Is business aviation ready for Blockchain?
You will have heard about Blockchain. But you should know about it, as it is coming to your market soon.
Is business aviation ready for Blockchain?
You will have heard about Blockchain. But you should know about it, as it is coming to your market soon.
“Blockchain is a distributed, decentralized, public ledger.”
BLOCKCHAIN IS one of those words nearly everyone has heard of or read about over the past decade, but very few people can define exactly what it is. Those who take a shot at explaining it usually end up saying something along the lines of: “Blockchain is a distributed, decentralized, public ledger.” Instead, the best way to think about blockchain is that it allows data to be held securely in a provable format. The blocks of the chain are digital pieces of information or data.
This deep granularity means small items can be tracked, with the data
stored on a network of computers. Fundamentally, the goal of blockchain is to allow digital information to be recorded and distributed, but not edited. Accessing indivudal blocks requires a key, created by complex algorithms. This ensures the data items cannot be tampered with, essentially helping the data points be verifiable.
For business aviation the potential application of this technology could be vast, from storing individual financing documents to spare-parts tracking of the smallest aircraft components. Fuel companies are also working on using it.
First movers
Adoption across business aviation of blockchain is still very much in its early stages but this will change soon. Clay Healey, owner of AIC Title Service, is among the first movers. The firm has been using blockchain since last year, mainly placing closing information into it, for roughly 2,000 assets with a $2bn value in closing. Healey says that AIC uses blockchain primarily for security but adds that a lot of the language around blockchain is slowing its adoption.
“For us at AIC, blockchain really is an added layer of security. I think a lot of the words used around blockchain make it incredibly hard for most people to grasp it. Nodes. Decentralisation. What do they mean?” he asks rhetorically.
“Breaking it down logically, it’s a way to put information across a vast array of servers, and that makes it extremely secure and virtually un-hackable. I say virtually as for verification of the documents, 51% of the computers, or servers, need to agree that the data is correct. To hack 51% at the same time is a huge task.”
Aiham Bader, founder and CEO of Click Aviation Network, is another pioneer. The trip support company is already using Blockchain technology for its Instant Permit Programme and is looking at leveraging it to help with parts traceability.
“If you are going to implement blockchain, start from within,” said Bader. “Have a group from your company who understand your business, vision, the target and the plan. Then you have the engine within who understand blockchain and if it fits within your business. Then from all the problems you have to pick out only one problem and start with it first.”
Aiham Bader speaks at Revolution.Aero 2019
Todd Siena, founder and chief of Block Aero, a start-offering a blockchain platform, also highlights that for aviation blockchain offers security of data and a method to verify the truth of that data, which can be crucial for an aircraft’s resale value.
“Where we see the value of blockchain at Block Aero is that it organises asset data and secures the verification of it. Given that aircraft value is linked to this asset trace data integrity, which grows over the life-cycle, being able to prove up that asset data is vital. If you lose the data, or it is incomplete, then you are losing resale value,” says Siena.
“If you are going to implement blockchain, start from within. Have a group from your company who understand your business, vision, the target and the plan”
Being able to store and verify crucial data cross many components is of obvious benefit to aviation, especially on the maintenaBlock Aero recently announced a flagship pilot project with Turbine Services & Solutions and Etihad Airways nce side where there are numerous parts to track.
The blockchain pilot project, sponsored by Mubadala Aerospace R&D, aims to improve engine-overhaul times by enhancing cooperation between parties that need to collaborate on aircraft asset data.
Healey agrees that blockchain’s ability to prove-up documents makes blockchain a good opation for aviation.
“One great thing about packaging our closing documents into one PDF is that all the information is there and if it is housed on the blockchain it’s incredibly easy to obtain that information if and when there’s a need to prove upwards.”
Siena thinks that aircraft will ultimately either be on the chain or not, with implications for the pricing of financing and asset sale value.
Tracking aircraft parts is a serious business
“I think the world will diverge into a place where we have aircraft and assets on-chain and off-chain. Maybe those at the start will be newer aircraft and premium ones like business jets,” he says.
On-chain aircraft may also be able to get tailored insurance policies as well, Sienna adds.
“These on-chain assets will enjoy several advantages over those not on the blockchain. For example, insurance may be cheaper as you can prove to the insurer the condition of the asset with risk monitoring over the life-cycle,” says Siena.
“Right now, most insurers offer very generalised policies, but providing more granular data means these can be more tailored. The same can be applied to asset financing.”
Clay Healey, owner of AIC Title Service
Back on the chain gang
One obstacle to blockchain’s wider adoption is that making a complete repository of all aviation assets is something of a herculean task.
“But away from putting new stuff into the blockchain, reverse engineering blockchain into the aircraft title world may be near on impossible as there are just so many aircraft. You’d have to go so far back to get all the information. If someone was to draw a line in the sand and say ‘let’s just do it from say 2018’, then it might be feasible,” says Healey.
Registry support would play a critical role in making the adoption of blockchain more feasible. But according to Healey no registry has embraced blockchain as of yet, though AIC is in talks with a European registry around use of blockchain.
OEM support would also help fasttrack blockchain’s use across aviation, according to Paul Jebely, partner at law firm Pillsbury in Hong Kong. “The inevitable march towards modernity must invariably begin with the OEMs as first movers,” Jebely says.
However, costs and a lack of immediate efficiency gain may dissuade OEMs from adopting blockchain swiftly, Healey argues.
“I wouldn’t say blockchain really adds efficiency and it does cost a lot, even for relatively small users like us. If you’re an OEM, the cost will be many times more and imagine having to log every piece of metal, every change to that piece of metal – that’s not efficiency, that’s slowing you down! But then again when it comes to certification, you can just take all that data stored in one place, assert that it’s true and present to the FAA or whomever– that is where the streamlining blockchain offers starts to come in for OEMs.”
Use of blockchain may not accelerate rapidly in business aviation, but there is little doubt that harnessing technology can bring business efficiencies. For example, Healey is using computing power to cut down the amount of time it takes to trace ownership.
“We are working on a computer system that will essentially be able to read registry documents, and hope to have that online by June. That will bring efficiencies as, before, tracking all the owners, different parts etc could take four to five days,” Healey says. “There’s a 9ft tall office we have here, and some of the paper trails you’d produce from those registry searches would be as tall as the ceiling. And you have to double check all of that! Now the computer will read that document in eight minutes and all we will have to do is to check it, which might take an hour or two. That’s a tremendous time saving.”
Smart business-aviation firms need to embrace technology that assists them. Whether blockchain is one that will become widespread looks unlikely in the near term. But as AIC’s planned new system shows, there are always new avenues to explore.
Other technologies are available
Use of blockchain may not accelerate rapidly in business aviation, but there is little doubt that harnessing technology can bring business efficiencies. For example, Healey is using computing power to cut down the amount of time it takes to trace ownership.
“We are working on a computer system that will essentially be able to read registry documents, and hope to have that online by June. That will bring efficiencies as, before, tracking all the owners, different parts etc could take four to five days,” Healey says. “There’s a 9ft tall office we have here, and some of the paper trails you’d produce from those registry searches would be as tall as the ceiling. And you have to double check all of that! Now the computer will read that document in eight minutes and all we will have to do is to check it, which might take an hour or two. That’s a tremendous time saving.”
Smart business-aviation firms need to embrace technology that assists them. Whether blockchain is one that will become widespread looks unlikely in the near term. But as AIC’s planned new system shows, there are always new avenues to explore.