Honeywell Brings Blockchain to Used Aircraft Parts Market
May 28 2019 - 4:16PM
Dow Jones News
By Agam Shah
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 100 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.
Write to Agam Shah at agam.shah@wsj.com
(END) Dow Jones Newswires
May 28, 2019 16:01 ET (20:01 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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