Blockchain Technology Finds New Purpose in Transforming Airline Retailing

Corporate travel managers from around the world are struggling with out-of-channel bookings, which the Global Travel Business Association estimated to be at 15 percent of all business air travel as of August 2018. In order to help ensure that bookings are aligned with company policies, these managers need a solution that gives them complete visibility into all bookings — including the ones that are happening outside the prescribed channels.

Airlines Reporting Corporation (ARC) in partnership with Blockskye, a blockchain solutions provider for the travel and entertainment industries, recently made this possible by successfully launching a pilot program for employees of a large, mutli-national corporation to book directly with United Airlines. These employees will have the same experience while booking direct as they would if they used their traditional booking channels – travel policy restrictions, corporate booking discounts, and escalation rules are all set. Employees also do not have to pay for the booking themselves or submit an expense report. Instead, ARC settles the payment directly with the company on the back end. This is a huge step in the right direction for corporates to capture bookings they presently don’t have visibility into. However, the implications are even more technologically significant for the future of airline retailing.

How? Let’s delve a little deeper into what happened here. In order for the back-end payment settlements to be completed efficiently, accurately, and securely when an employee books directly with United, there needs to be a single source of truth — one secure version of the transaction that shows the amount to the airline, the company making the payment, and ARC (who is settling the payment).

In the case of the United Airlines passengers here, that shared source of truth was created using blockchain technology by ARC in partnership with Blockskye. This is a strong proof-point and business case towards the role blockchain can play in transforming airline retailing in the future.

Now, let’s look a little further into the future and add a few more service providers that need access to this record, such as a duty of care provider and a travel management company. The duty of care provider needs access to this ‘single source of truth’ and all updates made to it in real-time so that it can provide the appropriate services. The travel management company should be able to provide support services to the employee and make changes to the booking if needed. There are now five stakeholders that need access to this ledger. As airline retailing becomes more omnichannel and settlements become more complex, blockchain solutions will be a key facilitator of the buy-anywhere service-anywhere approach.

The Role of Blockchain in ARC’s Pilot Program

While ARC was initially brought in specifically to help settle the transaction, it dove deeper. “We started looking at the whole solution and considered others that might need access to this data,” said Paul Barber, chief technology officer at ARC. “We started to look for ways to make the transactions, claim submissions, and money-exchanges even more efficient.” A secure, centralized shared ledger offers that efficiency by making claim submissions redundant. It also leaves an auditable transaction trail behind so that this verifiable information is easily accessible if there is a spending or tax audit tomorrow.

The transparency and real-time information that blockchain offers were key to developing this solution. The information is made available to the corporate customer the minute an employee books a ticket on United Airlines. “After seeing those transactions in near real-time, the corporate customer ingests the information into its payment system and initiates a transfer of funds to ARC,” said Michael Share, president at Blockskye. “Then ARC pays United.” A shared ledger means that this information is already verified and accurate.

Simplifying Complexities with a Distributed Ledger

A corporate traveler’s transaction details can get very complex. For example, say a traveler has $1,000 dollars in travel credits from United Airlines from personal travel refunds and $600 credits from canceled work trips. Today, these credits are filed together in a single United account. There is no way for the company to know which amount came from which transaction — except for via a personal ledger kept by an individual. This makes reconciling spend for the company difficult.

Things can get even more complicated for professional services companies. If $600 of travel credits came from a canceled trip with one client, it cannot be used for a different client. Not only is it difficult for an individual to keep track of these nuances, but it’s equally difficult for accounting and travel departments.

“People are constantly changing, upgrading, and canceling flights,” said Brook Armstrong, CEO of Blockskye. “And the existing data store that would speak to all of these transactions is a traveler’s personal ledger that is a collection of information from his or her credit card bills, expense reports, travel management company reports, and so on. That is neither reliable, verifiable, or trusted. What we are building is a distributed ledger amongst all these participants with verified information.” So, for example, when the company looks at the ticket data, it can clearly see where the $600 originated.

Blockchain’s Role in Facilitating Frictionless Experiences

The security and clarity that ARC and Blockskye’s technology offers is key to evolving the solution for different applications. “The primary opportunity that we were addressing with our pilot and what blockchain can offer in the future is around reducing friction for the traveler and giving them options to book how they like and where they like without compromising a company’s ability to manage the booking,” said Brian Coleman, senior manager of infrastructure engineering for ARC.

It ultimately comes down to meeting the customer where they want to be met. And that, in the future, will mean having travel management companies and corporate booking platforms involved as well. “From a corporate travel manager’s point of view, when it comes to servicing a booked airline ticket, it is a matter of choosing between suppliers,” Armstrong said. “To that end, in case of a disruption, the best alternate for the traveler may not be with the same airline. We will see more transactions having a single point of service, but many points of booking and shopping.” The importance that travel management companies play in such situations is indisputable.

Selling and buying tickets in the airline industry will increasingly be more omnichannel, and all stakeholders will need access to technology solutions that help them be more flexible. “As things merge and overlap more in the future, fundamentally, we want to be able to support all methods of making a booking or distributing inventory,” Barber said. “And having that shared, secured, single view will be very effective in the long term.”

ARC is continuing to enter new partnerships and develop solutions that will help all industry suppliers and buyers to be more omnichannel. “Blockchain technology is just one of many solutions ARC is pursuing in the marketplace to enable an omnichannel retailing future that connects airlines, travel managers, TMCs, and their travelers,” said Mike Premo, CEO of ARC. One such commercial partnership with Traxo was announced in October 2019. This partnership aims to help corporate travel managers collect direct booking data for duty of care purposes.

From a retailing aspect, the way inventory flows and is booked will continue to evolve. But with continued investments in new solutions that leverage these changes, stakeholders can benefit significantly from these evolutions.

This article was created collaboratively by Airlines Reporting Corporation (ARC) and Skift’s branded content studio, SkiftX.