Non-Fungible Plane Tickets

NFT technology will not change how tickets themselves are structured, but will have both positive & negative impacts when it comes to accounting & fraud prevention

My favourite animal is the whale – like me he’s a global traveller, lone ranger and thick skinned. So when I read about how young Benyamin Ahmed earned £290,000 in 2021 by creating his ‘Weird Whales’ (pictured, story) and selling them as non-fungible tokens (NFTs) I remembered the tail (whales have distinctive tails, geddit!!!).

And it is not just Benyamin seizing the opportunity. London-based weekly newspaper The Economist auctioned one of it's covers as an NFT and raised more than $400,000 for charity (story – behind a paywall).

Data in general can be replicated as much as you like, which we all know from using copy and paste on a daily basis. One person using a piece of data does not stop another from using it too – even if my co-author Ricardo (see his first and second articles) has already read this article that does not stop you, my other reader, from studying it as well. This gives data a property that economists call non-rivalry.

NFTs however cannot be duplicated because they are associated with specific data stored on a blockchain. It is this unique association that gives the NFT a clear owner and changes the data from being non-rival to rival. Accordingly NFTs can be owned and traded like any other normal good.

The image representing each Weird Whale or The Economist cover can be duplicated but title to the original cannot – that is the NFT sine qua non. The record of ownership is maintained for all to see through a technology called a distributed ledger.

NFTs can be any type of electronic data like pictures, music or text. Perhaps they can be plane tickets too. This article explores the possibility.

What is a plane ticket?

A plane ticket is a contract between an airline and a passenger. The airline promises to provide travel between two airports and the passenger promises to take the flight in accordance with the airline’s conditions. Modern electronic tickets are weightless documents in the cloud, but old ocean liner tickets like this Titanic-era one below were literally written as a paper contract.

It states, among other things, the following:

“Passenger’s contract ticket (not transferable)”

“White Star Line engages that the person named in the margin shall be provided with a third class (steerage) passage to and shall be landed at the Port of NEW YORK”

“With not less than ten cubic feet for luggage”

“BILL OF FARE – Beef, carrots and turnips or ling fish and sauce, with bread and potatoes”

Spaces for the passenger’s name and the fare paid.

Now here is my British Airways e-ticket ticket for my flight to Dublin next week:

It has EXACTLY the same content as the old ocean liner ticket, clearly stating my name, points of arrival and departure, class of service, baggage allowance, meal entitlement, excess baggage rates and price paid.

We all know that name changes are not permitted (non-transferability). Will I get beef, carrots and turnips or ling fish and sauce with bread and potatoes on the flight? Knowing British Airways I really would not be surprised…

Truly there is nothing new under the Sun.

Constant content with outsourced pricing

The ticket as Contract system has been fit for purpose for more than one hundred years. I have shown that their content has stayed the same despite the moves from ocean to air travel and paper to electronic documents. There is no reason to believe that a move to NFT ticketing would be any different. If tickets become NFTs their content will stay the same. What will change is the way they are priced, issued, processed and audited.

I covered pricing last week (see article) and proposed that airlines solve revenue optimisation challenges with an open-source, peer-to-peer public blockchain where third-parties do the heavy lifting. This will allow airlines to outsource all the cost and hassle of using artificial intelligence and machine learning, done upstream, and achieve higher revenue and lower cost as a result.

Tickets in motion

Airline trade association IATA publishes many manuals that airlines all over the world use to run their operations according to standards agreed through IATA’s resolution-based decision-making. The revenue accounting manual (RAM) is one of the largest and at more than a thousand pages in length not many people can quote it chapter and verse. You can buy a copy for USD 245 here on the IATA site.

The RAM’s processes are at the heart of how airlines handle tickets. They want to ensure three things:

1. That the person who has bought the ticket is the one who flies using the ticket

2. That the buyer pays the correct price

3. That when more than one airline operates the flights, each carrier receives the revenue they are entitled to.

These will stay the same regardless of whether or not NFT ticketing is introduced.

At first glance NFTs are ideal for each of these, but they are not a magical solution for every problem. Distributed ledger could have been invented for listing the passengers who hold valid tickets. But check-in agents will still have to decide themselves whether the person in front of them really is the named passenger and if their documents are valid.

NFT may reduce existing fraud but introduce new & harder to spot fraud

Validating the price happens in three stages – before travel through a process called revenue integrity, at the time of travel through a ticket check and after travel using revenue accounting.

Revenue integrity is used to stop seats being blocked by fraudsters and keeping them available to buyers who will pay the necessary price. Revenue accounting is used to detect fraud after flights have been taken. Such fraud might include:

1. Blocking seats to release at the last minute and hoping that the airline will then reduce it’s prices

2. Altering a ticket’s details manually and hoping that the airline will accept less money than they are entitled to

3. Booking connecting rather than direct flights to secure a lower fare and expecting that the passenger will simply abandon the connection.

Reducing opportunities for dodgy agents to commit fraud was one of the big benefits of moving from paper to electronic tickets back in the early 2000s. Twenty years ago chancers would put stickers showing false information over paper documents and hope they would not be picked up by revenue accounting.

The electronic equivalent – overriding a ticket’s electronic “mask” – leaves a paper trail. It also makes agents vulnerable to debit memos as airlines and their distribution partners guarantee that a fare is correct as long as the ticket is left alone.

It is likely that NFT-based tickets will offer additional security against fraud, just like how e-tickets did over paper documents. The distributed ledger that they are held in will be open for inspection by the airline’s auditors and their travel industry partners, making billing easy and automated. It may also be possible for the airline to be notified in real time of frauds as they occur, so today’s expensive and tricky process of trawling through bookings with robots can be streamlined.

However issuing tickets as NFT may open airlines to new and harder to spot types of fraud that are hard to imagine today. At the same time airlines are changing the types of product they sell, using offer management systems and a communications standard called NDC to bundle hotels, restaurant meals and even cuddly toys with their seats. New technology plus additional complexity at the shopping and retailing stages will introduce new opportunities for fraudsters.

Finally NFT technology itself is vulnerable to fraud. Some unfortunate members of the public are already finding that the NFTs they have purchased are fakes (story) and there are issues with money laundering and tax (story). Airlines will need to take care they avoid these pitfalls.

Open questions

Airlines considering whether or not they should use NFT technology to issue tickets will need to answer the following questions:

1. How do the costs of setting up NFT ticketing compare to the benefits of easier revenue integrity and revenue accounting down the line?

2. Is NFT ticketing an essential companion to blockchain-driven revenue optimisation and retailing?

3. What fraud risks does NFT ticketing remove and create for airlines?

Are you considering NFT or blockchain? Do you need answers to these or similar questions? If so, we can help – please get in touch.

oliver AT ransonpricing DOT com