1. An Ethereum-based Solution to Leased Aircraft Audits
BitLease
An Ethereum-based Solution to Leased Aircraft Audits
Team 8: Andres Florez, Paul Lee,
Junaedy Liem & Lyanna Lim

2. Like a digital twin the Dave Treat mentioned
Like a digital twin the Dave Treat mentioned. There are issues such as getting a complete inventory of the current planes but as we discussed, I guess they routinely do this. Would be interesting to see if the regulatory provisions for inside a plane the same as for critical systems. Need a bit more information on the specifics of the blockchain implementation.
82/100 Very nice.

3. Problem: Current leasing process is highly convoluted
Multiple parties generate records in aircraft leasing
Record review is challenging due to a lack of organized and reliable database
Manu-facturer
Airline
MROs
External auditor
Lessor $
Aircraft
MRO Service
MRO service
Lease
Compliance report
Records
Review of physical documents
Rebuild aircraft maintenance history
Verify signatures in maintenance documents of internal auditors vs. regulator’s database
Identify possible modifications to records
Current leasing process generates multiple, independent records that mandate costly audits at the end of each lease 2

4. Solution: BitLease will solve cumbersome aircraft lease audit process
BitLease eases record storage & auditing
BitLease enables immutable record keeping that benefits lessors & lessees
Manufacturer
BitLease is an aircraft leasing implementation of Ethereum
Enables & enforces smart contracts between lessors, lessees and all other leasing parties
Immutable records on private, permissioned blockchain enables faster, cheaper audits
MROs
Records
Airline
Records
Records
Bitlease
BitLease reduces the cost and time of aircraft leasing audits 3

5. Solution: BitLease will simplify the aircraft leasing industry
Blockchain: a game of winners and losers
How Bitlease Works
MROs
Regulator
Airlines (lessees) and aircraft owners (lessors) will benefit from reduced audit costs, immutable record of service, transaction confirmation efficiencies (from days to minutes) and higher consistencies
Any repair and maintenance work is recorded onto the blockchain. The transaction is verified only if all relevant parties agree, i.e. consensus
The regulator monitors maintenance records and validates signatures of airlines’ internal auditors.
Smart Contracts on
Ethereum
Manufacturers
Airlines
External auditors will be partially displaced; disintermediation occurs
Abusers will be discouraged to undertake fraudulent activities
Lessors
The manufacturer adds the model, aircraft identification number, and maintenance records to the aircraft template as permitted by the smart contract.
The internal auditor registers the aircrafts’ maintenance records onto BitLease.
Physical supply chain is integrated, but supporting information systems are often fragmented and involves a lot of cumbersome paperwork.
With Bitlease, every participant in thenetwork could monitor, access and share and analyze consistent and up-to-date information on the lease record and repair record of the plane, irrespective of where the plane is in its life cycle.
One complete agreed view of the complete aircraft history and this would greatly improve service warrant and recall costs by providing an agreed shared record of aircraft information and its transfer across the supply chain.
How Bitlease will work
The smart contract will ensure that only the regulator can do this. The regulator then transfers ownership of the aircraft to the manufacturer by invoking a transaction on the blockchain. The transaction is verified if all relevant parties agree.
This is referred to as consensus – made more efficient through blockchain usage. Bitlease will allow the validation method to be tailored to meet the needs of the business network.
The manufacturer adds the make, model and the aircraft identification number to the aircraft template again as permitted by the smart contract.
This update is visible to all members of the supply chain with the right permission.
When the aircraft is finally transferred to the leasing company, airlines can lease the planes. This synchronized process continues across the supply chain
At all stages, the security, integrity and validity of vehicle information is assured using proven cryptographic services. 4

6. Solution: High feasibility due to market structure and existing technology
Once leading lessor adopts BitLease, airlines will follow
Lessors are few and concentrated: Top 10 lessors have 66% market share
Air lease market growth is high: CAGR of 6% through 2021
Requires only one lessor buy-in
Lessors have significant information asymmetry once aircrafts are on lease, see value in a common database
Physical audit is mandated by international aviation agencies – process must be done and is highly expensive
Simplifies processes for regulators & lessors
Leverages existing Technology
Solution exists in already-established blockchains (eg: Quorum, Smart Contracts & Digital Twins)
Airlines already use internal software for MRO purposes
Guarantees privacy to all parties involved
Market Share:
CAGR: 5

7. Implementation: A deployed product will be available in 5-7 months
Definition
Development
Proof of Concept
Deployment
Expansion 1
month
2 - 3
months
1-2 5
Identify lessor and airline
Clarify business process
Define development guidelines
Develop software
Develop storage system
Develop user interface
Develop training materials
Develop test scenarios
Perform tests
Make adjustments
Train personnel
Launch application
Monitor progress
Expand to other airlines
Expand to other lessors 6

8. Future Work: Potential Upside for other Applications
Oil & Gas Equipment:
Oil & gas companies which lease drilling rigs and crews from oil-field services companies can utilize blockchain to record equipment lease and equipment repair and maintenance.
Heavy Industrial Equipment:
Lessors and lessees of land drilling and excavation equipment, heavy construction machinery etc can utilize blockchain to keep records.
Medical Equipment:
Hospitals and clinics which rent medical devices for fixed-term use can keep records on the blockchain ledger.
Container Ships:
Charter owners (lessors) and liner companies (lessees) can also utilize this blockchain technology to keep records of lease contract conditions and repair records
Market Share:
CAGR: 7

9. Risks & Mitigation: Mitigations plans have been formulated for high risk issues
No lessor is on board right now
Hire industry expert with connections in lessor companies
Regulator buy-in
Encourage lobbying from lessors and lessees
First mover disadvantage
Quickly increase barriers to entry through regulatory mandates
Low barriers to entry (Bitcoin / Ethereum is non-proprietary)
BitLease application to be proprietary
Security attacks
Usage of Ethereum blockchain 8

10. Financials: We require $770k in exchange for 30% share in BitLease
Year 1
Year 2
Year 3
Year 4
Year 5
( + )
Revenue 13
250
500
1,000
2,000
( - )
Developers
-120
-180
-300
-450
-600
Management
-200
-250
-400
Software licenses -4 -6
-10
-15
-20
Rental
-30
Other overhead -0
-23
-32
-45
-53
( = )
Total Operating Expenses
-354
-489
-672
-940
-1,103
EBITDA
-342
-239
-172 60
898
Taxes
120 84
-21
-314
Net Income
-222
-156
-112 39
583
Free Cash Flow
-233
Terminal value
5,007
Present Value
2,407
Investment
770
ROI
3.1x
Assumptions
Q1 Q2 Q3 Q4 Year 1 Year 2 Year 3 Year 4 Year 5    
Revenue assumptions
Licenses (#)
Cost per license ($/year) 5,000
Salaries assumptions:
Developers (#)
Developers salary ($/year) 30,000
Management (#)
Management salary ($/year) 50,000
Software licenses:
License cost ($/year) 1,000
Other costs:
Rental expense ($/year) 30,000
Other overhead (% of operating expenses) 5%
Tax Rate 35%
WACC 15%
Growth 3% 9