Plane taking off


Using blockchain to streamline airline finance

Promising applications ready to take flight

​If you find yourself reading about blockchain, but frustrated by the seeming lack of practical applications, you're not alone. In the airline industry, where operational finance needs are so specialized, it may seem especially hard to pair the new technology with potential ways to use it. But the opportunities are there, and some first-movers are already working to explore them.

What is blockchain?

Blockchain is a “distributed ledger technology” that allows digital assets such as currency, identity—or the status of physical assets like parts—to be transacted in near real-time, tamper-proof manner. It creates a verifiable record of every transaction with low friction, prompt settlement, and built-in privacy. This new capability is only one of many digital disruptors that are shaking up other industries and bringing change to airline finance operations.

The blockchain opportunity for airlines

Airline leaders are already familiar with robotic process automation (RPA). Another familiar vector of disruptive innovation involves cognitive computing and machine learning. Now, blockchain is making fast inroads, and a lot of finance decision-makers are hurrying along the learning curve. As with other technologies, airline CFOs need more than attractive promises—they need proof of real solutions so they can make the right decisions for their organizations.

In the airline industry, where concerns like safety and regulation make it unlikely to find first movers rushing into new technologies, blockchain faces a high bar for proof of concept. Still, a quick look around reveals that some of your competitors have already found places to pilot blockchain in their own operations.

The applications may include:

  • Parts tracking
  • Customer loyalty programs
  • Engine and parts leasing through smart contracts
  • Interlining and revenue recognition
  • Airport slot management

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In-flight: Where blockchain is already making a difference

Preparing for takeoff: Blockchain innovations on the near horizon

Proceed with care and parse reality from hype

Advances like these, and others yet to emerge, make blockchain an enticing prospect. Like any new technology, however, it will reward care in application, and the path ahead contains critical decision points. Where aviation and passenger information are concerned, for example, data security is imperative. Regulators, who may still be learning the technical basics just as airline executives are, have their own path to follow as they incorporate the new technology into the rules that run the industry. Whether it's parts tracking or interlining, blockchain must be adopted by all parties of the process ecosystem for the maximized benefit. And any new technology initiative carries capital and training considerations.

An effective approach starts with a realism that dispels the hype. Is blockchain un-hackable? No, just significantly more secure than the methods it replaces. Is it a way to store data, like the cloud? No, it's more like a way to give data a receipt – a record of transactions that serves as its own ledger instead of living on one individual company's ledger. Does using blockchain make your data public? No, certain participants in a blockchain system can have write access, while others have read-only; however, all participants see the authenticity of all transactions, but not their content.

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A path forward on making blockchain a reality

If you're looking for a path forward, it can help to start by asking a few questions that assess what needs exist inside your own organization and how ready you are for the steps ahead.

  • Is your current finance operation—its data structure, access patterns, and trust level—suitable for blockchain?
  • Considering your current data volume and adjacent technologies you might need, what would your ease of implementation be?
  • What's the impact blockchain can deliver for your organization—and do you have a clear present-day baseline from which to measure the benefits?

No matter how a self-assessment of an airline's readiness for blockchain checks out, the changes ahead run deep. This isn't a standalone technology—the more deeply it intersects with business operations and other systems, the more power it can offer. Some of the other platforms blockchain may touch are familiar legacy systems. In other cases, blockchain will work in tandem with other emerging technologies, such as image recognition. Similarly, the operational impact may go beyond current structures and extend into areas of more profound change, such as process innovation and business model innovation. An integration partner that excels at both the business and technology aspects of the challenge can help amplify the rewards.

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Plane take off

I can’t believe we used to do this without blockchain

Blockchain’s future in the airline industry is being written right now. With all paths open, now is the time to start small—and to think big. The examples here represent only some of the possibilities, and each airline should identify the opportunities that offer the right fit for its needs. From proofs of concept to pilot programs, there is room today to iterate, experiment, and refine. Before long, many airline CFOs will wonder how they did things the old way.

If you’d like to learn how blockchain and other new tools could enhance your own finance operation—or see how they’re already at work in other companies—the first step is to talk.

From there, it can be your turn to set the pace in blockchain adoption. Today, the only proofs of concept you have may be in someone else’s shop. Tomorrow, with the right roadmap, you can be writing your own.

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Road ahead
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