New Distribution Capability (NDC) from the International Air Transport Association (IATA) sets new standards for how data is transmitted between various airline systems. Though NDC is still in its early stages of adoption, it has disrupted the industry significantly with the promise of new and improved sale capabilities. NDC will allow airlines to have more control over offers and will help travel agencies provide more value to their customers. As a result, all stakeholders are developing or procuring new technologies for faster and easier access to NDC content.
“Today, global distribution systems (GDSs) compile offers by pulling together schedules, inventory, and fares from different sources such as Airline Tariff Publishing Company (ATPCO) and low cost carriers” said Will Owen Hughes, head of agency and airline transition at Travelport. “The current limitation posed by distributing fares through ATPCO — which most airlines use — is that it supports a maximum of 26 fare classes. However, with NDC, there are no limitations on fare classes, and an airline can compile and push through any number of branded offers.”
How will NDC benefit travel agencies?
This new way of creating, distributing, and selling airline inventory will change how agencies, GDSs, and airlines interact and conduct business. With the successful implementation of NDC standards, all airline distribution stakeholders can benefit substantially.
With NDC content, agencies and airlines can personalize offers in real time. NDC connections enable airlines to recognize an individual or a corporation at the time of search, even if the search request is coming through an intermediary. As a result, an airline can take the traveler’s preferences into account when showcasing rates and bundles to the booker. “For example, if a particular company offers their director-level employees additional lounge access for long-haul flights, relevant bundles that include that can be pushed to the agency during the search phase,” said Owen Hughes. “As airlines continue to invest in NDC and improve their backend technologies to better identify traveler personas and individuals throughout the booking process, all travel agencies can take advantage of this flexibility to understand their customers’ needs and offer relevant content to them.”
This flexibility also leads to airlines being able to offer dynamic pricing that responds to market demands. “Travel management companies, for example, will no longer be stuck with pre-negotiated, rigid deals with airlines. Should an agency deliver more bookings than promised, airlines can respond in real time with additional benefits for customers and agencies,” noted Owen Hughes.
Lastly, with NDC, airlines can also provide a wider variety of approved offers through GDSs. In turn, GDSs will no longer need to compile offers in their own systems for agencies. By selling airline approved rates, agencies can expect to see a reduction in debit memos (notice sent by airlines for additional compensation and disputing a fare compiled in the GDS system).
What capabilities should travel agencies be developing to take advantage of NDC?
Travel agencies have to update their workflows and technologies to adapt to this new way of airline retailing. “This is our area of expertise, and in spite of NDC’s infancy, we are already developing these capabilities for our agency clients,” said Owen Hughes. “For example, in order to benefit from access to real-time deal updates, travel agencies must be able to capture that rate — and show it to their customers in real time as well.”
“Some airlines, predominantly in Europe, are introducing new commercial models, like offering incentives to agencies that directly connect with them, to encourage NDC adoption,” said Owen Hughes. “With product and technology innovation, commercial models will also evolve. We expect to see a certain amount of trial and error, but as the technology is refined in 2019, these models should start to steady out. Agencies’ workflow and technology evolutions must consider these as well.”
In preparation for the future of airline retailing, “agencies should account for the fact that passenger name records (PNRs) and tickets (or orders) will now reside in the airline system, with a copy in the GDS system,” noted Owen Hughes. “This means that tickets will be issued by airlines directly, and not out of GDS systems. This serves as a first step towards implementing IATA’s One Order, where PNRs and Orders will be collapsed into one master record.”
One approach that Travelport is taking to ease the adoption of NDC is preserving a certain degree of familiarity for agencies by releasing new capabilities incrementally into existing booking platforms. “For example, NDC content is available through the Travelport Smartpoint platform, which is the current booking tool for offline travel agencies. NDC content for Trip Services, the booking platform for online travel agencies, is set to release later this year,” Owen Hughes said.
Agencies must also decide how they want to work with airlines in the future. What sort of deals are most relevant to their customers, and how can they ensure that the right deals are being surfaced for their travelers? For travel management companies, the question is even more complex. “How will personalization take travel policies into account, and how will workflows evolve as NDC content flows through online corporate booking tools?” he asked.
While being able to provide the aforementioned capabilities helps agencies differentiate themselves in the marketplace, it also means that they will have to take a more active role in discussions with airlines and GDSs to develop capabilities around policy control for business travel bookings to ensure relevance at all times.
Dave Bartels, vice president of pricing and revenue management at United Airlines, said “United is excited to be working with Travelport on our NDC initiative to provide tailored content to our customers through the Travelport subscriber network.”
For its part, Travelport enables this with rich content and branding features for the airlines. This allows agencies to not only offer great personalization to their customers, but also provide transparency and clarity as airlines continue to diversify and increase the number of offers available with NDC.
“While price is important, customers are increasingly looking at the value of the overall offer instead of the cheapest rate,” confirmed Owen Hughes. “Now, because agencies have a more flexible way of selling airline inventory than before, they will be able to have more comprehensive discussions with airlines — not just about price but the whole product bundle and what customers really want.”