Blockchain - what’s in it for airlines?

airBaltic was the first airline in the world to announce that it accepts payments in cryptocurrency. Although demand is not big, it is still significant enough to believe that at least some part of the future lies there. During the Rietumu Fintech Club meeting in September 2017, Senior Vice President of eCommerce, Marketing and Sales at airBaltic Jouni Oksanen shared his observations on new fintech technologies disrupting the airline industry.

How would you describe - what’s in this whole blockchain story for the airline industry?

There are four different areas. First of all, in airports where you can automate data collection about each passenger. Second is the big opportunity and the sky is the limit there - it is all you can think about spending money while travelling. For example, payments using cryptocurrencies, loyalty programs and instant withdrawal of the bonus points earned in a shop. All point earning systems from different airlines can now be connected and the passenger can use them immediately with the help of the blockchain and cryptocurrency in one digital wallet. The third usage case can be applied to the airline’s B2B deals, e.g. paying for meal deliveries or fuel. The fourth and the biggest change possible due to blockchains is the opportunity to eliminate middlemen services for ticket distribution. There are four major players globally, but their exclusion could change a whole industry - distribution is one of the main elements in our ticket price.

How open are the industry’s big players to all these changes?

Airlines are following existing legacy backend systems. This means that we are trying to find small areas where we can play with all innovations possible. Nowadays, it all happens up front and the customer can see it. Not so many things are possible backend due to the fact that legacy systems there are old fashioned, and the business models in distribution are not as flexible as airlines would like them to be.

What is the biggest achievement in the innovation field for airBaltic?  

If we should link to this topic, then airBaltic was the first airline in the world to use bitcoin back in 2014. It is a significant step towards adaptation and implementation of the new system. I was looking at the statistics. The numbers are not big, but we sell about 100 tickets each month by using cryptocurrency. The majority of buyers are from the Baltic countries, Finland, Germany and France.

Did the fact that cryptocurrencies split into two recently somehow influence your business?

No, we didn’t feel it, because the bitcoin business for us is so small. We don’t have to enable those new currencies yet or make any significant changes. Today, we are standing still and observing from the sidelines, but actively keeping track of what is happening in the field of new technologies.

But is the cryptocurrency the future?

I’m sure it is the future if regulation does not affect this field too much. If we think about mobile devices and e-wallets, we see that people are looking for convenience. The younger generation may be deeply into cryptocurrencies. So the game can change dramatically and faster than you can believe it will.  

There were a lot of discussions about fees that were also applied to payments in cryptocurrency. Do they still exist?

Yes, they do. Bitcoin, for example, does not differ much compared to credit cards in our business. We are looking more at cost savings, which is exactly touches on the fourth point mentioned earlier - distribution costs for airlines. Lufthansa recently announced that it will charge an extra EUR 16 per ticket if it is bought somewhere else and not directly from them. Big industry organisations internally discuss how to reduce costs that are caused by travel agents. Nothing happens in a day, a week, a month or even a year, but changes are in the pipeline.

If we come back to discussion about the cryptocurrencies, do you feel that people are still not used to getting all for free?

Someone has to pay anyway.  An airplane needs fuel and someone has to pay for it. Ryanair CEO Michael O’Leary recently said that in coming years flying for customers might be for free, but then he will have to charge airports, because he brings people to the airport. And then airports are going to charge shops. The earning mechanisms vary, but at the end of the day, the cost per seat needs to be covered.