104 AUSTRALIAN AVIATION
B
lockchain might sound like the
kind of digital development
you’d read about on a technology
website rather than in
Australian Aviation, but it holds the
key to a set of changes to the way the
airline industry works as revolutionary
as computerised reservation systems
or online ticket purchasing.
As Air New Zealand chief digital
officer Avi Golan says, “with its built-
in efficiency and security, blockchain
has the potential to trigger huge
innovation in travel, paving the
way for new business models and
collaboration.”
Bitcoin, the electronic currency,
relies on blockchain and other
technologies for its fundamentals,
including its security, so the two
are often linked together. Indeed,
the moment you start talking about
blockchain as a technology, everyone
uses the example of bitcoin. This
somewhat confuses the matter,
because the primary emerging benefit
of blockchain for aviation purposes
isn’t in purchasing tickets — it’s in
reducing intermediaries that maintain
the databases that form the backbone
of airline operations.
Blockchain’s first immediate
applications are likely to be the way
airlines manage sales in the future.
“Take travel distribution,” which,
Xavier Lagardère, head of distribution
for the Lufthansa Group hub
airlines, tellsAustralian Aviation,
is “a very layered, legacy-based IT
landscape, with players who have
been historically able to extract quite
some margin, and quite some dollars
from the value chain that holds a
stronghold. And take blockchain, with
the promise of a secure, value-based,decentralised transaction network.
Those two things are conceptually
completely opposite. The business
aspiration, the long-term, is indeed
to be able to offer a travel ecosystem
that is not as reliant on those
intermediaries.”
“A blockchain is a database, and the
key feature of that database is that no
one person or organisation controls
it,” Maksim Izmaylov, founder and
chief executive of Winding Tree, a
nonprofit corporation working with
the Lufthansa Group and Air New
Zealand (among others) on applying
the technology to airlines, tells
Australian Aviation.
“In the travel industry,” Izmaylov
says, “there are a few points of
centralisation. They are security holes
and they are bottlenecks. When you
decentralise those central parties that
are hoarders of the data today, you’ll
solve a whole number of problems.”
The decentralisation occurs by
creating distributed ledgers that are
encrypted stored in a blockchain,
which can be replicated infinitely to
create multiple sources of the same
truth, providing redundancy and
visibility of the encrypted chain.
The idea of a distributed ledger is
intended, in the aviation context, to
replace proprietary ledgers that are
used as databases: global distribution
systems that manage ticket inventory,
for example.
“Today,” Izmaylov highlights,
“in the airline industry there are
virtually two or three companies
that can help you distribute your
inventory. Of course, they are
enjoying tremendously the
quality of that marketplace
being oligopolistic.”This oligopoly comes with a
number of disadvantages, the first
being cost. There’s a substantial
amount of money to be made in
running a system on which many
airlines rely, representing a large
costcutting opportunity. Another
disadvantage is that the proprietary
and incumbent natures of the systems
mean that there is little impetus to
invest in new technologies, so many
of the databases are old and do not
interface properly with modern
systems. They also create barriers
to entry, especially for innovation,
reducing the ability of smaller
startups in particular to create new
applications for airline data.
Other disadvantages include
security, because a single operator of a
database is inherently less secure than
a distributed one.
Of the three primary threats of
this type, let’s call the first threat
type the Equifax threat, after the US
credit rating agency where millions of
individuals’ personal information was
leaked owing to not being adequately
secured and then penetrated.
The second threat is where a single
actor inside an organisation leaks
information, intentionally or not: let’s
call this the Snowden threat, after the
former CIA contractor who leaked
intelligence information.
The third threat is where a single
point of truth in a single system
with anything less than 100per cent
uptime or reliability causes problems
when it goes down. Let’s call this
the Amadeus threat, since many
passengers will recall being stranded
when that supplier of airline
operational functionality went offline
earlier in 2017.Bits & blocks
WRITER: JOHN WALTONBlockchain poised to transform the backend of commercial aviation
A handful of companies
presently have an oligopoly in
operating global distribution
systems. Blockchain has the
potential to break that apart.
SETH JAWORSKI‘Blockchain
has the
potential to
trigger huge
innovation in
travel.’
AVI GOLANBlockchain