🗣 Boeing partnered with Canada’s TrustFlight and developer RaceRocks to build a so-called digital aircraft record system that helps airlines keep up with required maintenance. This expands on Boeing’s earlier blockchain initiative with Honeywell’s GoDirect Trade platform, which in 2020 securely sold $1 billion in Boeing aircraft parts. In time they envision a global airworthiness records platform, which could save 25% in maintenance costs—worth billions annually across the industry.
How it all started
🗣 As of 2020, Boeing had added more than $1 billion in excess airplane parts to GoDirect Trade, a blockchain platform designed to prove the origin of the parts and ensure they comply with safety standards, according to the manager of the platform, designed by aerospace giant Honeywell. Honeywell general manager Lisa Butters, said transactions saw Boeing add the excess parts or parts they no longer needed, directly to the platform, which connects the layers of the supply chain into a single, shared ledger of transactions that transparently tracks their movement.
Traditionally, aviation parts would each have paper “birth certificates,” quality documents, and more attesting to their original manufacturer and current safety compliance, with each document needing to be physically moved from place to place and re-entered in the new owner’s accounts, making them almost impossible to sell online, where the paper documents could easily be forged. But by moving each layer of the supply chain to Blockchain 50 member Honeywell’s custom version of Hyperledger Fabric, open-source code that anyone can build on, each listing is tied to images of the part and corresponding documents for the exact part being offered for sale, helping not only ensure the part is there, but that the documents it’s associated with aren’t forged.
Unlike the bitcoin blockchain, which anyone can build on, Hyperledger Fabric requires that companies be given access to the platform. In this case, Boeing had to set up a digital storefront on GoDirect Trade, a process that takes about two minutes. Once the storefront is created, trusted companies can load their own excess and obsolete materials directly to the platform, similar to Amazon, via an API or by transferring a text file directly to Honeywell.
The need for security
🗣 As many countries look to the privatization of airport infrastructure, establishing a secure method of transactions is crucial. In October of 2018, the International Air Transportation Association (IATA) released its Blockchain in Aviation White Paper, in a series called Forecasting the Future of Aviation (2035). Three years later, in late January of 2021, IATA announced a blockchain-powered travel pass, designed to aid passengers in international travel given heightened COVID precautions. Steps toward incorporating blockchain technology are not entirely new to the aviation industry but could have groundbreaking effects in reducing transaction costs.
Eric Leopold, IATA’s Director of Transformation, Financial, and Distribution Services, spearheaded the project and noted that despite the main challenges of scalability, governance, and cost of usage, Blockchain technologies could lead to an industry-wide rebirth. “This first Blockchain white paper is intended to raise awareness on the potential of this technology for the aviation industry and to guide the industry towards the most promising business opportunities while being mindful of the potential risks and challenges,” he said.
The primary goal of incorporating blockchain technologies in aviation is to facilitate the exchange of information in an industry dominated by high transaction costs. By transaction costs, we mean those in the conventional economic sense—such as the time it takes to transfer information and mistakes made from this information transfer if not done correctly. Transaction costs can also refer to the difficulty associated with penetrating through layers of communication, especially prevalent in aviation.
Decentralizing data platforms
🗣 When describing the aviation system, the best analogy we can think of is that of a symphony. There are many moving parts on both the side of the airport and the airline—the aircraft manufacturers, the airline carriers, the airports, concessionaires, etc.—just as there are violinists and cellists and flutists. Where one might see the conductor of the symphony as the perfect orchestrator of knowledge, who can adapt to changes in pitch and smoothly translate this information back to the musicians, blockchain-based technologies would provide a decentralized and automated database that allows for secure transactions of information across a wide array of aspects of the system, such as the streamlining of customer loyalty programs and baggage tracking, in a much more organized way. In addition, given the heightened security concerns after 9/11, the management of information is crucial, but verification and authentication might be even more important.
How Blockchain impacts aviation
🗣 All in all, IATA identified five areas of aviation in which blockchain technologies could have a significant impact, summarized below and taken directly from the white paper:
- Frequent Flyer Points: Streamline the earning, spending, accounting, and use of frequent flyer points through tokenization. The main purpose is to help airlines deal with rising passenger load factors, as higher loads make the facilitation of point redemption more difficult.
- Baggage, Cargo, and Spare Parts: Facilitate the tracking of both status and location of passenger baggage, cargo, and spare parts in a way more reliable than current assets management systems, as they frequently change custody. The main purpose is to streamline the current process and unlock new product developments, as well as deal with disruptions such as delays and cancellations.
- Distribution and Payment: Allow the collaboration of airlines, travel agents, etc., across the aviation sphere to co-deliver products and services. The main purpose is to expand the distribution reach of all concessionaires and increase the efficiency of the aggregation of travel products and services.
- Passenger and Crew Identity Management: Provide a method to streamline the identity management of passengers and crew while protecting privacy.
- Smart Contracts Across the Travel Value Chain: Eliminate or heavily reduces the methods by which “airlines and other actors across the value chain trade products and services and spend significant efforts on contracts, execution of contracts, monitoring the fulfillment stage, reconciliation, invoicing and settlement” by leveraging the concept of Smart Contracts.
Boeing’s use of Blockchain Technology
🗣 In early 2018, it was announced that Boeing had partnered with Honeywell, a multinational aerospace conglomerate, to trace and resell over $1 billion in spare airplane parts, via blockchain technology.
Using Honeywell’s GoDirectTrade, a blockchain platform that monitors and proves the origin of used parts and verifies their compliance with safety standards, Boeing was able to resell $1 billion worth of excess parts, after setting up a “digital storefront.”
The tracing of information and verification aspects of the blockchain system is extremely attractive, given that aviation parts typically float through the market roughly four times before being retired, and have high stakes in terms of durability and safety.
The aviation industry is quite slow to adopt new methods of exchange, and in an interview with Forbes, Honeywell’s general manager Lisa Butters noted that “…less than 3% of the $4 billion in second-hand aerospace parts sold per year is done online.” A statement that sounds absurd in the age of the internet.
Thinking Rationally
🗣 Given the aviation industry’s history of slow adaptation to any new technologies, we are not convinced that we will see drastic changes that incorporate blockchain technologies anytime within the next two years, but we are not completely hopeless. It appears that the exogenous shocks posed by the pandemic sped up IATA’s Travel Pass, and it is possible that we will observe similar effects elsewhere as travel demand picks up and airlines and airports alike fight to establish market power and ensure social distancing and enhanced safety measures are met.
Last year, United announced that it would be grounding some of its Boeing 777 fleets after an engine failure over Denver justifiably brought up safety concerns about the aircraft’s engines, when the cowling surrounding the PW4000 engines caught flames and fell off into someone’s front yard. Less than 48 hours later, another Boeing aircraft fitted with a smaller version of the same engine, a 747-cargo plane, experienced an engine failure that resulted in dropping debris over Amsterdam. And on Thursday, February 25th, another Boeing plane made an emergency landing in Moscow. A report showed that Boeing was planning on replacing cowlings around the engine months before the incidents but had not completed the maintenance. My best guess is a combination of old engines and bad cowlings, plus a lack of effective FAA oversight.
United, the only U.S. airliner to fly aircraft fitted with the PW4000 engines, on the other hand, was being praised for handling the situation and safely getting the plane on the ground. Those incidents followed the 18-month suspension of the Boeing 737-max after several fatal incidents grounded the aircraft globally.
Given the stated facts, we agree that “frictionless” isn’t a word often heard in aviation, but blockchain technologies could facilitate an exchange system in which it is possible in terms of transactions.
📝 Sources:
