Using NFT to sell airline tickets is about creating secure contracts, not fancy artwork
Have you ever wanted to adopt a panda? Thanks to the Drunken Pandas project, now you can.
There is only one snag – the pandas live in an electronic bamboo forest, not the real world. Innovative artists created 3,000 cute and cuddly pandas and sold them at a price of 0.088 Ethereum, a cryptocurrency ( approximately $250/€238 at the time of writing).
Each panda is a non-fungible token (NFT), a unique piece of data whose ownership can be tracked and authenticity validated using a technology called blockchain. The pandas can be bought and sold on NFT marketplaces like OpenSea.
The idea is that as a panda changes hands a new ‘block’ of data is created and stored in a public record called a distributed ledger. Since this record is stored over many computers, not just one, anybody with Internet access can find out who owns the real Sensei Panda, Samurai Panda or Ghost Panda.
Drunken Pandas are not the only charismatic characters that traders can buy and sell. Weird Whales, Cool Cats and Cryptopunks are all in a similar vein.
NFT art can trade for big money. When The Economist, a British newspaper, sold one of their covers as such they raised nearly $422,000 for charity. The Drunken Pandas artists gave $50,000 to the World Wildlife Fund to help real pandas.
With stories like this all over the technology headlines, it is easy to imagine that NFT are all about adding fancy artwork to plane tickets. In an often difficult world the large sums of money involved for apparently trivial items can appear frivolous at first glance.
But looking under the hood shows that trading art as NFT represents just the early stages of technical change regarding ownership and validation. Manufacturers of branded drinks, jewellery, clothes and more can use them to guarantee consumers that they are buying the real thing.
NFT are already being used in travel
In travel too, NFT have a role to play as applied to plane tickets, hotel bookings and restaurant reservations, which TravelX call NFTickets. The first NFTicket has already been sold (see article) and it did feature artwork, a whirling jamboree of colourful stars, snowflakes and crystals by trendy artist Carlos Betancourt. Check it out here.
The lucky buyer can use it to fly from Madrid to Miami in business class with Air Europe and attend the Art Basel festival. There they will hang out with trendy artists and culture vultures.
But it is important to understand that the vast majority of NFTickets which people will buy will just be tickets, not works of art. To see how, let’s first take a step back and examine exactly what plane tickets are.
The systems approach to ticketing
There are two ways of understanding plane tickets. The first is as a systems component that has evolved with distribution and revenue management technology. The second is as a legal agreement between carrier and passenger, and this concept is much older than aviation.
The IATA standard ticket contains all the information that an airline needs to figure out which flight they should be accepted for and confirms that the person present at a check in counter has indeed paid for a seat. It contains the passenger’s name, flight details and a breakdown of the fare and any surcharges paid.
Each ticket has a unique ten digit number to identify it. This is preceded by a three digit code identifying the issuing airline. All airlines have agreed for many years that they will each accept tickets issued by another IATA member and divvy up the proceeds later in a process called settlement.
This means that for any one flight on a ticket there can be up to four airlines involved:
1. The airline who issued the ticket – shown in the three digit prefix to the ticket number
2. The airline who markets the flight – shown by the carrier code next to a flight number
3. The airline who operates the flight – not necessarily shown on the ticket but shown in the Official Airline Guide schedules
4. The airline who filed the fare under which the ticket was issued.
Consider the SkyTeam airline alliance for example. Member Aerolineas Argentinas could sell a ticket for a flight marketed by their American partner Delta but operated by their other partner Kenya Airways and priced using a fare filed by Dutch carrier KLM. It is not unreasonable to imagine that a trip from Argentina to Kenya and back could involve flights on all four airlines.
The ticketing processes and infrastructure has evolved to make this complexity easy to address at the front line. So when a passenger arrives at Kenya Airways’ check in counter at Jomo Kenyatta Airport in Nairobi their bags are accepted and their boarding pass issued.
The process is much simpler than it used to be because all tickets are now issued electronically, so there is no paperwork to get lost or misplaced. First introduced in the mid-to-late-90s, e-tickets became mandatory in 2008.
Behind the scenes things are a little more complex than they appear to passengers. Once used, or ‘uplifted’ as we say in the trade, the ticket is processed through a clearing house. Each airline involved earns a share of what was paid in accordance with their commercial agreements.
In this respect, the ticket can be seen as a system for collecting revenue, validating that a passenger has paid for their travel and ensuring that each of the airlines involved earns what they are due.
The contracts approach to ticketing
But a ticket is not just a system to help a check in agent decide whether to accept a passenger for travel and a team of revenue accountants to figure out how much to pay their partners.
It also constitutes a legal agreement between a passenger and the airlines involved. The airlines promises to carry the passenger and their baggage between the cities listed on the ticket and the passenger promises to follow the relevant conditions of carriage.
This part of the ticket is important because it gives airlines assurance that they will be paid for their services. It formalises three things:
1. That the person using the ticket has paid for their flights
2. That the itinerary purchased is the one actually flown
3. That when more than one airline is involved, each carrier receives the revenue they are entitled to.
Sometimes a passenger might have their ticket accompanied by some other revenue documents. Formerly known as Money Collection Orders, like tickets they are now issued electronically and are called Electronic Miscellaneous Documents. These are issued so that passengers can pay for other services, such as excess baggage, onboard food and drink, access to plush lounges in the airport and more.
The processes change with technology but ticket basics stay the same
Flight tickets have always held the same key information about who the passenger is, the place their journey starts and where they are flying to. More than a hundred years ago, ocean liners were issuing tickets that may have looked a little different to today’s, but were fundamentally the same in respect of what they achieved from a revenue allocation and contracts perspective.
When airlines moved from paper to e-tickets, the information shown on the ticket stayed the same. The way tickets were issued stayed the same. And the way tickets were processed stayed the same too. The only thing that changed was that electronic documents changed hands rather than paper copies. This had three advantages:
1. Paperwork would not get lost, muddled or mislaid
2. Calculations would be done by computers, reducing the risk of “fat-finger” errors
3. It was harder to deface tickets – when an e-ticket was altered, the travel agent lost a guarantee from their airlines that the fare was guaranteed, making the agent liable to a debit memo.
But e-tickets still have a number of issues:
1. Altered tickets still need to be checked and automating this process is not reliable
2. Making changes to tickets is complex and expensive, with new reservations and fare calculations requiring many “clicks”
3. Airlines and passengers remain vulnerable to certain types of fraud and must maintain revenue integrity teams
NFTickets are the natural evolution of this process
In the same way that the introduction of e-tickets solved some issues, tickets that are issued as NFT will help airlines make further progress.
NFTickets use blockchain to keep a comprehensive record about the airlines who originally made seats available and any changes made since the time of purchase. All the information on a ticket is stored on one block of the chain, and as changes are made, new blocks keep a record on a distributed ledger.
This means that ticket alterations can be tracked through comparing blocks with each other, making it easier for airlines to spot fraud and consumers to be sure that the ticket they are buying is valid.
The infrastructure that TravelX is building to support NFTickets integrates nicely into existing travel selling platforms and distribution systems. But as the technology involved matures the number of “clicks” required to make changes is likely to fall, making it easier for airlines to service tickets.
Blocks will also store records of the sales process and help ensure that passengers always pay the correct fare. For example, blocks will show the original inventory availability on connecting flights, making it easier for revenue integrity teams to spot “married segment” issues which cause tickets to be under-priced because an airline might choose to offer different inventory availability on connecting rather than direct flights.
TravelX co-founder Facundo Diaz said “the real world application of NFTickets will be massive and it is really amazing to be at the beginning of this process. We are defining the new standard for air tickets so that both airlines and travellers can make the best possible use of a new technology. The first step is to create the standards so that NFTicketing has no frictions and plenty of helpful features that help people buy the travel services they need and help airlines to make profits too.”
Are you ready to join us?
To make all this happen we are building a free-to-join and open-to-all community of travel industry colleagues and stakeholders. This community is brand new and we will start by posting articles just like this to keep you informed of all the key issues relevant to NFT in travel.
We will be covering all the related issues in technology, economics and travel industry processes with thought-provoking analysis, industry comment and where possible a little bit of humour.
We figure that everybody in the commercial and financial side of the travel industry is an NFT in travel stakeholder. Whether you work at an airline or a hotel, a distribution or technology platform, or a manufacturer or an OEM we would love to welcome you.
Coming up later will be round-table discussions, working groups and special events to help us help your business get what you need from this exciting new technology. Our written articles are available to all, but please be sure to sign up with your official travel industry e-mail to get full access to discussions, working groups and events.