K
Kathleen Martin
Guest
Anyone who’s ever sold their home will know about the mountain of paperwork that’s required to transfer large assets: title deeds, conveyancing reports, legal contracts and so on.
Now imagine what it’s like when you’re selling a commercial aircraft. As well as being much more valuable than the average home – a ten-year-old narrowbody jet might set you back $30 million – these are assets that literally jump around the globe on a daily basis, spinning a web of paper trails in each and every country they’re operated from.
Factor in the staggering amount of maintenance work that’s needed to keep planes airworthy – all of which must be properly documented – and you can see how the business of trading aircraft is a bureaucratic nightmare.
That will always be the case.
But, according to Dublin-based startup BlockAviation, there is at least room to streamline and automate much of the necessary complexity – just as long as the aviation industry is willing to embrace blockchain technology.
“The aircraft is not worth anything without a fully coherent paper trail,” BlockAviation’s chief executive, John Roberts, told me. “So we're building a network to manage all of that.
“We're looking at the actual aircraft itself. And then all the parts that are on that aircraft. And then utilization reporting, which is one of the things that lessees [companies such as airlines that rent aircraft] must do every month. At the moment, lessors [companies that loan out aircraft] are updating their asset management platforms ad hoc [with reports that] come in on email and PDF.
“We can network that and we can keep it on the network.”
BlockAviation has signed up four customers to date – including lessors SMBC and Aircastle – who collectively have 1,200 aircraft under management. That’s about 5% of the global fleet of 25,000 commercial planes.
Leasing companies are an obvious target for the startup as they tend to take delivery of brand new aircraft straight from the manufacturer. These units are placed with a succession of customers across the globe under short-term operating leases. They are typically then sold after about a decade – by which time their value has fallen sharply, but they’re still commercially viable as passenger jets.
Older aircraft also have some residual value – though it’s largely based on the plane’s prospect of being converted for cargo operations, or being scrapped for metal and components.
In all cases, Roberts said that aircraft buyers will demand “massive discounts” if there are “incomplete paper trails, or paper trails which can be questioned”.
That, of course, should never happen.
The industry’s existing regulations and protocols should, in theory, ensure that lessors have all the component, maintenance and airworthiness compliance records they need in order to prove their asset’s true value. In practice, though, collating the necessary documentation is a time-consuming, cumbersome and costly process that requires the cooperation and competence of lessee customers.
A better approach, according to BlockAviation, is giving every aircraft its own “networked record” – a digital logbook that’s remotely accessed and continually updated with all the data needed for a seamless, efficient and fair transfer of ownership.
The only stumbling block is trust: how can buyers be certain that the digitized, networked records are as accurate as the signed, physical hard copies they represent?
Enter blockchain.
Trustworthy notarization
“Blockchain, very simply, is a secure network. And that's what we're using it as,” Roberts explained. “We're using it as a notarization service to notarize these transactions as parts move and aircraft move and records move from place to place.”
Explaining blockchain technology without turning off readers is always a challenge.
In essence, blockchains are strings of data that are being shared by multiple different parties and that are continually cross-checked to ensure that no one party has altered any of their contents. This requires a ledger (a digital book storing all the data); encryption (a process for writing new data into the ledger, without invalidating the old, immutable data); and nodes (different parties who agree to store a copy of the ledger, thereby ensuring it can be cross-checked).
“[Without blockchain] you don't have the possibility to create a networked record,” Roberts continued. “You don't have the ability to create a record that's there; it's networked; it's trusted by everybody; it can be accessed at any time; it can be referred to; and it can be queried, because there's a full audit trail behind it.
“These records don't have any inherent value [by themselves]. It's the concatenation of all the records that has value.”
BlockAviation isn’t the only company trying to convince the industry about the benefits of blockchain technology.
Continue reading: https://www.forbes.com/sites/martinrivers/2021/11/10/how-blockchain-technology-can-revolutionize-commercial-aircraft-trading/?sh=62c37cf16e53
Now imagine what it’s like when you’re selling a commercial aircraft. As well as being much more valuable than the average home – a ten-year-old narrowbody jet might set you back $30 million – these are assets that literally jump around the globe on a daily basis, spinning a web of paper trails in each and every country they’re operated from.
Factor in the staggering amount of maintenance work that’s needed to keep planes airworthy – all of which must be properly documented – and you can see how the business of trading aircraft is a bureaucratic nightmare.
That will always be the case.
But, according to Dublin-based startup BlockAviation, there is at least room to streamline and automate much of the necessary complexity – just as long as the aviation industry is willing to embrace blockchain technology.
“The aircraft is not worth anything without a fully coherent paper trail,” BlockAviation’s chief executive, John Roberts, told me. “So we're building a network to manage all of that.
“We're looking at the actual aircraft itself. And then all the parts that are on that aircraft. And then utilization reporting, which is one of the things that lessees [companies such as airlines that rent aircraft] must do every month. At the moment, lessors [companies that loan out aircraft] are updating their asset management platforms ad hoc [with reports that] come in on email and PDF.
“We can network that and we can keep it on the network.”
BlockAviation has signed up four customers to date – including lessors SMBC and Aircastle – who collectively have 1,200 aircraft under management. That’s about 5% of the global fleet of 25,000 commercial planes.
Leasing companies are an obvious target for the startup as they tend to take delivery of brand new aircraft straight from the manufacturer. These units are placed with a succession of customers across the globe under short-term operating leases. They are typically then sold after about a decade – by which time their value has fallen sharply, but they’re still commercially viable as passenger jets.
Older aircraft also have some residual value – though it’s largely based on the plane’s prospect of being converted for cargo operations, or being scrapped for metal and components.
In all cases, Roberts said that aircraft buyers will demand “massive discounts” if there are “incomplete paper trails, or paper trails which can be questioned”.
That, of course, should never happen.
The industry’s existing regulations and protocols should, in theory, ensure that lessors have all the component, maintenance and airworthiness compliance records they need in order to prove their asset’s true value. In practice, though, collating the necessary documentation is a time-consuming, cumbersome and costly process that requires the cooperation and competence of lessee customers.
A better approach, according to BlockAviation, is giving every aircraft its own “networked record” – a digital logbook that’s remotely accessed and continually updated with all the data needed for a seamless, efficient and fair transfer of ownership.
The only stumbling block is trust: how can buyers be certain that the digitized, networked records are as accurate as the signed, physical hard copies they represent?
Enter blockchain.
Trustworthy notarization
“Blockchain, very simply, is a secure network. And that's what we're using it as,” Roberts explained. “We're using it as a notarization service to notarize these transactions as parts move and aircraft move and records move from place to place.”
Explaining blockchain technology without turning off readers is always a challenge.
In essence, blockchains are strings of data that are being shared by multiple different parties and that are continually cross-checked to ensure that no one party has altered any of their contents. This requires a ledger (a digital book storing all the data); encryption (a process for writing new data into the ledger, without invalidating the old, immutable data); and nodes (different parties who agree to store a copy of the ledger, thereby ensuring it can be cross-checked).
“[Without blockchain] you don't have the possibility to create a networked record,” Roberts continued. “You don't have the ability to create a record that's there; it's networked; it's trusted by everybody; it can be accessed at any time; it can be referred to; and it can be queried, because there's a full audit trail behind it.
“These records don't have any inherent value [by themselves]. It's the concatenation of all the records that has value.”
BlockAviation isn’t the only company trying to convince the industry about the benefits of blockchain technology.
Continue reading: https://www.forbes.com/sites/martinrivers/2021/11/10/how-blockchain-technology-can-revolutionize-commercial-aircraft-trading/?sh=62c37cf16e53
