Blockchain Leverages the Airline Industry
Airline Industry Challenges
The world of the aviation industry is not as simple as it seems. Airlines put much effort into ensuring that passengers have the opportunity to book a ticket, solve all issues related to transfer and luggage, comfortably wait for their flight, and fly in comfort. Let’s consider the air industry’s main challenges.
The Fuel Price Factor
The fuel component of airlines represents 26% of total costs. The problem of uneconomical technology is more than just the factors affecting fuel costs. Great difficulty for aviators is also created by the absence of a single pricing method, which is a consequence of the monopoly position of aviation fuel sellers at many airfields. Fuel price is one of the most significant concerns in the modern airline industry. Many airlines imposed fuel surcharges on their customers due to high fuel expenses. Industry analysts state that with constantly rising fuel prices, most airlines are experiencing an impact on their profits. The Walter Capital Management specialists discovered that there is a clear connection between airline stock and crude oil prices. Singapore Airlines has already determined that high fuel expenses are their major problem.
Congestion
The number of people using air transportation increased by 6.6% in 2017. Skies all over the world are overloaded with air traffic, and airports are overcrowded. In recent years, airline companies have increased the number and frequency of flights, leading to an increase in the number of passengers in airports. This enlarged the number of delays, resulting in overcrowded airport terminals.
Terrorism
The number of airline terrorist actions has decreased in recent years. However, they haven’t disappeared completely, so airport security services around the world have to stay alert. Over the last 15 years, security screening processes have improved and become more accurate. This has made travelers’ check-in procedure more time-consuming.
Technology
As the airline industry and airports around the world become more and more contingent on technology, it will be more vulnerable. Inadequate investment in the technological infrastructure over the past years has resulted in a flow of computer outages capable of damaging airline operations for a long period. Also, as cybercrime threats increase, the airline industry has to devote much effort to securing its system.
Passenger Comfort
In many ways, the airline industry’s search for higher profits has been at the expense of passengers conveniences. For airlines, an efficient way to reach a lower unit cost is to fill planes with more seats. It is clear that such a method will result in far less comfortable conditions for each individual passenger. And that is not the only problem. The IATA (International Air Transport Association) conducted a study to portray the main airlines’ drawbacks:
Baggage Loss
Tens of millions of suitcases are lost in the world yearly, which entails multi-billion-dollar losses for airlines. Errors in the sorting of baggage lead to a violation of schedules and passengers are late for flights which leads to a decrease in customer loyalty. This is especially true for regional airports, where baggage handling is sometimes carried out manually.
Air Transportation Technologies
Increasing globalization and digitalization and the widespread use of large data analysis technologies has radically changed the organization of airspace management and the air transportation market. The world’s leading airlines have modernized location systems to accurately identify the location of aircraft, passengers, and luggage, accelerate ground preflight preparations, and automate and improve the service.
Due to the growth of passenger traffic, increased aircraft traffic, and the expansion of the use of unmanned aerial vehicles (UAV), new requirements have arisen for the organization of airspace. Most traditional radar systems and airflow management systems no longer provide proper flight safety, and are no longer economically viable.
Some airlines have already implemented ADS-B (Automatic Dependent Survey Broadcast) technology, which operates not with a radio signal, but with a GPS signal. This allows accurately determination and broadcasting in real time of data about the flight (aircraft coordinates, altitude, speed, flight, etc.) to ground control centers and other aircraft. As ADS-B can operate at both low altitudes and on land, this technology is also used to monitor traffic on runways and airport taxiways. Moreover, ADS-B works even where the radar is ineffective: in remote areas or mountainous terrain. With mass use, it is possible to increase the safety, flexibility, and efficiency of air traffic control while reducing longitudinal separation between aircraft, noise, radiation, and fuel consumption.
However, the implementation of this technology meets some barriers, such as:
- high cost of equipment
- insecurity of confidential data and the possibility of attacks on the ADS-B system
- insufficient technological development for its complete and safe use in areas with heavy traffic
Leading airlines and major airports are actively implementing the Internet of Things (IoT) technology, connecting to it more and more elements of physical infrastructure and developing special navigation applications that analyze information from sensors about the location of objects. The technology allows management of increased passenger traffic, improvement of the quality of service, reduction of costs, and general optimization of work in the industry.
There are also obstacles in the implementation of this technology:
- unresolved issues with sensor power supply
- a lack of common data integration standards
- an increase in the load on network resources due to the growth of the Internet of Things
- complexity in maintaining the security of the Internet of Things ecosystem
It is worth mentioning that in aviation transportation, RFID (Radio Frequency Identification) technology plays an important role in reducing costs and increasing efficiency. By recording the necessary information on an RFID tag that is stable in unfavorable environmental conditions, it is possible to trace the history of the movement of an object.
This technology is used to:
- identify employees
- handle cargo
- maintain ground equipment
- automate the operation of security systems
- track the movements of passengers
The memory capacity of an RFID tag (RFID) is hundreds of times larger than the amount of barcode or QR code memory. Data for tags are recorded or automatically read by means of a radio signal, which makes it possible to identify people or objects at a significant distance.
The most widespread technology is now used in the field of baggage logistics: the introduction of radio tags that control the movement of baggage, significantly reducing the risk of its delay or loss. Tracing the movement of passengers around an airport between check-in and departure helps prevent congestion at checkpoints, generally improve safety, quickly locate people in emergency situations, search for lost children, and notify passengers who are late for the gate.
The barriers of this technological implementation are:
- the possibility of unauthorized reading of the RFID tags
- absence of normative legal, organizational, and technological
documentation for the operation of the new technology
The main sphere of air-transport utilization is passenger transportation. The growing popularity of air travel has led to the introduction of a booking system in order to facilitate interaction between the flow of passengers and the airline. In the departments themselves, airlines have begun installing terminals where you can book a ticket. Now this can be done by travel agencies and independently. The application from the client in the form of an electronic record with personal data is received by the operator of the agency. The application is processed, and the client redeems an air ticket booked earlier. Automated booking systems greatly facilitate the work of airlines.
It is important to add that passenger inspection is an important stage in preflight preparation. This is conducted in order to identify and prevent the presence of a person with weapons or other dangerous items on board. In the process of inspection, technical means are used: a metal detector and a scanning device.
The main tasks of the airlines are:
- to provide a high-quality onboard service
- to develop an appropriate and affordable pricing system
- to ensure security and safety of the technical condition of the airliners
- to control air-transport use (check-in and luggage check-in)
- high-level reception and timely delivery of luggage
- to ensure a safe and convenient flight
- personnel qualification check, etc.
Internet of Things to the Rescue
The Internet of Things is a set of physical objects connected to the Internet and equipped with sensors — from smartphones and tablets to cars and jet engines — which collect data and exchange it over the network, including local or wireless. At airports, this technology makes it possible to combine warning and monitoring systems for all objects, make passengers safer and more comfortable by transferring data relevant for navigation to their portable electronic devices (smartphones, tablets, etc.). Aviation nodes can more effectively control the number of passengers at any point in the airport and prevent the accumulation of large queues.
IoT has many opportunities for the aviation industry in terms of optimizing operating costs and obtaining additional revenue through the introduction of IT solutions.
In the aviation industry, there are many problems that can cause trips to be very troublesome and expensive for passengers. Now, 86% of airlines are sure they will have a beneficial effect on business within the next three years. One of the priorities is the optimization of baggage transportation with the help of IoT. Monitoring baggage carts using wireless tags provides continuous, automated online monitoring of baggage location, both inside the airport and outside the airport. It is the perfect solution for reducing queues and problems with lost baggage.
Without significant investment in the creation or modernization of the infrastructure, aviation-industry participants can earn by providing users with paid access to a Wi-Fi network, demonstrating advertising content in a mobile application, and/or receiving a subscription fee from telecom operators for the use of a distributed antenna network in airports.
Innovative navigation systems inside airports and tracking using Wi-Fi can increase the speed and convenience of customer service. Mobile navigation and tracking applications help passengers build the necessary routes (for example, to the boarding gate), thus avoiding delays to the flight. Airports, in turn, have the opportunity to collect analytical data on the frequency of visits and patency of terminal zones, which allows identification of areas of increased congestion and helps passengers to quickly solve problems (for example, to open additional check-in counters). It also provide visitors with personal offers (for example, discounts from cafés, restaurants, and shops located within walking distance).
Furnishing airport buildings with high-tech engineering infrastructure can provide security and comfortable conditions for passengers and guests at the airport. Such solutions will integrate engineering and technological systems, including data-center information, communication systems, and integrated security systems. Technologies for the virtualization of computing resources, storage systems, and workstations from the direction of infrastructure solutions help to improve the performance of high-loaded computing systems while reducing the equipment used.
More and more elements of physical airport infrastructure will have Internet access. These are buildings, trolleys, tugs, various equipment, and the registered luggage of travelers. Part of the IoT can also be employees of the airports, service organizations, and passengers. This became possible due to the fact that 83% of passengers travel with smartphones, and before departure, they constantly use the Internet.
A SITA study conducted in 2015 showed that with radio beacons, cellular signals, etc., airports plan to develop the use of geospatial information. This is necessary to manage luggage tracking, notify passengers in a timely manner about changes to exit numbers to the aircraft, and other alerts. To do this, a mobile application is sufficient to analyze the location of passengers by radio beacons. In 2015, about 60% of airlines had their own applications for smartphones, which notified passengers about the current status of flights. By the end of 2018, the proportion of carriers offering mobile applications will exceed 96%.
Airports aren’t using IoT and transport telematics technologies just for monitoring transport and special equipment. They also solve multiple tasks using the Internet. The system of remote monitoring and management of the airport’s engineering infrastructure provides online monitoring and control of the parameters of the airport engineering systems (water supply, sewage, electricity, heat, ventilation, etc.) With its help, it is possible to identify accident locations with high accuracy on the controller’s digital map in order to manage emergency situations.
There is an incredible variety of Internet of Things devices and application options. However, all operate in a centralized system, which is their main drawback. That is why blockchain, a secure decentralized ledger, was created.
How Can the AirLine Industry be Improved with Blockchain?
For any type of passenger transportation, including aviation, the lives of passengers has always been the most important, forcing the industry to improve safety in all modes of transport. This includes the safety of information and its protection from the access of third parties. All this has allowed airlines to move to a modern stage of development and an improved stage of competition with the help of blockchain technology.
Blockchain is a consecutive chain of blocks containing data about transactions and contracts of the user in encrypted form. The information is stored in a distributed network database, which can only be accessed using a unique code. Each transaction on the network is converted into a so-called block, which is distributed over the computer network between nodes. The block contains important data: information about the seller and the buyer, details of the transaction (for example, the time of purchase) and the digital wallet (crypto wallet) from which the payment was made. The transaction is instantaneous, and the record about it cannot be changed. Each block is added to a chain of other blocks, and thus, the history of transactions in the public registry is created.
The technology of blockchain has great prospects for the modernization of financial activities in the airline industry. It ensures the reliability of any transactions on the Internet, since all information is encrypted in a distributed registry and it is impossible to forge or correct the data. This technology allows for optimization of the regular processes airlines repeat from day to day, thereby reducing prices and the labor costs of personnel while increasing the speed of settlements. One of the main advantages of blockchain is the openness and anonymity of the system. For example, when registering for a flight, a traveler can be assured of the safety of his or her personal data. Blockchain can also be used in calculations for aviation fuel, board meals, and the services of counterparties.
Blockchain technology has the potential to optimize business processes and evaluate risks in the insurance industry. It can help to cope with key problems of the airline insurance system in the following ways:
- The Internet of Things: This technology will allow machines, electronic devices, or home appliances to obtain their own insurance policies, registered and managed with the help of smart contracts in the blockchain network.
- Increasing customer interest: Customers often fear losing control over their personal data at the time of transfer to an insurance company. This can be eliminated by using blockchain to verify personal information.
- Increasing economic efficiency and improving fraud detection methods: To increase the effectiveness of fraud recognition systems and falsification of information, there is the option of creating a special blockchain database.
- Reduced administrative costs: Blockchain can be useful for reducing administrative and/or operational costs via automated verification of policyholder identity and the validity of the agreement. This includes registration of claims for insurance payments and verification of data coming from third parties, using a payment infrastructure based upon blockchain and smart contracts.
IOTA
A great project that can revolutionize the Internet of Things is IOTA. IOTA is a transaction protocol system for IoT. It is expected that in the next decade, more than 50 billion devices will be connected to the global network. IOTA provides a method for conducting microtransactions between these devices. The main purpose of the IOTA project is the ability to conduct micropayments via such devices in real time, with no competition or commissions.
IOTA Tangle does not involve mining or verifying blocks, as in the common blockchain. The Tangle is a directed acyclic graph (DAG) for decentralized transaction storage, which stands for IOTA ledger data storage. All transactions and approvals are connected with each other as follows: one transaction is confirmed with the help of two previous ones. IOTA nodes should be affirmed by a centralized node.
Its main distinction from blockchain is that there are no blocks generated. It utilizes Proof of Work (a consensus algorithm used to confirm transactions and create new blocks in exchange for a reward) to get rid of spam. With this mathematical algorithm, micropayments are conducted more securely.
The main advantage of IOTA is that it makes microtransactions easy to carry out, since commissions usually make small money transfers too expensive. It solves a lot of problems, and opens up new opportunities for business. Using the Tangle registry, IOTA allows the secure transfer of data from one device to another.
With this functionality, IOTA could create a new airline world that allows users to communicate with each other without points of failure (centralized authorities or data storages). In other words, each member (unit of the community) will be presented as an independent server (node). With high transaction speed, it will allow communication between them that provides the opportunity to make all things “think” as one big computer. For customers of this system, it will provide the necessary information about any parts of this computer at any point of time, in a fully decentralized, secure, and transparent manner.
IATA
Another good example of the use of blockchain in the air-transport sector is a pilot project launched in December 2016 by the International Air Transport Association (IATA). IATA members will be able to save up to $1 billion a year, as banking and services of international payment systems will be replaced with the blockchain. Now, traditional payment mechanisms cost more than $8 billion a year for IATA. Air carriers expect to replace them with blockchain technology, on the basis of which transactions will be carried out much more cheaply and safely. For this purpose, participating companies will use the IATA token with a rate linked to the dollar. In addition to reducing costs, this system is designed to speed up settlements between companies.
The number of IATA investments in the project will be determined based upon the results of the pilot project. The technology is still used between two airlines that are part of IATA. Later, it can be scaled and implemented in the settlement systems of other air carriers. IATA consists of 270 airlines, which account for 80% of all international flights. In a few years, tour operators and passengers will be able to connect to the new blockchain flight system.
The American Boeing corporation intends to patent a blockchain system for countering interference, which can affect the operation of GPS receivers during the flight of an aircraft. The corresponding application is published on the website of the Bureau of Registration of U.S. Patents and Trademarks. The company developed a new system consisting of their blockchain data registry, data storage unit, data protection module, and backup navigation system module. The placement of data in the blockchain, in the opinion of the authors of the application, will make it possible to use it as a backup version of the information in the event that a warning system for interference reveals a potential problem. The described blockchain system will be able to work on all types of aircraft, including unmanned aerial vehicles.
For a better understanding of how blockchain can help Boeing, we first need to look at how aircraft assembly works:
In each of these steps (designing and building, scheduling and operating, monitoring and maintaining), thousands of individual parts are implicated, so tracing all of them and keeping reports of their operation is a complex task.
Blockchain can reduce outages and unscheduled maintenance. With blockchain technology, Boeing will hold full origin details for each basic unit. The data will be available for all manufacturers in the production process, aircraft owners and maintainers, and government regulators.
Blockchain provides the ability to reorganize the sale of tourism products by neutralizing the role of intermediaries between businesses and companies, thereby improving services in the tourism sector. It can connect airlines, hotels, and other industrial enterprises and businesses that need these services.
For instance, the largest European airline, Lufthansa, will test the technology of blockchain in the sphere of air transportation. The company has partnered with the Swiss blockchain startup Winding Tree to create the first public blockchain products of the tourism industry at lower prices. Having concluded a partnership with an airline concern, Winding Tree will have access to experts in the field of air transportation. Cooperation with Lufthansa involves the participation of the latter in the pre-sale of tokens, with which users will pay for hotel reservations, air tickets, and cruises. In addition, the airline has integrated its API into the Winding Tree platform.
Many companies in the airline industry have already started the implementation of blockchain technology. The Swissport company is implementing a blockchain solution for tracking air cargo; Singapore Airlines is creating digital wallets for loyal customers; and the militaries of the United States, China, and Russia are implementing blockchain in their development of air forces.
As the aviation industry supply chain is one of the most ambitious and complex of all systems, blockchain can change the rules of the market, ensuring the authenticity of details in the supply chain. With this intention, Accenture and Thales developed a blockchain solution based upon the Hyperledger Fabric platform, which will be used in conjunction with the physically unique function (PUF) developed by Thales for “tracking and authentication of aviation parts and materials.”
The possibility of using blockchain technology in the aviation industry was also considered by Air France. Their servicing aircraft information can be completely transferred to blockchain. Together with Microsoft and Ramco Aviation, Air France is considering the development of blockchain applications for supply chains, which will be particularly attractive for the maintenance of passenger airliners.
A Final Word
Air transport is a dynamically developing branch of the global transport system. Not only has aircraft technology changed, but the methods and models of the aviation business have transformed, as well. At the same time, the introduction of new information technologies has led to the emergence of new ways and areas of cooperation and interaction between airlines and their clients. Blockchain is one of the most promising methods for enhancing the airline industry and bringing it to a new level of security, transparency, and high-quality operation.
