Blockchain: potentially transformative technology that could help rebalance the aviation value chain

According to IATA SVP Financial and Distribution Services Aleks Popovic, IATA's financial settlement system hands USD7.7 billion annually to financial institutions in fees (22% of the world airline industry's estimated 2016 net profit). Financial institutions are just one of many intermediaries in the aviation value chain, each taking a cut.

IATA, airlines and other aviation organisations are understandably researching blockchain technology's potential. It could help to reduce airlines' dependence on intermediaries, to lower costs and to streamline processes.

The best known application of blockchain is bitcoin, the mercurial cryptocurrency, whose benefits for payment include speed of processing, lower costs versus credit cards, lower risk of fraud, and its cross-border nature. It also widens the potential customer base, since bitcoin payment does not require a credit card, or even a bank account.

But blockchain has huge transformative potential beyond cryptocurrency. An open, distributed ledger that records transactions in a manner that is permanent and verifiable, blockchain allows parties to exchange money, data and contracts without involving a third party. It enables 'smart contracts', which automatically trigger an action on the fulfilment of agreed conditions.

Blockchain's potential uses in aviation include areas such as passenger and operational data, loyalty, baggage tracking, MRO, security and distribution.