Bitcoin, and other cryptocurrencies, are becoming well established in many industries. So far, though, not so much in aviation, with just limited use from charter firms and a few airlines. But the aviation industry loves new and emerging technology. Challenges remain with Bitcoin, but there is huge potential if airlines (and airports) choose to adopt it.
Blockchain and Bitcoin
Bitcoin regularly dominates headlines, with its dramatic rises and falls over the past years. It has certainly caught the attention of many investors and companies. Tesla and Mastercard have been recent major joiners to the Bitcoin world. Airlines too, but not so extensively yet.
Firstly, a quick recap on Bitcoin. It is a digital currency created in 2009, based on blockchain technology. It is not linked to any country or central bank, nor is it government regulated. Instead, digital coins are stored via a public ledger, making them secure and preventing fraud.
For clarity, there are plenty of other cryptocurrencies. We refer to Bitcoin here, but that is not to say others could not offer the same potential. Whether or not Bitcoin remains dominant is up for debate (and beyond our scope of expertise!), but others could take its place.
Bitcoin and aviation
Why should the aviation industry be interested in Bitcoin? Part of its appeal lies simply in its growing popularity. As far as any company wants to be open to as many payment methods as possible, the aviation sector will too. But there are other advantages.
Allowing cryptocurrency payments should offer lower transaction costs. Taking payment through credit cards, for example, add fees that average from 1.3% to 3.4%. Funds should also transfer much faster.
Bitcoin is truly digital and is stored in a digital wallet. This works well alongside airlines’ moves to offer digital technology throughout the journey. Airlines have already adopted digital tickets, check-in options, and flight management. Payment is a logical next step.
Cryptocurrencies also offer advantages in an international setting. Exchange rates add cost, and sometimes difficulty, for passengers. And cross border exchange and movement is a major consideration for airlines.
Early moves in the aviation sector
It is early days still for Bitcoin in the aviation world. The first adopters have been private charter companies, taking bitcoin as payments for services.
The UK-based private jet company PrivateFly started accepting these in 2014 – and even claims to have received a Bitcoin booking for a charter on the first day. In early 2021, the company revealed that 19% of its sales now come from Bitcoin. It offers an account where members can store Bitcoin and pay for services based on the Bitcoin value at the time.
Other charter services that have moved to accept Bitcoin include Star Jets International, JetVizor, Monaco Jets, and SimpleCharters.
Some uptake from airlines
Also in 2014, airBaltic became the first airline to take Bitcoin payments. It achieved this by partnering with Bitpay, a third-party payment processor. It converts Euro-based pricing into Bitcoin using live rates at the time of booking. CEO Martin Gauss explained the reasoning for adoption in a statement, saying:
“airBaltic has been ranked among top 10 most innovative airlines globally. Introducing the Bitcoin payment option is a part of our innovative approach to service with a central focus on our customer.”
Others have since followed. LOT Polish Airlines started accepting Bitcoin payments in 2015. Japanese airline Peach Aviation announced it would take Bitcoin in 2018 – not a surprising move given the popularity of cryptocurrencies in Asian markets.
Norwegian Air Shuttle took things a step further in 2019. It announced a plan to start taking Bitcoin, alongside investment in a cryptocurrency exchange, Norwegian Block Exchange (NBX). It planned to offer discount fares and other perks to promote Bitcoin use. This would allow Norweigan to get immediate access to the full cash paid. Liquidity and rising fees have been a problem for the airline.
NBX’s managing director, Stig Aleksander Kjos-Mathisen, explained this approach in an interview with Forbes. He said,
“We can set the standards ourselves now… This positions Norwegian to … be a leader on the technology that is chosen. Also, by owning NBX, we can easily integrate [it with Norwegian’s sales channels] so that the transition between the fiat world and the virtual world is frictionless for us.”
It was reported in 2017 that Russian carrier Aeroflot was considering accepting Bitcoin – an interesting move, showing that it is not just limited to newer or more innovative airlines. It is not clear yet whether it is fully in use, though.
Flights with many more airlines can be booked through third-party agents that convert Bitcoin to other currencies at the time of booking. Cheapair.com became the first US website to take Bitcoin payments in 2013. Several others have followed.
And even from airports
Use is not limited to airlines, with benefits for airports as well. Increasing ways to take payments can only be a positive for retail outlets, and again there are the same advantages of lower transaction costs and exchange issues.
Australia’s Brisbane Airport became the first to move into Bitcoin, announcing it would accept payments in retail outlets in 2018 through a deal with TravelbyBit. As reported by TravelMole at the time, airport general manager Roel Hellemons, explained the reasoning:
“Many people around the world have made money investing in cryptocurrencies and a lot of these people travel internationally, so it makes sense to offer a digital currency experience within our terminals.”
So far, though, airport use is minimal. No other airports seem to have introduced widescale Bitcoin usage. Some have made a limited introduction, such as Bitcoin ATMs at airports, including Amsterdam Schiphol and Miami International.
Bitcoin use still very limited
A handful of airlines have moved into Bitcoin, but uptake is slow. They have not released figures for usage, but it is unlikely to be as dramatic as the 19% that PrivateFly claims.
There are still major challenges of cryptocurrencies limiting their acceptance. Stability and regulation stand out. No organization regulates the usage or value of Bitcoin. There have also been high levels of speculation and trading affecting the price.
There have been large swings in value, both up and down, over recent years. In February 2021, Bitcoin reached a new high of over $50,000, following the news that Tesla would make a major investment. It was closer to $5,000 a year before.
This sort of volatility is not something everyone wants, and certainly not airlines in the current environment. Companies usually mitigate the risk by converting Bitcoin to other currencies. They may also hedge a margin over the current rate to protect against swings.
Other uses for blockchain
Bitcoin as a payment currency for airlines has been a main focus in the industry so far. But there are other potential uses of the blockchain technology that cryptocurrencies are built on.
IATA released a report in 2018 looking at several opportunities across the aviation industry. The immutable trusted data records that underly blockchain have application in airline logistics, baggage tracking, cargo management, and even passenger identification.
Deloitte released an interesting study in 2018 looking at blockchain’s potential in the aircraft leasing and maintenance industry. Trusted data between the many parties involved over the aircraft lifecycle could reduce costs and risks significantly.
Simple Flying took a look at one major example of blockchain in use recently. Gazpromneft-Aero has completed tests of a blockchain-based refueling system. This allows safe instant payments (reducing processing from several days to just seconds) and secure digital tracking of contracts and deliveries.
Will the use of Bitcoin widen?
Bitcoin use in aviation is something of a niche market at the moment. There are certainly opportunities to reduce transaction costs and maybe even to attract new business. Airlines want this and, of course, are not afraid to move into areas of new technology.
We have seen aviation take a leading role in developing online ticketing in the 1990s and 200s. And more recently, it is becoming a major adopter of biometric technology.
And in areas like digital check-in, mobile boarding passes, and digital booking and management, airlines constantly look for ways to offer more and reduce costs.
With this in mind, it seems likely we will see use expand across airlines as the popularity, and reputation, of Bitcoin and other cryptocurrencies, grows.
The past year or more has certainly not been the time for this. Airlines are struggling to get aircraft in the air and earn any revenue in many cases. Expanding and marketing a new niche payment method has hardly been a priority. But as the market picks up in 2021, and with Bitcoin making headlines with its new highs, perhaps more will decide now is the time to give it a go – especially if they can minimize the risk.
Bitcoin is starting to make a difference in many industries. Do you think aviation will be one of them, or will it remain a niche offering for some time? Let us know your thoughts in the comments.