After literally years of hype and anticipation, blockchain is finally going mainstream in the aviation supply chain. Gazpromneft-Aero, operator of the Gazprom Neft aviation refueling business, and S7 Airlines, the Siberia Airlines brand and a member of the oneworld global aviation alliance, have introduced joint smart-contracts (aviation fuel smart contracts — ), developed and implemented using blockchain as the underlying technology. AFSC is the latest milestone in the drive to improving speed and efficiency in reciprocal settlements in aviation refueling, as well as automating planning and accounting in fuel supplies.
This is the first usage of distributed ledger (blockchain) technologies on the Russian market. With its help, aviation companies now have the opportunity to make instant payments for fuel directly on refueling aircraft, without pre-payment, bank guarantees or any financial risks to the parties involved — an approach that engenders significant improvements in the speed and efficiency of financial transactions.
Blockchain technology is most often associated with cryptocurrencies like Bitcoin but blockchain is, in fact, a secure “ledger” system that can record transactions between parties efficiently and in a verifiable way. Once the transaction is recorded, for all practical purposes it cannot be altered. The blockchain is self-regulated (by the participants in the network) and does not rely on a central bank or agency to validate transactions or maintain the security of the data.
In AFSC, the blockchain platform works provides the storage for smart contracts that define the fueling and payment conditions for the airline and the fuel provider. When the aviation fuel operator delivers the fuel to the aircraft, the payment is automatically completed and posted to the contract. But it doesn’t stop there. All refueling activity is resident in the contract records including aircraft identification, day and time, the fuel volume dispensed, and price. So both the airline and the fuel supplier can analyze these records and do a better job of managing aircraft fuel usage as well as fuel supplies and fueling resources (personnel and equipment) in order to provide better service to the airline customers.
The contract data includes planned refueling needs that the supplier can use to manage inventory and assign tasks to a tanker drivers at the airport. On arrival, the airline pilot asks the operator for a specific volume of fuel, through the system. An online application is electronically sent to the airline’s bank to hold the required amount on account. Instant confirmation from the bank initiates the refueling process. Once the fuel delivery is complete, payment is settled and a complete record of the transaction is sent to both the airline and the fuel supplier together with all accounting documents.
The security of the blockchain eliminates any risk of breach of contract terms and provides both parties with clear, secure visibility to contract and performance information. More importantly, perhaps, AFSC makes the payment process quick and efficient while maintaining full visibility.
Anatoly Cherner, Deputy CEO for Logistics, Refining and Sales, Gazprom Neft, commented: “The development and implementation of digital services like this is an important element in creating a digital platform for managing the logistics, processing and sale of oil products at Gazprom Neft. Implementing digital transformation projects in cooperation with major partners will enable the company to reach a new level in technological and operational efficiency, right now.”