In this fourth installment of our five-part series highlighting the legal issues presented by blockchain, we’ll consider application to the aviation industry. Blockchain has the potential to increase airlines’ profitability by lowering transaction costs as well as improving efficiency and transparency, while simultaneously enhancing customer experiences.
As we discussed in the post “Taking Control of Your Identity,” digital identity verification is difficult and lacks trust – problems the blockchain can solve. And where is identity verification more important than when you’re standing in a long check-in line at the airport? Securely storing passenger information and identification on the blockchain will streamline passenger identity verification and may even reduce those long lines. Different airlines, airports and other entities can use the same shared, secure blockchain to create a universal digital identity system, significantly reducing operational costs. One blockchain startup is already developing a digital token that would contain all of a passenger’s travel documents and passport/identification in one place.
The blockchain could also be used to abate credit card transaction fees and currency exchange fees for international flights. Accepting digital currency, such as bitcoin, as a form of payment will create a more seamless and robust system between airline and third-party booking sites. The blockchain will be a permanent and indisputable record of all transactions, can reduce double- or over-booking, and can be expanded to include other airline products and services from checked baggage to inflight entertainment.
Similarly, moving frequent flyer miles to a blockchain platform will create a more seamless and integrated loyalty program. Airlines can also use smart contracts to issue frequent flyer miles instantly. With increased transparency and interoperability, loyalty programs can easily accommodate transactions among different airlines’ and companies’ loyalty programs and even peer-to-peer transactions. Blockchain will reduce the cost and friction among these loyalty partnerships, making miles easier to both use and track.
Beyond improving customer satisfaction, the blockchain can help airlines reduce their administrative and operational costs. For example, logging passenger baggage and air cargo on the blockchain could reduce lost or delayed luggage. The inherent qualities behind blockchain technology make it an ideal system to track an item at every step of the chain – from origin, through shipping, to arrival at the airport – resulting in increased efficiency, lower costs, and less fraud. All parties involved will have access to the same data, making tracking bags and shipments across international borders much easier.
Customer satisfaction has become increasingly important as airline competition increases and passenger’s needs evolve. And while US airlines are reporting record profits in 2016, increasing labor costs and uncertainty surrounding fuel prices may motivate companies to quickly adopt new technology that will increase profitability. Blockchain addresses both profitability and customer satisfaction.
While implementing the technology will raise some new legal questions, most will fall under existing regulation, just applied in a new way. Both federal and state regulatory agencies, and even international agencies, will play a vital role in the blockchain’s adoption. The airline industry is already experimenting with new technology, such as finger and eye scans for security check-in – so why not blockchain?