There are some things in the world that I just don’t understand, and one of those things is blockchain. I mean, I get it technically, but I find myself stuck on figuring out how it actually fits into the world of air travel in a meaningful way. Even though I wasn’t able to join Hahn Air for the first flight using a ticket issued via blockchain, they were able to introduce me to Pedro Anderson, the founder and CEO of their partner Winding Tree. This seems like a good time to introduce a new series called “Stuff I Want to Understand.”
I spoke with Pedro over the phone while he was at his current home in Ukraine. I’ve trimmed the interview heavily to focus solely on the parts that pertain to air travel. I ended up breaking this into two parts. Today we talk about the basics of when it could be useful and how the current Hahn Air application works. Next time, we’ll go into possible future applications.
[Disclosure: Hahn Air paid for my travel… though I didn’t end up going]
Brett Snyder, Cranky Flier: Where is this making the leap over into the airline industry? This is where I’m trying to find out what the right applications are and what makes sense and what doesn’t. To me it seems like this is much better with a transaction from the many to the many. If you think about sending money to someone, right? Whereas if you’re just buying a straight airline ticket, you know that that airline is going to have to keep a record of what’s going on there anyway.
There are a lot of people that are buying it, but it’s the many to the one. There are a lot of different things that go with that. You have travel agents. You need settlement. You have interline between airlines, and that adds more complexity. Maybe that makes it more appealing, but I’m curious what you’re looking at in the airline industry and saying “this is where we think it’s most promising to try and use this as a technology.”
Pedro Anderson, Founder and CEO, Winding Tree: I think you nailed it; you definitely see where this connects to banking. And what you see with banking and with blockchain applied to money is that blockchain… it’s not everything it’s made out to be. Like, [people think] you put blockchain over something and it becomes better. “This is a blockchain scooter. Now it’s faster and it can light up and fly.” No, it’s not magic. It should not be applied to a scooter.
Where blockchain helps is in issues of trust and control. With money, who controls money is a huge issue. And then trusting the source and how the system works and everything is also a huge issue, right? That’s the issue with money everywhere in the world. Trust and control. And so if you’re looking for an application of blockchain, it should pertain to one of those two things or both. Blockchain should not be used in the marketing for that product. And frankly most of the blockchain stuff today does not touch on those things. It’s more of the “magic scooter that flies” type of stuff.
The way that we’re applying it with Winding Tree specifically is we set off to create a marketplace and facilitate innovation in travel. And what we wanted to do was make it easy for travel companies to connect with one another, build new stuff, and not have to ask a gatekeeper for permission to enter the space. [That would] allow for suppliers — the airlines, the hotels — in the space to own the relationships with third parties that they do business with.
Today, when a supplier hands over the keys to the kingdom to an intermediary, they lose control of the relationship. There is an issue of access to data. There’s an issue of who gets to sell their stuff. I’m not sure if you’re more on the airline or hotel side…
Pedro: Ok, but there was a huge thing with Marriott declaring that they’re just moving [away] from any distribution with anybody except for Expedia.
Expedia has always been their eternal enemy. And here they are saying “actually we’re only going to work with these guys.” And the reason was because different companies were going and taking packaged tours and then depackaging it and then reselling the hotel component for much cheaper. It’s a longstanding issue of connectivity of who gets to sell your stuff and then maintaining control of all that.
So we invented what’s called ORG.ID which is basically a digital passport for companies that lets them prove that they really are a business in good standing. For example, Hahn Air really is Hahn Air and can cryptographically sign agreements using their ORG.ID on the platform to say “yes, I’m making this offer to you.” And then any startup can come on the system. They can, in a decentralized way, prove that they are a business in good standing with their ORG.ID, and they can start doing business with Hahn Air on an API level without ever having gone through the traditional way of connecting with a company which is too involving and expensive for a big company to go and vet every startup that wants to try to do business with them, because their volume is just too small. As a startup, by definition you’re starting up; you’re small, right?
So this platform allows them to work with all of those guys. It allows them to control who they work with and how, so they can blacklist any of the companies that they don’t like or that they don’t feel comfortable with or that did something wrong. They can whitelist the ones that they want to, for example, give a special offer to. And it allows them to work with many third parties in an automated, decentralized way but without losing the connection to those third parties.
Winding Tree is not like an intermediary. It’s just a connecting platform that has all of this decentralized tech that lets them do all that without actually taking over the relationship between them. It’s kind of like with the Bitcoin experience. I’m sending money to you. Satoshi [Nakamoto, founder of Bitcoin] is not sitting in the middle and saying “Oh yeah. Let me send that money for you.” It’s all done decentralized.
In this case, Hahn Air is directly connected to the startup and even though it’s on Winding Tree which is a platform, Winding Tree doesn’t sit in the middle controlling anything. It’s all open source code so anybody can check that it’s all authentic, and you have don’t have to trust us or anyone else for that matter.
Cranky: You’re using an example of Hahn Air connecting with a startup and by a startup you’re talking about a supplier, a travel agency?
Pedro: Yeah, a travel agency. When we use “distributor” and “supplier,” a supplier is the person offering the service or, in the case of an airline, it’s a seat on a plane. Then the distributor would be anyone selling it. It could be an OTA [online travel agent]. It could be an app. It could be a hotel that sells flights; that wants to try to start selling flights. It could be the tourism board. It could be anybody that wants to sell flights.
Cranky: Today Hahn Air is taking that [booking] through the airline reservation system which is [run by] whatever [company] they’re using or through a global distribution system that then has to talk to [Hahn Air’s reservation system] if it’s booked through a travel agent. You’re saying you can just wipe all that out and then it’s just using blockchain? They can validate and say “OK. This is someone who’s legitimate. They can make this purchase.” And everything gets recorded as a block. It’s that easy?
Pedro: Yeah. So, very specifically, they take their NDC API and they hook it up. They make it available on Winding Tree. They have certain requirements for a company that wants access to the API… they should do X, Y, and Z, right? And whoever doesn’t have that won’t be able to access that API.
And so [that company] gets to prove in a decentralized way that it meets all that criteria. “I’m a big enough business. I have X, Y, and Z things checked off. I’ve proven it, and I’ve even staked some money to prove that if I am not, you know, maliciously trying to create this transaction. I’ll just lose the money.”
It’s basically like a dowynpayment. So I access the API, I get to make a booking, and Hahn Air has full control at any time to say, “Actually, I don’t want to do business with these guys” even though they pass all the [criteria].
It speeds up the process, really. You know, “all these people are accessing our API. This is great. We’re getting more revenue. We’re not wasting anything chasing up all these startups.” And they can switch on and off whoever they want.
Cranky: OK. Let’s say I’m this startup travel agent, right? It’s still just access to an API. So I’m going to need some sort of [graphical interface] or something so that my agents can actually sell something, right?
Pedro: Yeah, this is 100 percent B2B. Yes.
Cranky: So you still need the technology on either side. Today, let’s say somebody uses a GDS, and they book through the GDS, and it gets recorded in Hahn Air’s airline reservation system that it’s a valid reservation. What you’re saying is this would effectively just replace the GDS, replace the distribution system because for the GDS if you’re an agency you have to be registered with this or that and you have to apply for this and put money down and do whatever it is to get access to it. It’s a much more difficult process.
[The Winding Tree solution] would just say “OK, we can validate you much more easily and quickly, and you’re legitimate… or you’re not.” Then Hahn Air can flip you on and off if they want to, but they just need some sort of system to access that would allow people to make these bookings. This is just how it works on the back end. Get validated using blockchain instead of existing GDS technology.
Pedro: Yeah, except for its using it not instead of but rather with. Hahn Air is pretty clear on that, because they’re experimenting with tech, but they also don’t want to hurt their existing relationships with GDSs while they explore this stuff. It’s using both in tandem. It’s not “either or.” They can begin to make their API available here while also working with the traditional GDSs. But yeah, you summarized it just right.
Stay tuned for the second half of this discussion where we dive into potential future applications for blockchain technology.