Honeywell International Inc. is using blockchain to shake up the market for used aircraft components, making it easier to check the certification and origin of a part and speeding up transactions.
The company’s Honeywell Aerospace unit earlier this year introduced an online marketplace based on blockchain that lets more than 800 international buyers and sellers trade aerospace parts in real time. Participants include Dassault Falcon Jet Corp. and aircraft-repair specialist StandardAero Aviation Holdings Inc.
Before blockchain, a transaction took, on average, two phone calls and four emails to arrange, and two days to close. The sale of larger parts such as engines could take weeks of sending quotes and exchanging documentation. With blockchain, a buyer can locate a part and purchase it immediately.
The aircraft-parts industry is heavily regulated, with sales requiring certification from the U.S. Federal Aviation Administration and other agencies. Blockchain can quickly trace the history of a used part, including previous transactions, owners and repairs.
“The goal was to digitize that. If I need it frictionless, and remove human interaction, I need a technology that will create trust. That’s where blockchain came in,” said Sathish Muthukrishnan, chief digital and information officer at Honeywell Aerospace.
The marketplace, called GoDirect Trade, has notched $2 million in sales so far, and Honeywell Aerospace targets sales of $10 million by year-end. The average transaction is worth about $8,000. One of the bigger transactions was the sale of a $100,000 turbofan engine, Mr. Muthukrishnan said.
Honeywell Aerospace charges companies $15,000 to establish a storefront on the marketplace. Buyers don’t need to pay a fee.
Many industries see blockchain, the distributed-ledger technology known as the record-keeping system behind cryptocurrencies, as a way to authenticate transactions and streamline processes across large networks involving various partners. Walmart Inc.recently established a blockchain to track food from suppliers. Merck & Co. sees it as a way to share drug shipping data to track drug ownership and prevent counterfeiting. Shipping giant A.P. Moller-Maersk A/S is using blockchain to streamline operations for the global shipping ecosystem.
Blockchain is a decentralized system that makes it possible to create and share a digital ledger of transactions among various parties. The data, encrypted and unchangeable, is always up to date on all participants’ systems.
GoDirect Trade was designed along the lines of a retail website. It lists items such as bolts, nuts, avionics and engine parts in different categories, along with images and the company selling the part. Airlines can also use GoDirect Trade to buy noncritical parts to fix seats or in-flight entertainment systems.
The encrypted digital trail cuts the need for paperwork and makes it quick and easy to check the certification and origin of a part, said Samuel Engel, senior vice president and head of the aviation group at consulting firm ICF International Inc., which verifies parts for clients.
Many websites list used aircraft parts but omit details like final prices or provenance documents. Using the blockchain-based marketplace removes uncertainty from the transaction, Mr. Engel said: “It’s not random. It’s not like ‘Oh, what did I get from eBay?’”
The used aircraft parts market was valued at $5.4 billion last year, 60% of that engine-related and 36% component-related, according to ICF. The market is expected to grow to $7.7 billion by 2026.
Honeywell Aerospace first deployed the system based on open-source blockchain technology called Hyperledger and tested it on Microsoft Corp.’s Azure cloud. The company moved the blockchain to an internal cloud to be able to control security and data privacy, Mr. Muthukrishnan said.
The hope is for GoDirect Trade to eventually also sell whole used aircraft, Mr. Muthukrishnan said, much like how cars are sold on eBay.
Credit: Wall Street Journal