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Tokenization of civil aircraft: Transformation of the aviation industry

Tokenization of civil aircraft: Transformation of the aviation industry

Friday, April 12, 2024

Let's explore how civil aircraft tokenization will impact the aviation industry, especially compared to the traditional aircraft leasing model, from Expedit's point of view.

In an increasingly digitized world, the tokenization of financial assets has emerged as a disruptive innovation with the potential to transform numerous industries, including aviation. Tokenization, which involves the conversion of physical or financial assets into Security Tokens on the blockchain, offers several advantages in terms of efficiency, transparency, and accessibility.

The Evolution of Civil Aircraft Financing

For decades, the acquisition and operation of civil aircraft have been dominated by large manufacturers and airlines that rely heavily on financial institutions to finance aircraft purchases. Aircraft leasing has been a popular option for acquiring aircraft, as it allows airlines to operate fleets without incurring the total cost of ownership. However, the financing process through aircraft leasing is complex and costly, with many intermediaries involved and variable interest rates.

Tokenization: The New Frontier of Aviation Finance.

Tokenization of civil aircraft offers an innovative alternative to the traditional aircraft leasing model. By converting ownership of an aircraft into Security Tokens, tokenization allows individuals or investors to purchase fractions of the aircraft, which in turn diversifies risk and lowers the barrier to entry for these individuals, individual investors, and small businesses. In addition, tokenization simplifies the financing process by eliminating intermediaries and reducing associated costs.

What is civil aircraft tokenization?

By way of example, civil aircraft tokenization is the process of converting ownership of an aircraft into Security Tokens that can be bought, sold, and traded on a platform such as Expedit. Each Security Token represents a fraction of the ownership of the aircraft and investors can purchase these Security Tokens to obtain a stake in the aircraft. This form of investment allows investors to access the aircraft industry in a more accessible and flexible way.

Advantages of civil aircraft tokenization versus aircraft leasing

1. Individuals' access to aerospace investment: The tokenization of civil aircraft will allow individuals or investors to access the aerospace industry without the need for large amounts of capital. Security Tokens allow investors to acquire a fraction of the ownership of an aircraft, significantly lowering the barrier to entry.

2. Increased liquidity: Security Tokens are easily transferable and tradable on platforms such as Expedit, providing greater liquidity compared to traditional aircraft leasing. Investors can buy and sell their Security Tokens at any time, giving them flexibility and control over their investments.

3. Transparency and traceability: The blockchain technology used in civil aircraft tokenization provides an immutable and transparent record of all transactions related to Security Tokens. This provides investors with greater confidence and investment security, as they can easily verify the ownership and transaction history of Security Tokens.

4. Dividends and voting rights: Depending on the structure of the tokenization, investors may receive dividends and have voting rights in relation to the aircraft. This gives them a greater say in decision-making and the possibility to earn additional profits.

5. Portfolio diversification: Civil aircraft tokenization allows investors to diversify their portfolio by including aerospace assets. This can help reduce risk and increase the potential return on investment.

Impact on the aeronautics industry

Tokenization of civil aircraft has the potential to have a significant impact on the aviation industry:

1. Alternative financing: The tokenization of civil aircraft provides a new source of financing for the acquisition and operation of aircraft. This can help airlines and aerospace operators diversify their financing sources and reduce their dependence on traditional bank loans and leasing.

2. Increased investment efficiency: Tokenization of civil aircraft can improve investment efficiency by allowing investors to access the aerospace industry more quickly and easily. This can streamline aircraft acquisition processes and reduce associated costs.

3. Increased transparency and security: The blockchain technology used in civil aircraft tokenization provides greater transparency and security in transactions. This can help reduce the risk of fraud and improve trust in the aviation industry.

4. Innovation in business models: The tokenization of civil aircraft can drive innovation in business models in the airline industry. For example, airlines could offer loyalty programs based on tokenization of financial assets by revolutionizing the easy way different asset classes are invested in and accessed. In particular, civil aircraft tokenization will generate a major impact on the airline industry, offering new financing opportunities and improving conditions for users compared to the traditional aircraft leasing industry. In this article, we will explore in detail how civil aircraft tokenization is transforming the aviation industry and the benefits it offers to users.

5. Access to a broader investor base: Tokenization allows civil aircraft owners to access a broader global investor base, including retail and small and institutional investors. This democratizes access to aircraft investment and provides opportunities for those previously unable to participate in this asset class.

6. Reduced costs: Tokenization of civil aircraft can reduce the costs associated with acquiring and maintaining an aircraft. By dividing ownership into Security Tokens, investors can acquire a fraction of the aircraft, reducing the amount of capital required to invest. In addition, tokenization can simplify administrative and legal processes, which also results in cost savings.

7. Investment flexibility and accessibility: The tokenization of civil aircraft allows investors to purchase a fraction of an aircraft rather than having to invest in the entire aircraft. This provides flexibility to investors as they can diversify their portfolio by investing in multiple aircraft or different fractions of the same aircraft.

In summary, the tokenization of civil aircraft will transform the airline industry by offering its customers a new experience through the opportunity to participate not only as frequent flyers earning miles, but to participate in the development of the financial industry by improving their relationships, products, and services.

At Expedit we are open to listening to any concerns about tokenizing a business model. Contact us now!

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