Blockchain Hurdles Still Blocking Progress in the Aviation Aftermarket

Blockchain has been a buzzword within aviation for years and, in recent months, organizations such as the MRO Blockchain Alliance and SITA have been pushing for deployment of the technology within the aftermarket. However, according to some supply chain stakeholders, there are still several barriers standing in the way.

During a panel about digitalizing the supply chain at Aviation Week’s Aerospace Incubator event on Nov. 2, the audience was polled on its understanding of the role blockchain could play in aviation. Only 33% of respondents felt they fully understood blockchain’s potential for the industry, whereas 59% felt they only understood the technology somewhat and 7% did not understand it at all.

Meanwhile, panelists pointed out that industry regulations still need to catch up with the technology. According to Rogerio Besouchet, global product manager for logistics company Kuehne + Nagel’s aerospace segment, a third-party company tried to get it on board with blockchain last year. While Kuehne + Nagel did have relevant data such as shipment information and customer pricing, there was concern because the blockchain would also have included competitors—and this was further compounded by regulatory roadblocks.

“Because of the local client’s concern, we had to stop the conversation because we’re not allowed to share this level of information by law,” said Besouchet. “It’s not a company regulation—it’s a compliance regulation where we cannot share buying or selling rates of how much I’m paying to the airline or how much I’m charging my customer.”

“I think we have more compliance issues when we talk about blockchain for the industry versus anything else,” continued Besouchet. “I don’t think we have a technology issue to share the blocks, build the blocks and [show] the proof of work, but when we talk about compliance, it’s a key issue when we share customers, rates and fuel price.”

According to Rodrigo Garcia, vice president and chief technology officer at aircraft parts marketplace PartsBase, the company evaluated the possibility of creating its own blockchain a couple years ago. “We don’t see a constraint in the technology—it’s there, we can harness it and it would be fairly easy for us to put it together,” said Garcia. “However, we do see that the lack of enforcement of some of the standards that could be applicable and will be required as part of that blockchain effort are just not there. The reason we decided not to continue with the process was not because of a technology restraint, but because we didn’t see a consensus and a way for us to break that barrier.”

Paul Stewart, president of aftermarket software provider Ambry Hill Technologies, pointed out that part of the problem is companies trying to monetize blockchain platforms themselves rather than the retrieval or input of the information. “I think that we need to have standards in place, and almost an open-source type of idea about blockchain management and a platform that is accessible to everybody,” he said. “Because until you have that standardization, it doesn’t matter if you’re tracking information against aircraft or a part that goes on the aircraft—if they’re in different blockchains, you’ve just completely defeated the purpose of tracking the information because you’ve siloed the data; you’re on different platforms.”

Kuehne + Nagel’s Besouchet believes the first step forward will be to tackle the regulatory compliance issue. “I think we have to first convince the authorities that we can share that additional data without jeopardizing the compliance regulation,” he said. “If we can at least afford to change those into being a little bit more flexible, then I think we can go to the next step.”

PartsBase’s Garcia points out that minds will need to be changed internally at companies first before progress can be made on the regulatory side. When it comes to industry’s fear of sharing data, “we need to talk to internal teams and boards to show them the efficiencies that you could facilitate in the procurement process if you were to implement some of these technologies versus the regulatory concerns,” said Garcia. “I think in a lot of the cases, the benefit is going to outweigh the cost here. And in that way, we can use our public voice to talk to authorities and lobby for those standards or those regulations to change.”

Garcia also believes companies that don’t get on board will be at a disadvantage. “From an ecommerce perspective, last year the B2B ecommerce was valuated at $6.5 trillion just in North America alone, so there are a lot of opportunities out there,” he said. Garcia posed a final question to companies afraid of sharing pricing information: “How much of that pie will you lose versus the companies that are willing and have the ability to embrace that change?”