The potential of the new IATA standard NDC to transform sales for airlines, GDS providers, travel agents and OTAs but also the challenges facing its implementation will be hot topics at the inaugural European Aviation Symposium in Munich on January 29-30.
IATA developed the XML-based data transmission standard New Distribution Capability (NDC) to improve how airline prices are made available for sale to customers, in particular by overcoming current limitations on product differentiation and time-to-market. Instead of the usual PNR, bookings using NDC will create a One Order data record.
"The entire ordering process with PNR, EMD and ticketing will be replaced in future by One Order - for the airline itself, but also in cooperation with its partners," explains Alexander von Bernstorff, Director of Airline Solutions at Interes, who has been involved in NDC development at IATA for years.
The aim of the airlines is to become faster and more agile in sales. "The NDC data standard is an important prerequisite for dynamic pricing and opens up many new sales opportunities for airlines," says Mark Friesen, consultant at Quinta Consulting. In addition, the airlines want to further differentiate their offerings in order to make comparison with other airlines more difficult and to reduce pure price-based competition. For this reason, network carriers have an interest in having indirect sales supplied by NDC.
Massive impact on GDS providers
The planned NDC transformation will have a massive impact on GDS providers, who still process the bulk of airline bookings through their reservation systems, but are under threat from other distribution channels, including airline direct sales, OTAs and flight portals. They are now joining the revolution to avoid losing business.
The first NDC booking via a GDS was made only in October 2018. In the next few months, all three leading GDS operators (Amadeus, Sabre, Travelport) will activate NDC bookings in their respective user interfaces. In addition, they will provide access via web services and interfaces (API). On the one hand, this is intended to give travel agencies access to the many additional services with which airlines want to generate ancillary revenues. On the other hand, counter staff will also have access to the preferential conditions that the Lufthansa Group, for example, only provides via NDC.
But the GDS operators still face diverse challenges:
* Getting travel agencies on board.
Travel agents will have to get involved and learn new things. They, and the GDS operators, will only be valuable for airlines if they sell the additional services. Previous experiences are not very positive, as Rainer Klee, head of German airline ticket specialist Aerticket, criticises. Aerticket already offers various additional services through the Cockpit system. Counter staff will also have to re-learn how to use the GDS. Offers called up in the system using NDC are specially marked, because work processes, for example in case of rebookings, will function differently than usual.
* NDC and GDS parallel operations.
The background for the changed workflows is that bookings via NDC do not end up in a GDS booking data record (PNR) but in a One Order data record. One Order is not based on any flight tariffs but only on prices and does not even provide for ticketing.
"In the transition phase, airlines still need a PNR for NDC bookings because many processes, especially airport processes such as check-in, are based on it," reports von Bernstorff. The GDS operators are therefore developing a back channel from the NDC booking into the traditional GDS system.
"Many airline managers consider pure NDC booking engines to be the right solution, but do not yet consider their companies to be ready for it, especially in organizational terms," says von Bernstorff. However, IATA CEO Alexandre de Juniac has already demanded that airports and service providers who are active there should also introduce IT systems for NDC communications. Such a change is likely to take several years, though.
* Contracts with airlines.
53 airlines are certified by IATA for Offer and Order Management (NDC Level 3), and almost 30 of them are particularly active in pushing the new data standard. But the GDS operators have only been able to name a few so far. Insiders suspect that there is a struggle for business models with the airlines.
The airlines have declared their intention to significantly reduce their distribution costs and are using NDC direct sales as a means of exerting pressure. On the other hand, NDC lacks functions such as ticketing and interlining, so GDS tools still have to be used. GDS managers suggest that the NDC interfaces will only gradually be released for distribution because of the contracts.
* Loss of technical intelligence
Due to historical developments, airlines have not launched their product range directly onto the market. They distributed fares and their restrictions and flight plan data through various companies such as APTCO and AOG and only provided seat availability at the time of the booking request via a Passenger Service System (PSS). The product is first created within the GDS. In future, these and numerous other functions are to be fully controlled by the airlines in the One Order data record. GDS operators could thus be downgraded to pure data carriers.
However, Gianni Pisanello, head of the NDC-X programme at Amadeus, denies this: "The range of flights, the additional services, their combinations and prices are being brought into the market in an increasingly fragmented manner. So the role of the GDS as a re-integrator will become much bigger and more important.”
Yet this task will not be easy, as Travelport manager Marcel van de Wal states. "Make the standard really into a standard," he demands from airlines. Since NDC can be used so flexibly, they could apply the data standard with many variations, for example by describing the same services differently. Kathy Morgan, Vice President NDC at Sabre, adds: "It is our task to preserve the value of indirect sales, and their working efficiency as well.”
The use of NDC in travel companies via the GDS providers will therefore have to overcome some hurdles and is unlikely to go smoothly, observers believe.
Preferential conditions attract OTAs and flight portals
Online travel agencies (OTAs) and flight portals are already further ahead than GDS providers. The first OTA flight booking based on the NDC data standard already took place in September 2016 through Kayak, and both Kayak and Skyscanner now use the new format.
Both airlines and portals have good reasons to push ahead with the new data standard.
Commercially, airlines such as the Lufthansa Group exerted enormous pressure because they lowered prices for flights and services such as seat reservations in NDC sales. Lufthansa recently removed its Light fares from GDS sales. For the internet travel portals, however, even the smallest price differences are important because the web offers customers a high degree of transparency and just a few euros can influence buying decisions. In addition, the portals work on the basis that the prices delivered directly by an airline are reliable. This is not always the case in the complex world of reservation systems with different data suppliers and price calculations.
But the business model of portals is also different from that of travel agencies or travel management companies in customer relationships. The portals concentrate on pure sales: they make offers, take bookings and receive the payment. They leave the remaining services that customers may need to the airlines. This includes rebooking, assistance in the case of travel problems and other services.
Airlines have no objections to this, as they are interested in keeping in touch with their customers anyway. If possible, this will be digitalised in the future. Nearly all airlines are therefore working on systems and smartphone apps that turn passenger assistance into self-service.
NDC and One Order will be the topic of two panel discussions at the European Aviation Symposium on January 30. Speakers will include Julio Rodriguez (IAG Head of Group Commercial Planning), Tom Fecke (Sabre’s Director Strategic Sales EMEA), Olaf Petersenn (Executive Director Rentals, Insurance, Ancillaries at TUI Deutschland), and David Rutnam (Manager New Distribution Capability Regional Implementation, Europe at IATA).