Under the agreement concluded between PJSC Siberia Airlines and one of the counterparts the calculations with the usage of covered letter of credit have been done. The deal has been concluded through Alfa-Bank.
“S7 Airlines is the most technologically advanced airline on the Russian air transportation market. We traditionally use the newest solutions and technologies not only to develop our passenger service, but also to develop business. By conducting the deal, we have tested efficiency of smart-contracts and realized how this technology could help to optimize business-processes and improve effectiveness of document flow. We are planning to continue cooperation with Alfa-Bank in this respect”, — the S7 Group Deputy Director General Dmitry Kudelkin noted.
“Using Blockchain, the Bank is building a platform, which will protect from non-performance of conditions of financial deals between customers. The Blockchain technology is a perfect solution for business conducting multiparty deals and deals with newly entering parties who have not built mutual trust yet. Use of Blockchain increases payment speed and transparence. The more market players (banks, major counterparties, individuals) will carry out deals through Blockchain-based platform for secure deals, the more transparent, fast and cost-effective financial cooperation will be.
Alfa-Bank provided the members of the deal with additional facilities of its “Alfa-business online” electronic system: the customer could apply for opening the letter of credit and the contractor — provide the bank with the documents on the provision of services. The funds were written off from the customer’s account to a special cover account by the time of application for a letter of credit, and reached the contractor’s account by the time of submission of documents.
The main steps of the deal — opening and utilization of letter of credit — were also made in the form of transaction on the basis of smart-contracts in the Ethereum system and recorded in a distributed ledger (Blockchain). A Blockchain record includes a hash (result of encryption) of the following information: deal identifiers (Taxpayer Identification Numbers (INN) of the customer and the contractor and type of works) and commercial terms (value of the letter of credit, date of opening and closing of the letter of credit). The contractor can therefore, having all the necessary information, check the status of the letter of credit.
Using two smart-contracts simultaneously is a distinctive feature of the deal: one was used only to open the letter of credit and the other — to close it. Existence of two interacting smart-contracts is intended to reduce the potential for code errors and thereby protect interests of the parties of the deal and improve its transparency.
“In September, in cooperation with the Central Bank, we participated in development of the Masterchain network, and in October, we presented the Blockchain-based platform “Potok” on Finopolis. Today, we are glad to have S7, strong and distinguished company, as our partner in the implementation of modern technologies, “— said Nadezhda Avdanina, the Director of Alfa-Bank Electronic Business Innovation Centre.
Deloitte CIS advised S7 on the usage of Blockchain technology. Specialists of the company also provided legal support of the project.
“We are glad, that Blockchain technology is used in work of innovative companies within the Russian jurisdiction. We welcome S7 Airlines’ willingness to experiment with smart-contracts implementation in business processes and believe that further use of Blockchain technology will help to significantly reduce costs and improve work efficiency. This deal meets all the legal requirements for conducting of such a form of wire transfer as a letter of credit, and clearly demonstrates application options of smart contracts under Russian law”, — Artem Tolkachev, Director of Deloitte CIS Legal Services for Technology Projects Team, noted.
S7 Airlines (“Siberia” airlines brand, s7.ru) is a member of the oneworld® global aviation alliance. The airline has a wide internal route network, created on the basis of air transport hubs in Moscow (Domodedovo) and Novosibirsk (Tolmachevo). S7 Airlines also performs regular flights to countries of the Commonwealth of Independent States (CIS), Europe, the Near East, Southeast Asia and countries of the Asia-Pacific region. Today S7 Airlines has the newest and one of the most modern aircraft fleets on the Russian air transportation market. All airline’s flights are operated on aircrafts of the world’s leading producers — Airbus and Boeing. The airline is a member of the S7 Group of companies. In 2015 Group member airlines carried 10.6 million passengers.