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New Distribution Capability (NDC) standards, introduced by the International Air Transport Association (IATA) promise to enable smarter retailing through indirect distribution channels such as Global Distribution Systems (GDS). This means that GDSs will be able to show and sell offers that can be branded, differentiated with rich content, and personalized to drive higher conversions.
As more companies within the airline distribution ecosystem adopt NDC standards, airline retailing solutions must be able to support these growing volumes without compromising the customer experience or disrupting operations. In addition, a variety of other stakeholders involved in fulfilling and servicing these orders — not just airlines directly involved with offer and order management — must be able to support NDC sales.
Sabre, a travel technology company and one of the larger GDSs in the industry, reports that it produces 300 terabytes of shopping data every day, which roughly translates to 600 million shops a day. “When somebody enters the search parameters into our system, it takes us under two seconds to produce all the possible results and combine them into the most favorable offer for travelers,” said Brett Burgess, senior vice president of product management for Sabre Travel Network. “As we think about NDC and airline retailing, the most important thing to do is to continue to deliver the same level of efficiency and service at scale with NDC connections as well.”
“From our perspective, we need to make sure that our NDC-compliant connections — also called NDC Application Programming Interfaces (APIs) — can support those 600 million shops a day,” said Kathy Morgan, vice president for NDC solutions at Sabre. Without scale, the promise of NDC to open up the marketplace to new types of airline offers, rich content, retailing, and differentiation cannot be fulfilled.
Addressing Challenges as an Industry
Along with providing scalable NDC-enabled solutions, the industry must address some other challenges as well. “We must recognize that we are dealing with under-specified standards. Initially, these standards only addressed what a reservation workflow would look like for an airline’s brand website, and that worked well for meta-search engines and online travel agencies (OTAs),” said Morgan. “But, scale includes both business and technical considerations, and when you open up the market to other third-party buyers like travel management companies and corporate travel booking tools, these standards don’t address all their needs. We’re excited to see that IATA acknowledged industry feedback and created NDC Level 4 and NDC@Scale certifications. Through our test-and-learn approach, we look forward to sharing insights that can refine the definition of scale.”
IATA has set an industry-wide goal that 20 percent of all sales for the 21 airlines on the NDC leaderboard should be powered by an NDC API by 2020. These 21 airlines account for 30 percent of IATA passenger volumes. The fact that world passenger volume has exceeded 4.5 billion as of June 2019 is an indication of the kind of volume that NDC APIs must be able to support.
In early April 2019, Sabre announced that it had begun testing NDC offers with United Airlines. “United is thrilled to be the first airline to partner with Sabre to offer NDC capabilities through their booking platform as we continue to advance the travel industry,” said Dave Bartels, vice president of revenue management for United Airlines. “We strive to provide the best experience for our customers at each step of their travel journey, including when they shop for flights. Working with Sabre to improve the booking process is another way we are able to enhance the experience for our customers.”
Driving Scale for all Functions in the Workflow
Managing and supporting large volumes of shops and transactions through NDC APIs are not the only things to consider when thinking about scale. Are other service providers, like payment fulfillment platforms and catering vendors, able to understand the new NDC offer and order model and handle the resulting volumes coming through NDC channels as well as traditional channels? “NDC changes how tickets and ancillaries are sold,” said Michael Reyes, senior director, offer management at Sabre Airline Solutions. “We can build and sell the offer, but we must also pay attention to what happens after the sale.”
For example, when ancillaries like special meal requests are booked more frequently through an NDC-enabled API, a catering vendor’s system must be upgraded to process and fulfill these orders. Therefore, NDC adopters must look at the entire retailing process, including at how the offer will be fulfilled, how the customer will be supported in case of changes after the order is placed, and how third-party vendors are kept informed to successfully achieve scale.
“Today, Sabre has the computing power to support 600 million shops with 99.999 percent uptime,” said Morgan. “Our shopping volumes double every 18 months, and the look-to-book ratios are 20,000 to one in some markets. And, it’s constantly growing. NDC will require us to transition the burden of computing and managing these volumes to the airline systems.” Not only do airline systems need to be prepared to handle the increased volume, they must do so while maintaining the current service standards. Otherwise, airlines may risk losing customers due to unmet expectations.
To achieve scale, “The first thing we are doing is changing the notion that airlines can only take a limited number of attributes into account when building an offer,” said Reyes. New NDC-enabled solutions from Sabre ensure that airlines can distribute any number of offers through their systems that take attributes such as ancillaries, availability, and schedules into consideration, enabling them to be smarter retailers.
“This is where I see the GDS and players like Sabre to be key,” said Charlene Wee, manager of distribution for Singapore Airlines. “There are only a certain number of things airlines can do on their own. Can you imagine us going to 1,000 different partners and setting up 1,000 different connections? It’s not possible or scalable. Once we have the GDSs on board, we have connections to thousands of players out there.”
Some travel agencies using Sabre, such as Carlson Wagonlit Travel (CWT), are testing new technologies that allow them to sell offers delivered through NDC APIs using their existing shopping applications. “While some change in operations is expected, we have been focused on minimizing the disruption that NDC content might cause a travel agency’s existing workflows,” said Morgan.
“Sabre’s approach is very different compared to the other GDSs and, we believe, more scalable,” said Wee. “The key aspect is that it requires less changes to the agency workflows, driving higher adoption. We want to be a part of making NDC a reality by helping facilitate between the airlines and agents. If we do things in a way that would drive agency adoption, then we are happy to understand how the workflows should change on our side. Ultimately, it’s not just us wanting to distribute NDC content, it’s about us partnering with agencies to distribute all this rich, new content.”
To truly benefit from the increased retailing potential that NDC promises, the travel industry must take an ‘ecosystem’ approach to building and deploying solutions. This means developing scalable solutions that support the needs of disparate stakeholders — from travel agencies, airlines, and corporate booking tools to mid-and back-office technology providers, corporations, and travelers themselves. “NDC might have started off as an airline-led initiative, but our approach to ushering in this new era of retailing is to leverage our position as a technology provider at the center of this ecosystem and create an expansive marketplace with solutions that can be scaled,” said Morgan.