For decades, airlines and travel agencies have used global distribution systems (GDS’s) to match up passengers with seats on flights and take payment. Companies like Amadeus, Sabre and Travelport have provided customers with a single point of contact through which travel agencies can book seats, as well as services for hotels, car agencies and other players. However, with the recent rise in distributed ledger technologies, a number of commentators have asked whether an airline blockchain would help bypass these traditional ‘middlemen’.
Blockchain has enormous potential for cutting costs and improving many aspects of how the aviation industry works - from baggage handling to the ordering of spare parts (a handful of airlines are already using it for certain activities). However, one of the most obvious areas would be to allow for easier payment between airlines and travel agencies.
But before we begin, let’s get some key concepts around airline blockchain and GDS’s cleared up:
GDS’s are, for want of a better word, middlemen. They help process payments between travel agencies and airlines, as well as plenty of other players, and ensure the right information about tickets and money gets sent back and forth.
Example: Tropical Travel Agency is a tiny agency in a small Caribbean island. They want to sell seats on Exotic Airways flights. However, Exotic Airways are a huge international airline, which makes it difficult for the agency to book flights directly with them. So, instead, they pass their orders through a GDS, whose software locates seats on Exotic Airways’ flights, transfers the money from the customer and ensures the small agency gets their commission.
Blockchain can be defined as a distributed ledger. What this means is that for every payment or transfer of value, a new ‘block’ is added to a ledger saying who owes what. This ‘ledger’ is distributed among many people, which means it’s near-impossible to change earlier entries, and that means there is complete transparency over what is owed to who.
Example: Tropical Travel Agency sells a ticket to a customer for a flight on Exotic Airways. This sale is added to the blockchain ledger so that Exotic Airways can also see the sale. Because the ledger is distributed, everyone in the network can see how much has been paid. Exotic Airways will then credit Tropical Travel Agency with their commission. Thanks to the transparency of the ledger, Tropical Travel Agency can trust Exotic Airways to pay and there can be no confusion about who owes what.
As you can imagine, since GDS’s are middlemen, they charge a fee. And therefore, there’s a strong motivation for travel agencies, airlines and other players like hotel chains and car hire companies to cut them out of the process. In this case, blockchain seems like the way to go.
At first glance, using a blockchain system for the airline industry provides plenty of benefits. These include:
But before getting caught up in the hype of an airline blockchain system, it’s worth considering the drawbacks too:
Blockchain has garnered plenty of hype as well as disappointment in recent years - not least with the bubble and crash around Bitcoin. Nonetheless, the technology is compelling and clearly offers benefits to many industries - yet the way it eventually comes to be used in the airline industry remains far from clear.