Announcements of new products and services are rare at year end (IAG's proposal for a new low-cost long-haul carrier withstanding), but it was a good time for players to air their thinking about what the new year might bring.
Reports from Accenture and Frost & Sullivan, sponsored by Amadeus, offer a lot of insight into how the world of airline booking and payment could soon change.
To state the blindingly obvious, aviation is a global business. Carriers deliver cross-border services which can mean different regulations, taxes and fees, not to mention fares in different markets and currencies.
The usual trading structure in other sectors is individual contracts between each buyer and seller.
Aviation, however, avoids the scenario of every agent having to have a contract with every airline complete with an invoicing and payment structure by the use of central settlement systems: ARC (the Airlines Reporting Corporation) for US carriers and IATA and BSP — the Bank Settlement Plan — for non-US carriers. Very simply agents must be accredited by IATA in order to book and purchase air tickets on behalf of clients. All the data goes to a central repository (BSP) which calculates how much each agent owes in total and then regularly takes a single sum on an agreed schedule which is distributed to each airline on which the agent made bookings. In the UK this has been monthly but it is known that IATA wants to up the frequency to every two weeks.
The system has been in place for half a century and has been a means of agents' paying and airlines' receiving money in a fairly simple and accurate way. The delay in taking money from agents can be seen either as a cash flow issue for carriers or a way of softening the effects of late payers for TMCs.
However, this system looks archaic in today's world of instant, global financial transactions. Blockchain, the technology which allows an independent record of transactions to be created without the need for a central body to manage it and which anyone who needs to can access, could mean instant payment from agents to carriers.
Blockchain is most famous for underpinning the virtual currency Bitcoin. It is a way of having many owners of the information in a combination which allows a neutral, yet accurate ledger to be kept. It has obvious benefits for financial services companies and airlines, especially in ticketing and reconciliation.
Instant payment may be a boon for airlines but it could very well add cost — or complexity — for buyers. Purchasing would become more fragmented with direct connections between buyers and suppliers, as is the case for other goods and services. That will mean different contracts and terms and conditions; albeit once agreed, these will be embedded in the blockchain technology for ever.
The current system also allows TMCs to offer buyers credit until they are required to settle with BSP — this would likely disappear under blockchain.
Adopting blockchain could be a step forward to match processes to today's world but it could mean a lot more work and cash flow issues in the short term.