These past few weeks have been flooded with news of COVID-19 (“coronavirus”), with the consequences of this epidemic going far beyond health issues. Businesses in multiple sectors globally are suffering, but few have been as severely affected as the airline industry, where the predicted financial impact is substantial.
According to an IATA report from 6 March, the airline industry is expected to suffer financial losses between $63bn and $113bn. The study also noted that airline share prices have fallen nearly 25% since the onset of the outbreak, around 21% more than the decline that occurred at a similar point during the 2003 SARS episode. However, since this data was published, we have seen shares fall further still, which has only been exacerbated by extensive travel bans.
Drops in crude oil prices could provide some relief to the industry, but the estimated $28bn saving on their fuel bill, on top of that achieved as a result of reduced operations, is far from enough to soften the blow.
In these times of uncertainty, and amid the multiple travel restrictions, the aviation sector should consider investing in blockchain technology to help mitigate some of the financial impact of the virus, while improving their processes for the future.
The airline industry’s supply chain faces numerous challenges, relying on heavy volumes of data continuously being updated and shared among participants inside and outside the industry. Management of documents relating to logistics and the condition of goods is critical, and the fallouts of any input delay or inaccuracy are considerable, ranging between delays on luggage to security issues.
Blockchain increases efficiency by providing a platform that enables a fluid communication and the control of stocks of goods such as plane fuel, resulting in a high level of inventory accuracy. It also creates a real-time, valid and unalterable record of the services provided by the Into-plane company, reducing uncertainty and costs of MROs, while fostering collaboration and productivity.
Discrepancies can always arise between different accounts and checks. However, blockchain ensures that invoices procured are legitimate by offering a “virtual copy” of immutable record and creating a secure environment for payment reconciliation and settlement.
By digitising processes, blockchain supports the creation of smart contracts, considerably decreasing back-office workload, while facilitating adjustment of invoices among stakeholders, which results in time-saving and better cash flows.
Demands on companies to reduce the environmental impact of their operations have significantly increased over the last few years, as seen by the surge of new regulations and Environmental, Social, and Governance (ESG) initiatives.
Airlines are under particular pressure to adopt more sustainable practices and adopting blockchain technology as a core part of a digitisation strategy provides the tools necessary to achieve their operational and ESG objectives. Its implementation would allow them to build transparent ecosystems to ensure that ethical practices are enforced and followed along the whole supply chain; for example, blockchain can follow the path of the fuel from factory to airline and confirm its provenance and quality. By building trust and encouraging compliance, airlines can focus on creating a more mindful ecosystem and turning a business imperative into a competitive advantage.
The different usages of blockchain in the aviation industry are multiple and still being developed and explored, so there are undoubtedly more benefits to come. At this challenging and uncertain time, it may be prudent for airlines to look at developing their blockchain ecosystems so that, once they have weathered the coronavirus storm, they can emerge with better processes and cost-saving measures in place to enable their business to soar.