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Blockchain to Disrupt Air Travel and Insurance with FlightDelay

Last Updated March 4, 2021 4:51 PM
Andrew Quentson
Last Updated March 4, 2021 4:51 PM

Editor’s note: The article has been updated to reflect that Stephan Karpischek, together with Christoph Mussenbrock, co-founded FlightDelay.

By law, airlines are required to compensate travelers for flight delays or cancellations, but as anyone who has tried knows, the process is a nightmare. So much so that some businesses thrive solely on their offer to buy your claim and carry out the compensation process on your behalf.

That is about to change. FlightDelay , a new Ethereum based smart contract DApp, wants to bring air travel to the 21st century by replacing the cumbersome claiming process with a very short and friendly form. As long as you have MetaMask installed, you enter flight details by selecting departure, arrival, date, and then you see this:

FlightDelay Daap Test Run
FlightDelay Daap Test Run

I’ve entered a premium of 0.5 ETH for the random flight I picked. If there are no delays, I receive nothing back. If the flight is delayed by 15 to 29 minutes, which occurs about 20.34% of the time, I am sent 0.95 ETH to my MetaMask wallet.

That’s it. I just click apply and we’re done. The hidden, complicated, technical backend code manages the rest and ensures I get automatically paid if the independent data says the flight is delayed. Stephan Karpischek, the co-founder of FlightDelay, who previously worked as Researcher at ETH Zurich and Business Analyst at UBS, speaking to CCN.com, states:

“We get numbers from flightstats.com, their API. We calculate the probabilities from [their] historic data, last three months typically. If the probability of a delay is higher the payout will be lower… in the end it is almost a zero-sum game, except for the fees we need to pay for the API and Oraclize.”

It’s all open-source, so everything can be easily checked. The more technically inclined can also play around with the code. For the rest, it’s a dynamic website that just works.

Insurance Disrupted – Travel Next?

Where binary answers are available, such as was there a bankruptcy/default or was a ship delayed, the whole insurance process can be turned into just an app. Moreover, if police services, courts, fire services, open up their data (and they probably will have to), this could be extended to daily items such as phones, laptops, houses, or even car insurance.

By using blockchain-based smart contracts, costs are reduced, if not fully eliminated. The insurance industry, will, therefore, in the near future, turn into a zero-sum service, allowing individuals to keep more of their wealth, thus increasing standards. For flight delay compensation it is slightly more complicated.

By law, airlines are required to compensate for any flight delays or cancellation, but the process is intentionally difficult. Angry delayed customers clog departments with claims just to make a point, but with airport space limited, airlines and train companies act like monopolies and treat their customers as such. However, as the law requires compensation, opportunities are opened for insurance companies and entrepreneurs. Karpischek states:

“It literally is a big unsolved problem in aviation today. You know: customers are set up in the first place because they are delayed, then they have to go through bureaucratic hell to claim their compensation… now imagine this being replaced with a fully automated insurance policy.”

For insurance, a billion if the not trillion-dollar market, it is pretty clear how this works in practice and at scale – as long as you have a reliable data feed, the whole thing is just automated – but for this to become a reality as far as delay claims are concerned, a more radical change is needed, the alchemic transformation of money itself into natively digital currency.

The Bank of England is considering doing just that, but, at best, that’s five years or a decade away. However, some airlines currently accept btc and, if they want a taste of the future, might even try accepting eth or one of the eth based stable coins that try to implement Hayek’s suggestion. Karpischek states:

“Airlines are required by law to compensate customers today for extreme delays, but it is a big hassle for them and they don’t like to do it. What I could imagine (and I am not yet sure if this works out) is a checkbox in the booking process which basically offers delay insurance at low cost (similar to the add-on carbon footprint compensation you can choose with some airlines today).

So, as soon as we get to the point where people can buy flight tickets with digital currency, airlines can offer automated insurance as an add-on easily. And we will get there. Maybe there even is an airline out there which lets you buy tickets with Bitcoin. We could already interface with that.”

There are indications air travel is experimenting with blockchain technology as shown by Airbus, a plane manufacturer, recently becoming Hyperledger’s newest member. More will probably follow, not least because leaving a new invention on the table in a competitive market is an easy way to make sure you get disrupted. However, beyond all these considerations, what FlightDelay shows is what has become possible. Through an entry form, what previously required, and still, currently, requires, whole insurance departments and even skyscrapers, is turned into just 1s and 0s.

It’s just a demo, says Karpischek, “to show what is possible on the blockchain,” but it’s far more than that. It shows how Ethereum has turned bitcoin, and the whole blockchain space, into something very new, something very real.

Images from Shutterstock.