Russia Airline Eyes Blockchain to Track Fuel Payments

Russia Airline Eyes Blockchain to Track Fuel Payments

Major Russian airline S7 announced it has tested a blockchain-based application capable of tracking transactions related to refueling planes including payments.

In a statement, S7 said that together with it was the first airline in Russia to refuel an aircraft using digital smart contracts anchored on the blockchain technology. The experiment, done along with Gazpromneft-Aero, its fuel supplier and Alfa-Bank, the country’s largest private bank, was conducted crew of S7 3013 Novosibirsk-Krasnoyarsk flight at Tolmachevo International Airport.

The airline company explained the application records details about fuel demand on the distributed shared ledger (DLT). A copy of the transaction is managed by representatives of the three entities involved in this project. Moreover, payments for refueling planes can be conducted on the network, with digital invoices created via smart contract every after each transaction.

During the trial, the funds are written off after the refueling of planes and reporting documents are transmitted to the firm’s commercial services and fuel supplier. The entire transaction, which was completed in 60 seconds, was undertaken based on the scheme approved by all parties.

“The new technology will allow airlines to increase the speed of settlements and minimize the financial risks of participants in the transaction, without requiring advance payments and bank guarantees,” S7 said in a statement.

“This is an automated trading operation between three parties: a bank, an airline and a tanker. Upon the fact of fueling the aircraft according to the pre-established rules, reconciliation and write-offs are carried out. The technology allows to increase the transparency of mutual settlements, to refuse a number of manual operations and to accelerate the processes,” it added.

The development is part of S7 project to test the blockchain technology for potential applications to its operations. In July last year, the airline said it started issuing passenger tickets via the ethereum blockchain as part of its collaboration with Alfa-Bank, the country’s biggest private banking institution.

According to a local report, the platform is created to reduce the transaction time between the airline and the agent which normally takes about two weeks. Furthermore, it aims to streamline the payment process by cutting the commission which the agent receives after ticket sales. However, it did not indicate whether the platform is anchored on the public or private version of ethereum.

In December 2016, S7 and Alfa-Bank forged a partnership to explore the use of smart contracts in tracing letters of credit. Under their deal, both entities would test smart contract operations and their capability to enhance business processes and increase the reliability and quality exchanging information.

“The transaction enabled us to test the capabilities of smart contracts and understand how the technology helps to improve business processes and document flow efficiency. We are planning to continue cooperating with Alfa-Bank in this area,” Dmitry Kudelkin, S7 deputy general director, said at that time.

“Legally, this transaction meets all the requirements for a letter of credit as a form of bank settlement, and demonstrates the potential of smart contract application in the framework of Russian legislation”, Artem Tolkachev, Deloitte CIS’ director of Legal Services for Technology Projects, had said.

Deloitte advised S7 on blockchain technology application and rendered legal assistance to the project.

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