today, it can alleviate some key pain points associated with the airline industry.

Let's take a look at what those pain points are, how blockchains can help and what decentralizing entrepreneurs have achieved to date.

Overbooked Flights

Many air travelers learn the hard way that a plane ticket for a given flight doesn't necessarily entitle them to board that flight. Airlines commonly and deliberately overbook flights , betting that some passengers won't show up. When more passengers show up for a flight than there are seats available, and not enough passengers volunteer to switch to different flights, some passengers get bumped to a later flight against their will.

Blockchain technology and smart contracts could alleviate this risk. Instead of issuing manual calls at the gate for volunteers to give up their seats during an overbooking situation, airlines could offer passengers the option of booking e-tickets with built-in smart contracts that bump passengers and modify ticketing information voluntarily. This would make the process of finding volunteers less ad hoc and opportunistic. The airlines would know ahead of time who is willing to be bumped, and passengers who want to take a bump would be able to do so without having to be present at the gate prior to boarding.

Travel Insurance

What if your flight is overbooked or another type of delay occurs and you want to cancel your trip entirely? Traditionally, passengers have had few good options in this type of scenario. Airlines rarely issue ticket refunds except in extreme circumstances. And while you could buy travel insurance to provide a refund in the event of a flight delay or cancellation, obtaining the refund usually requires collecting documentation of the problem, submitting a claim and waiting for a refund to arrive. This process adds inconvenience to passengers who have already been inconvenienced.

At least one travel insurance company, Fizzy , believes that smart contracts can provide a better solution. By tracking public flight records and using smart contracts to issue refunds, Fizzy delivers automatic compensation to customers in the event of flight delays.

Lost Luggage

The incidence of misplaced luggage is another frequent woe for air travelers whose impact could be reduced with the help of a blockchain.

The solution here is simple to envision: If passengers registered each piece of luggage on a blockchain when they dropped it off, and registered it again when they picked it up, it would become much easier to find a misplaced bag or suitcase in the event that it ends up on the wrong flight, the wrong passenger picks it up and so on.

The records would be immutable, providing an unalterable record for tracking luggage as it moves around the world. They could also be shared easily between airlines in the event that an item ends up not just on the wrong flight, but in the hands of an entirely different airline than the one that is supposed to be responsible for it.

Airline Record Keeping

Airlines collect vast amounts of data related to passengers and flights. While a portion of this data has to be reported to authorities like the Federal Aviation Administration for compliance purposes, most of it is not stored in a systematic way.

A blockchain is an obvious solution for this challenge. It is already being put to use by Aeron , which encourages pilots to log flight data on a blockchain. Aeron's major focus is on combating fraudulent record keeping as a way to improve safety, but it is easy to imagine how blockchain-based storage for other types of data, such as ticketing information and even data as mundane as the layout of a plane's cabin, could add transparency and efficiency to the industry.

Flyer Rewards

Frequent flyer programs have significant drawbacks. Passengers can typically redeem rewards in exchange for a very limited set of goods and services, which means that the rewards have virtually no real-world value. Airlines also usually require passengers to accumulate a certain quantity of rewards before they can redeem any of them, with the result that passengers who earn only small amounts of rewards within a given time period often cannot use them at all.

And the process of redeeming rewards is usually complicated, especially if you use them to purchase something other than flights. You can't just browse an online retailer who partners with your airline to redeem your rewards; you have to go through a complex process to use the rewards to buy something from the retailer, if this is allowed at all. This issue can be even more daunting if - as many travelers do - you live in one country but want to use your rewards to buy something in a different country with a different currency.

Issuing flyer rewards as cryptocurrency would mitigate these problems. Cryptocurrency would be easier to use for purchases without a complicated redemption process. Cryptocurrency-based rewards would be easy to use in any country, regardless of the local currency. And if airlines released rewards as a cryptocurrency that could be traded on public exchanges, the rewards would have real-world value.

Singapore Airlines has already announced plans to tokenize one of its flyer rewards programs in order to streamline the redemption process. The company will be using a private blockchain, which limits the functionality of its tokens in some ways. Still, the innovation represents a significant proof-of-concept experiment that could push other airlines to make similar decisions.

Although only a handful of blockchain-based solutions for the air travel industry have been developed so far, the potential for further innovation in this vein is significant. Blockchains may not make flying totally pleasant, but they can help to reduce many of the problems and inconveniences associated with air travel.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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