Air NZ partners up to explore blockchain
Air New Zealand has announced a partnership with Swiss startup travel platform Winding Tree to explore the use of blockchain-based systems within its business.
"While we are still exploring its benefits, blockchain may offer a streamlined way to retail airfares and ancillary products alongside our current channels," said Air New Zealand chief digital officer Avi Golan. "In removing complexity from the sales chain, customers benefit from reduced transactional costs and airlines benefit from the swift and secure sharing of information."
Blockchain uses mathematics and cryptography to provide an open, decentralised database of any transaction involving value and underpins the virtual currency Bitcoin. According to Golan, Air New Zealand is looking at potential uses including cargo and baggage tracking, retail, distribution, and loyalty programme opportunities.
Winding Tree is a blockchain-based distribution platform for the travel industry that is creating its own token, or cryptocurrency, to allow anyone to access inventory directly from suppliers, making it possible to bypass third-party vendors. The Winding Tree cryptocurrency is called Líf and its planned date for token distribution is February 18, according to its website.
The platform is both public and permissionless and is built on the Ethereum blockchain, Winding Tree said in a white paper. Ethereum describes itself as a "decentralised platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference."
Winding Tree will not charge suppliers any distribution fees, but will charge a small transaction fee to incentivise miners to give computational power to the network, it said.
"Blockchains are designed to cut out the middlemen. Bitcoin, for example, is a financial system without one central authority, such as a bank or a government, and Winding Tree applies a similar logic to the travel industry using the universal smart contract platform that Ethereum has provided to decentralise the world economy," it said.
Today, booking an international flight involves a multi-currency transaction which can span a handful of countries for a simple flight. "A single booking can involve more than five currency trades for a simple flight if third-party insurance or a car rental is added to a booking at checkout," it said. "Winding Tree solves this problem by using blockchain technology to remove extensive currency conversion from the travel booking process."
According to Reuters, Air New Zealand said it will invest in Winding Tree’s Líf token sale slated for early next year. Air New Zealand did not disclose how much it intends to invest. Air New Zealand officials were not immediately available to comment.
In October, Lufthansa Group also announced it was partnering with Winding Tree, and also agreed to participate in the pre-sale of Líf.
The Reserve Bank of New Zealand raised some concerns about cryptocurrencies in an analytical note series this week. While it noted the new payment mechanisms are unlikely to completely supplant traditional payment systems, it underscored that cryptocurrencies "raise consumer protection, anti-money laundering and counter-terrorism financing concerns".
While they do not currently pose material financial stability concerns "risks could increase in materiality if cryptocurrencies become more popular and/or more integrated with the activities of traditional financial institutions", it said.
They also said it is important to understand that cryptocurrencies "are extremely volatile and there are significant risks associated with holding such assets".