Blockchain In Aviation: The Example Of S7

At the end of July, the volume of airline ticket sales through the S7 blockchain platform and Alfa-Bank in Russia reached one million dollars a month. The total turnover of this joint project of an air carrier and a financial organization amounted to 245 million rubles since the beginning of the year. S7 is known for its interest in high technologies. The eloquent indication of this fact is the purchase of the Sea Launch cosmodrome by the S7 Group holding and the company's management plans to rename it to S7 AirSpace Corporation.

Though for a large airline (and S7 is the second largest air carrier in Russia) a million dollars in monthly turnover is a drop in the bucket. The reason is that the platform currently works with only one bank. BNT figured out why the airline needed this blockchain solution.

Why does S7 need blockchain?

The main advantage of the new platform is the simplification of work with agents which are the distributors of airline tickets. The existing system requires intermediary agencies to make quite significant investments: it is necessary to make an impressive cash contribution to a bank account and use the bank guarantee procedure.

It is long-termed, expensive and inconvenient: it takes about two weeks to settle between partners (the agency and the airline), the bank charges a commission for the guarantee, and agents have to renew the guarantee if they exceed the limit (sold more than planned). Using the blockchain platform jointly developed by Alfa Bank and S7, the speed of operations increases, while the amount reserved by the agency for settlements with the airline decreases and is spent more flexibly.

At the same time, verification of supporting documents, monitoring the availability of a sufficient amount of funds in the agency’s account, transferring the required amount and accounting for tickets sold are carried out using smart contracts and are recorded in the blockchain. To compare the duration of operations, the following data is presented: a standard system of working with agencies requires 12-15 days for settlements between an agency and an airline, and using a blockchain platform, it takes several tens of seconds, almost instantly.

How does the platform work?

To implement the project, a smart contract system and the Ethereum protocol are used — they provide “informational interaction of counterparties when making payments.”

According to S7 representatives, the platform uses solutions from the Hyperledger Fabric project, which, along with high performance, allows you to "to store the data of different participants in a safe and private way."

Alfa-Bank and S7 specialists are participating in the development — this is a joint project, and its functionality is currently provided by the interaction of these two enterprises. For example, agencies that don’t have service contracts with Alfa-Bank cannot connect to the platform. This is an important condition, because the payments are made through this bank and the agency account must be opened there. Apparently, the plans of the developers include expanding the functionality of the platform and providing other banks with the opportunity to participate in settlements.

Not only airline tickets

The airline's work includes many processes with a large number of participants. These are suppliers of parts and materials, service departments, operators who monitor safety and compliance. The operation of the entire system may be disrupted due to failure to fulfill obligations by just one of the links in the chain.

This is probably why S7 uses blockchain solutions to optimize other business processes. For example, when making settlements with aircraft refueling services at airports. This is another joint project of the company with Gazprom Neft.

The specialists of these two organizations developed the aviation fuel smart contracts AFSC. With the help of it the provision of S7 aircraft fuel became faster and more efficient: blockchain and smart contracts in this area also brought transparency, speed and convenience.

NDC, IATA, and GDS — aviation loves abbreviations

“During this year, it is planned to connect the first online agents that work according to the NDC standard to the platform,” the S7 website says.

The introduction of the blockchain platform in the airline distribution process is only a part of the process in which S7 participates. Around the world, airlines are trying to compete in the market by introducing more advanced and more profitable technologies. One of them is NDC.

NDC (New Distribution Capability) is a protocol that should improve existing generally accepted systems of accounting and distribution of airline tickets (they are called GDS — Global Distribution Systems). The standard is supported by IATA (International Air Transport Association).

Thanks to the use of NDC, airlines can regulate the system of selling additional services to their customers more flexibly, as well as introduce an individual approach to passenger service, offering each of them products that are in demand and corresponding to their capabilities.

In the near future, Bitnewstoday will write about the history of the development of ticket distribution systems, global trends in this process and airlines using modern information technologies.

Image courtesy of Blocktribune