Tokenized Airline Credits
Hey everyone! Hope y’all had a great three-day weekend with MLK day. It’s always good to look back at these larger-than-life characters, as their powerful messages still hold value and importance today. My favorite quote of his goes:
“I have a dream that my four little children will one day live in a nation where they will not be judged by the color of their skin but by the content of their character.”
Aside from this, I finished my first week in Tampa as part of the 12 Cities in 12 Months challenge, and have loved it. I have been doing my best to stick with the plan outlined in my 12 Cities, 12 Months blog, by posting content via TikTok, Instagram, and, for the first time, Spotify.
12 Cities in 12 Months Linktree if you’d like to follow along the journey
As the Los Angeles Chargers learned this weekend against the Jacksonville Jaguars, it’s not over until it’s over, so let’s dive into the blog.
Earlier this week, I tried using airline credits I had through Expedia to book a flight back to New Orleans for Mardi Gras, and it was an absolute nightmare (able to get the flight but took way longer than it should’ve). Just like many of my previous blogs where I theorize Web 3.0 versions of current systems or businesses, I figured I would do the same with Airline credits.
Expedia Experience
Before diving into the idea, I want to talk about my experience with Expedia to help illuminate why I thought crypto airline credits can be of benefit to all involved parties (and to also let out my anger and disdain toward this company).
Back in April of 2022, I had a flight booked through Expedia on American Airlines to go to Minneapolis for VeeCon but had to cancel the trip unfortunately. Thus, instead of getting my ~$900 back (yeah, bought it late) in actual cash, I received airline credit. However, I didn’t think it would be the worst thing in the world since I would most likely use it before it expired a year later.
I quickly put those $900 credits to work as I purchased a flight to Austin for the Consensus conference which happened amid the Three Arrows Capital collapse.
This put me at ~ $600 left in airline credit. However, since I used some of the credit, a representative from Expedia informed me that I would not be able to see it in my account anymore, but it was still there. Thus, they informed me that I would need to contact Expedia to use credits in the future instead of just being able to book flights on my own.
Thankfully, I was planning on using it fairly soon in August for a trip to Europe (a first for me) with a few friends. However, I was unable to use these credits since the original flight I gained credits from was within the US, and the only flights I could book using that credit also had to be in the US. Although this made no sense to me personally, especially since I still planned on purchasing a flight through American Airlines, I understood and accepted this condition.
However, what was annoying about obtaining this information was not the info itself, but how much time and effort I needed to put in to get to this simple conclusion. It took over three hours on the phone with two different representatives from Expedia. The communication I had with the Expedia reps was as confusing as Abbot explaining the St. Louis lineup to Costello.
Now, the most recent experience occurred this past week when I went to use the last ~$600 to book a flight back to New Orleans for Mardi Gras. Just as I explained, I knew my flight credit was there even if it didn’t show up on my account. Thus, I had to book my trip through an Expedia representative.
I was able to book my flight in the end, but the process was burdensome
- Had to wait for the rep to respond, but had to quickly respond myself, or else they would close the conversation (annoying cause I had work to do at the same time)
- Sent screenshots of the exact flight I wanted, but the rep said they couldn't see the dates. The rep then corrected me when I mistyped the date, meaning they could see the pictures
- Originally told me my flight credit was invalid even though it hadn’t been over a year from the original cancellation
- The flight I tried to book cost $500 when I sent the photos to the rep, and the rep confirmed this when creating the flight on their end
- However, after needing to rebook the trip for some reason, the rep sent me this:
Disclaimer: This is not meant to be an attack on the representative themselves as they are most likely working hard at their job with the parameters they have in place. Rather it is to express criticism of the system Expedia has put in place to handle situations like this.
Overall, the process took 2 hours to complete, which, in today’s digital world, is quite long IMO. It got me thinking: How could crypto not only solve this problem but make an even better system?
Solution: Tokenized flight credits
What is Tokenization?
The tokenization of real-world assets (RWAs) has become more and more common as blockchain technology is further adopted as it makes systems more efficient, transparent, and secure. For those new to this topic, tokenization refers to the process of transforming the ownership and right of particular assets into a digital form on the blockchain. Two of the most prominent examples we see today include carbon credits and real estate, and even the CEO of BlackRock, the largest asset manager in the world, Larry Fink, said:
“The next generation for markets, the next generation for securities, will be the tokenization of securities.”
This idea of tokenization could be replicated with flight credits in a way that benefits airline customers and the airlines themselves. Here’s how.
What it would look like
I see two different scenarios on how this plays out:
Firstly, you could tokenize the flight credits by creating non-fungible tokens (NFTs) with them. In this instance, one would create a unique digital representation of a specific flight credit that include information such as flight number, departure and arrival times, seat class, and other specific details. By using NFTs, one would only be able to purchase specific flights where the dates, times, seats, etc. are unalterable.
Secondly, you could tokenize the flight credits by creating fungible tokens, which would be interchangeable with other tokens of the same denomination (i.e. other flight credits). This would be useful if the goal is to create a standard unit of value that can be easily exchanged and traded on a blockchain-based marketplace or exchange. This means that a flight credit with a specific value could be bought, sold, or swapped regardless of the flight number, departure and arrival times, seat class, and more.
In my theoretical dream world where this existed, I would go with the second option where there would be an exchange/marketplace just like Uniswap (or maybe it would just be Uniswap) where a user would be able to buy, sell, and swap airline credits from multiple airlines such as Delta, American, Southwest, and more.
Some of y’all may ask, “Who would use this?” Here are a few examples of those who would use them brought to you by ChatGPT (yes, I will be transparent about when I use AI so y’all don’t think I’m smarter than I actually am):
- A company that frequently books flights for its employees could tokenize their flight credits and trade them on a blockchain-based exchange to maximize their value.
- An individual who is unable to use a flight credit before it expires could tokenize it and sell it to another individual.
- A travel agency or an aggregator could tokenize its flight credit and resell them to its customers.
Others may ask, “Why would airlines & customers want to do this?” Well, it provides a win-win situation for both parties:
- Customers now have the ability to “cash out” on their flight credits for actual cash, swap credits with restrictions (i.e. not being able to purchase flights outside the US), obtain credits from another airline with better flight options, and more.
- Airlines now have a completely new revenue stream. For every transaction on this theoretical exchange/marketplace, the airline could add a 5% transaction fee (just as an example) that they would receive. This means that on a $1000 flight credit, which the airline has already made money on, the airline will make an additional $50 to add to its top line at the end of each quarter.
If you ask me, this is an amazing deal for both parties. Almost as good as Hulk Hogan and Randy Savage joining forces.
Tokenized Flight Credit Pros & Cons
Below is a list of the pros and cons that tokenized flight credits would provide (I also used Chat GPT to help with this btw).
Pros:
- Increased Efficiency: Tokenized flight credits would enable more efficient buying, selling, and transfer of flight credits, as transactions would be recorded on a blockchain, which is a secure and transparent ledger. This could potentially reduce the need for intermediaries and streamline the process of buying and using flight credits.
- Liquidity: Tokenized flight credits would be tradable on a blockchain-based marketplace or exchange, which could increase liquidity for individuals and businesses that hold flight credits. This would make it easier for them to buy and sell flight credits as needed.
- Traceability: Tokenized flight credits would enable tracking of the ownership of flight credits, which could prevent fraud, double-spending, and other issues.
- Accessibility: Tokenized flight credits could make flight credits more accessible to a broader range of individuals and businesses, as transactions would be recorded on a blockchain, which is a secure and transparent ledger.
Cons:
- Complexity: Tokenizing flight credits would require a significant amount of technical expertise and resources, which could be a barrier for some companies.
- Regulation: Tokenized flight credits would be subject to a wide range of laws and regulations, which could be difficult to navigate and comply with.
- Adoption: Tokenized flight credits would require the adoption of the technology by the airlines, travel agencies, and other relevant parties, which could be a slow process.
- Legal challenges: Tokenized flight credits could face legal challenges due to the lack of regulatory framework for this type of tokenization, and it could also face legal challenges from consumers and other stakeholders.
- Taxation: Tokenized flight credits would be subject to various tax laws and regulations, which could create complexity for the companies and for the customers.
However, when looking at the list of cons, most of them include short to medium-term problems. On the other hand, the pros indulge in the long-term benefits that this potential idea would provide. These differences remind me of a fixed cost and revenue chart: start at a loss early, but use the fixed cost investment to turn a profit in the future.
Thus, if airlines, regulators, customers, and more are willing to play the long game, pass sensible regulations, and adopt blockchain technology, we can be in for an extremely interesting and unique application that everyone can benefit from.
Conclusion
Not only would this application help solve the previous experience I had with Expedia, but it would also be a real-world, applicable use case that those other than crypto-natives would be likely willing to use. Coming out of the 2023 bear market, I’m hoping that real-world use cases can arise from the dust to onboard more users to crypto and to make this industry something built on substance instead of hype.
Hope y’all enjoyed the blog! The next time I publish one of these, I will have started my job and will be in Melbourne, Florida. If anyone has any general advice for starting a new position or some recs for things to do in Melbourne, please let me know!
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