Navigating New Horizons: Harnessing Blockchain’s Potential in Commercial Aviation
There has been no shortage of non-fungible token application ideas over the past few years. For some reason, the world of commercial air travel keeps popping up as one of the most forward-thinking industries trying to leverage NFTs in ways that actually solve problems and enhance the traveling experience.
In this blog post, we’ll focus on the benefits of blockchain-based loyalty rewards programs and briefly expand on some additional blockchain integration use cases for the commercial aviation industry.
Loyalty Rewards Programs: Problems Solved by the Blockchain
Blockchain rewards programs offer several advantages over traditional rewards programs, addressing key challenges and limitations that are prevalent in the conventional approach. Here are some areas where blockchain rewards programs offer better solutions than what currently exists:
Transparency and Trust
Problem: Traditional rewards programs often lack transparency in terms of how rewards are earned, redeemed, and distributed. This can lead to customer skepticism about the actual value they’re receiving and concerns about hidden terms.
Solution: Blockchain rewards programs are built on transparent and decentralized ledgers. All transactions and interactions are visible to participants, ensuring trust and eliminating doubts about the fairness of the program.
Fraud Prevention and Security
Problem: Traditional rewards programs are susceptible to fraud and abuse, such as duplicate accounts, fake redemptions, and unauthorized use of points.
Solution: Blockchain’s cryptographic security and immutability make fraudulent activities much more difficult. Smart contracts ensure that rewards are distributed only when specific conditions are met, reducing the risk of exploitation.
Ownership and Portability
Problem: Traditional rewards programs tie rewards to centralized databases controlled by the issuing airline. Customers can lose their rewards if the program is discontinued or if they switch providers.
Solution: Blockchain rewards are stored as digital assets in a user’s wallet. This ownership allows customers to easily carry their rewards across different platforms, providers, or even trade them in open markets.
Interoperability and Flexibility
Problem: Traditional rewards programs often lack interoperability, making it challenging for customers to use their rewards across different businesses or industries.
Solution: Blockchain rewards can be designed with standardized protocols, allowing them to be easily integrated with various platforms and services. This provides customers with greater flexibility in how they use their rewards, and airlines new opportunities for brand partnerships (more on this later).
Reduced Middlemen and Costs
Problem: Traditional rewards programs involve intermediaries for transactions, leading to higher costs and longer processing times.
Solution: Blockchain rewards programs eliminate many intermediaries, reducing operational costs and allowing for faster and more efficient transactions between participants.
Personalization and Targeting
Problem: Traditional rewards programs often struggle to deliver personalized offers and rewards to individual customers due to limited access to data and complex processes.
Solution: Blockchain enables secure and permissioned data sharing, allowing airlines to access valuable insights and offer tailored rewards and experiences based on customer behavior and preferences.
The open-ended nature of what can be done with blockchain-based loyalty programs often becomes a non-starter for brands exploring the concept; a unique combination of blockchain technology and marketing knowledge is required to develop a quality program idea.
Below, we explore a simple example of gamification and a few content ideas that are both technically executable and likely aligned with a major airline’s brand guidelines:
Gamification Example: “Destination NFTs”
Upon reaching their destination, passengers will receive a push notification inviting them to an exclusive “unboxing event.” This event will reveal a high-quality digital artwork unique to the locale they have just arrived at. This innovative approach aims to provide passengers with a rewarding and uplifting experience upon disembarkation.
- Enhanced Post-Flight Experience: Travelers often experience fatigue after flights. The “unboxing event” offers a delightful “reward moment,” counteracting the strains of travel and creating a positive association with our airline.
- Gamified Loyalty Program: Destination NFTs can be treated like trading cards, with rarity determined by flight routes. Common, uncommon, and rare cards tied to specific flights will create a gamified loyalty program that rewards passengers for their journeys.
- Marketplace and Trading: By establishing a marketplace for trading these Destination passengers are able to interact, exchange, and complete collections. This fosters community engagement, strengthens loyalty, and encourages repeat travel.
- Customizable Rewards: Collecting specific packs of Destination NFTs could unlock tailored rewards, such as bonus miles, lounge access, or priority boarding. This personalized approach enhances passenger loyalty and incentivizes them to explore more routes.
- NYC → Chicago: COMMON
- LA → Miami: COMMON
- Dallas → Detroit: UNCOMMON
- Boise → Anchorage: RARE
Collect all 4 and redeem 10,000 airline miles
Exclusive Travel Experience NFTs
An airline can create NFTs that represent exclusive travel experiences, such as VIP access to airport lounges, priority boarding, and special in-flight amenities. These NFT holders could enjoy unique perks that regular passengers do not have access to, enticing travelers to purchase these tokens for enhanced travel experiences.
Historical Milestone NFTs
Commemorate significant milestones in the airline’s history, such as the inaugural flight of a new route, the introduction of a new aircraft model, or a special anniversary. Create NFTs that capture these moments with exclusive content like behind-the-scenes footage, interviews, and documentaries. These NFTs could appeal to aviation enthusiasts, loyal customers, and investors interested in supporting the airline.
“Immortalize Your Moment” Promotion
An airline could hold a daily (or weekly, monthly) competition where passengers are asked to submit their “unforgettable travel moment” while traveling. Whoever submits the image that best encapsulates the spirit of the brand activation (i.e., ‘living life without limits’) is rewarded with free travel vouchers, miles, etc. Of course, these rewards can be delivered as NFTs to the winner’s wallet.
Frictionless Brand Partnerships
The idea of more seamless and cost efficient brand partnerships built on the blockchain extends beyond commercial aviation, but it’s an ideal industry to trailblaze the concept, given the number of brands the average consumer interacts with during the travel experience.
Blockchain technology can reshape the dynamics of co-marketing partnerships by simplifying processes, increasing transparency, and ensuring that all parties involved can focus on delivering value to the end customers.
Immutable and Transparent Data
Blockchain’s inherent characteristics of immutability and transparency ensure that all transactions and interactions within the co-branded marketing ecosystem are securely recorded and tamper-proof. This eliminates disputes related to data accuracy, accountability, and revenue-sharing, which can commonly arise in traditional co-marketing collaborations.
Smart Contracts Automate Processes
Smart contracts — self-executing code embedded in the blockchain — enable automated execution of predefined terms and conditions. In co-branded marketing programs, smart contracts can automatically trigger the distribution of rewards, benefits, or discounts to customers based on predefined triggers or actions. This eliminates the need for manual intervention and streamlines the entire process.
Traditional co-marketing programs often involve complex settlement processes that can be time-consuming and prone to errors. Blockchain enables real-time settlement and auditing of transactions. This means that as customers engage with the co-branded program, the blockchain automatically calculates and distributes rewards to relevant parties without delays or discrepancies.
Enhanced Data Sharing and Privacy
Blockchain technology allows for secure and selective data sharing among partners. Airline and partner brands can access relevant data in real time, allowing them to tailor offers and rewards to individual customers. At the same time, customer data remains protected through encryption and permission-based access, improving customer privacy compared to centralized databases.
Blockchain Beyond Marketing: Future Applications
Marketing programs that leverage NFTs are an exciting opportunity, but blockchain technology has the potential to revolutionize various aspects of the airline industry, including logistics, ticketing, and more. For large companies, marketing and loyalty programs can serve as a proving ground to explore the new technology and build blockchain-based infrastructure that can be expanded upon to accept crypto payments, implement better supply chain systems, and whatever future use that may arise over the next 5–10 years. Here’s how embracing blockchain technology as an early adopter could be advantageous:
- Logistics and Supply Chain Management: Blockchain’s decentralized and transparent nature can significantly enhance the efficiency and traceability of supply chain and logistics operations within the airline industry. By implementing blockchain-based solutions, airlines can track the movement of parts, equipment, and maintenance records across their complex global networks. This ensures real-time visibility into the status of assets, reduces fraud and counterfeiting risks, and streamlines maintenance and repairs, ultimately improving operational reliability and reducing downtime.
- Secure Ticketing and Identity Verification: Blockchain can revolutionize ticketing systems by providing an immutable and secure ledger for ticket issuance, distribution, and verification. Smart contracts can automate ticket sales, ensure authenticity, and prevent scalping and fraud. Additionally, blockchain can enhance identity verification processes, allowing passengers to securely share their travel information without compromising sensitive data. This not only improves passenger experience but also strengthens security measures.
- Inter-Airline Settlements and Partnerships: Airlines often collaborate through code-sharing agreements and partnerships to provide extensive route networks. Blockchain-based smart contracts can automate and streamline the settlement of payments between airlines, reducing complexities and ensuring accurate compensation for services rendered. This can enhance collaboration and reduce administrative burdens, benefiting both airlines and passengers.
- Customer Data Privacy and Personalization: Blockchain’s decentralized architecture enables passengers to have greater control over their personal data. Airlines can use blockchain to securely store and manage passenger data, ensuring compliance with data protection regulations while still offering personalized services. Passengers can grant selective access to their information, allowing airlines to tailor services without compromising privacy.
- Carbon Emission Tracking and Sustainability: Blockchain can be used to create transparent and auditable systems for tracking carbon emissions across the airline industry. This can support sustainability efforts by accurately measuring carbon footprints, incentivizing reductions, and promoting eco-friendly practices. Such initiatives align with the growing demand for environmentally responsible travel options.
NFT Market Growth: The NFT market saw extensive growth in recent years, with total sales volume exceeding $10 billion in the first half of 2021. (Source: NonFungible.com)
Blockchain Investment: The blockchain technology market size is projected to grow at a compound annual growth rate (CAGR) of over 67% from 2021 to 2028. (Source: Fortune Business Insights)
Flexible Ticketing and NFTs
Change in Travel Plans: Over 60% of travelers have had to change their travel plans due to unforeseen circumstances. (Source: JD Power)
NFT Ticketing Popularity: As of 2023, more than 60 airlines globally are exploring the use cases of NFT tickets, showcasing the growing interest in this innovative approach. (Source: CoinDesk)
Metaverse and Digital Experiences
Metaverse Interest: Nearly 60% of respondents globally are interested in using the metaverse for travel experiences, indicating a significant appetite for digital engagement in the travel industry. (Source: Deloitte)
Digital Transformation: Around 87% of travel executives believe that digital transformation is essential for their business’s survival in the next five years. (Source: Accenture)
Blockchain Adoption: 76% of airlines and 70% of airports are planning major programs or research into blockchain initiatives by 2023, indicating a strong interest in adopting the technology. (Source: SITA Air Transport IT Insights)
Building a Better Program
There are a number of friction points companies face when considering blockchain integrations — cross-department support, retaining qualified partners to build an enterprise solution, and legal considerations, to name a few.
Shift Markets has over a decade of experience building enterprise technology solutions for financial institutions and consumer brands, boasting strong partnerships with a number of leading blockchains including Stellar, Avalanche, and Alogrand.
We’re uniquely positioned to onboard the next generation of enterprise brands onto the blockchain with our combination of consultative experience and blockchain development capabilities.
If you’re interested in exploring these concepts more deeply, contact our team to learn more.