Airline Tickets Should Become NFTs

As technology changes & ticketing stays the same, NFTs could be the perfect ticketing platform for the 2020s & beyond

Non-fungible tokens (NFTs) make big money and big headlines. British newspaper The Economist auctioned one of their covers as an NFT and raised nearly $422,000 (£345,000) for charity.

A group of artists behind the Drunken Pandas project created 3,000 cute and cuddly panda NFTs and sold them each for 0.088 Ethereum, a cryptocurrency, which would be worth approximately $167 at the time of writing. The artists gave $50,000 to the World Wildlife Fund to help real pandas. And twelve-year old Benyamin Ahmed made £290,000 in 2021 from his Weird Whales (see article).

Each cover, panda or whale is a unique piece of data whose ownership can be confirmed using a technology called blockchain, which stores information about who bought or sold each piece and when for all to see. The NFTs can be bought and sold on special NFT marketplaces like OpenSea.

Early generation NFTs were rather clunky, just a link to a server where artwork was stored as a JPEG or similar, and can be lost forever if the link breaks. This was necessary because early-generation blockchains like the Ethereum chain simply could not hold much information. Today’s NFTs are less prone to loss, less costly to maintain and can be stored on the blockchain itself.

At first glance NFTs seem all about large sums of money and apparently trivial items. The whole thing can seem rather frivolous. So an idea that plane tickets might one day be sold as NFT leads to some standard objections, typically based on the idea that people do not need pictures on their tickets and that airlines sell travel, not art.

The first NFT ticket has already been sold. A lucky buyer paid $1,002,000 to fly from Madrid to Miami in business class on Air Europa. The NFT ticket did not just include the flight, it also bundled in a chance to hobnob with society types at Art Basel as well as a piece of actual electronic art by trendy Carlos Betancourt.

Why would Air Europa be interested in this technology? Do they think it is all about art? No. Thinking of NFTs just in an art context misses the point. NFTs are not really about art – they are about ownership and validation. Looking under the hood suggests they might be perfect for airlines.

Read on to find out how…

The two approaches to ticketing – tickets as a system

To understand how NFT will help airlines with ticketing it makes sense to take a step back and ask what airline tickets actually are. There are two ways of looking at it. 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 everything airlines need to figure out which flight a passenger should be accepted for and confirms that the person present at check in has paid for her seat. As well as the passenger’s name and flight details it shows fare, taxes and surcharges paid.

Each ticket has a unique ten digit identification number, preceded preceded by a three digit code identifying the issuing airline, who is said to “own” the “stock” on which the ticket has been issued. 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 schedules published by OAG, the Official Airline Guide

4. The airline who filed the fare under which the ticket was issued.

Consider the oneworld airline alliance for example. Hong Kong-based member Cathay Pacific could sell a ticket for a flight marketed by their Scandinavian partner Finnair but operated by their other partner British Airways and priced using a fare filed by US carrier American Airlines.

It is not unreasonable to imagine that a flight from Hong Kong to South America and back could involve flights on all four airlines (see map below).

The systems approach to ticketing is based around making this complexity easy to address at the front line. So when a passenger arrives at British Airways’ check in counter at Guarulhos Airport in Sao Paolo their bags are accepted and their boarding pass issued.

Since all tickets are now issued electronically, there is no paperwork to get lost. This was a key marketing point of e-tickets when they were first introduced in the mid-to-late-90s. E-tickets became mandatory for all airlines 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. Commercial agreements between airlines determine what each airline gets paid.

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 two approaches to ticketing – tickets as a contract

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 airports listed and the passenger promises to follow the airline’s 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. These Electronic Miscellaneous Documents 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. Back in the days of paper they were known as either Money Collection Orders or Miscellaneous Charges Orders depending on who you spoke to.

Technology and processes change, but ticketing stays the same

Flight tickets have always held the same key information about who the passenger is and what their journey involves. Even a hundred years ago tickets were much the same. Here is one from White Star Line with a picture of four-funnelled beauty RMS Olympic.

These tickets looked a little different to today’s, but they were fundamentally the same in respect of what they achieved from a revenue allocation and contracts perspective. Notice how there is space for the passengers’ names, their origin-destination pair and the amount of money they paid.

When airlines moved from paper to electronic documents, the information shown on the ticket stayed the same. The ways tickets were issued and processed stayed the same too. The only thing that changed was that electronic documents changed hands rather than paper copies. Think of it as changing from actual paper to a PDF. 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.

NFT tickets 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.

NFT tickets 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.

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. This will allow automation of checks and generate significant cost savings for airlines.

As the technology involved matures, airlines will be able to build smoother change processes either within or outside the existing distribution ecosystems. This should reduce the number of “clicks” required to make changes and make it easier for airlines to service tickets, leading to lower costs and better service both online and in the call centre.

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.

With blockchain technology and NFT tickets, consumers and airline can be sure that every ticket they see is genuine or not. The industry should prepare for a migration to NFT tickets just like we did for paper tickets in the early noughties.

oliver AT ransonpricing DOT com