For years, airlines, travel agencies, and their technology partners acknowledged they could adopt more modern ways of selling plane tickets. The sticking point lately has been less technological than commercial. Thursday's deal is a seismic moment serving as a model for how the sector might afford to transition to the future.
Air France-KLM and Amadeus have agreed on commercial terms to make the airline group’s plane tickets available for travel agents to book through the Amadeus travel platform via newer, more modern forms of selling, the companies said Thursday.
Travel agents piloting the technology will begin booking via the new method, the so-called new distribution capability (NDC), in the next three months.
Air France-KLM will add a surcharge of “a few euros” per ticket for agencies using the new content. Agencies will need to sign agreements with both Air France-KLM and Amadeus, and those deals will settle the precise commercial terms.
“This is a breakthrough agreement,” said Robert Buckman, director, travel content sourcing, Americas, Amadeus.
The surcharge will be less than the $13 (€11) surcharge per one-way ticket Air France-KLM has officially charged agencies since 2018 for sales made through the global distribution systems like Amadeus and its peers Sabre and Travelport that didn’t follow the more modern retailing method. In practice, many large resellers, such as Expedia Group and many large travel management companies, negotiated ways to avoid or minimize the surcharge, often via so-called “private channels.”
The deal is a milestone on a long road since 2012 when the International Air Transport Association proposed the idea of new technical standards for how airlines, agencies, and vendors communicate with each other.
One key haggling point has been who should pay for the cost of upgrading the technology. The Air France-KLM deal with Amadeus suggested an implicit split among airlines, technology partners, and online and offline travel agency customers.
The deal will be closely studied. Air France-KLM had followed Lufthansa Group and International Airlines Group (the parent company of British Airways) in adding a surcharge on tickets booked outside of the more modern methods. Sales for those three airline groups accounted for roughly 20 percent of the flights booked through Amadeus’s main distribution unit before the pandemic.
Other airlines have added surcharges since then, including Qantas last year and, as Skift reported in July, Singapore Airlines. The broader industry effort has aimed to let airlines sell and upsell travelers, or as they prefer to put it, create personalized and tailored offers. For context, read Skift’s recent explainer on the so-called new distribution capability, or NDC, and how it might affect agencies in the pandemic era.
A fight over equal access to content has held up negotiations in recent years.
“The agreement ensures the access to that Air France-KLM content will be the same access and content an agency or other seller would get from any other intermediary, such as another global distribution system, or aggregator,” Buckman said. “For Amadeus travel agents, they’ll be assured a level of parity across those intermediaries and aggregators.”
Another industry roadblock to adopting the new distribution capability has been a concern about integration with systems that help travel agencies provide customer service on tickets if something changes with a flight after it’s booked. Until now, United Airlines and American Airlines have worked with Amadeus in making some of their content available via the new distribution capability, but agencies balked at the complexity of trying to service those tickets.
Amadeus believes it has found ways to address many of the most common servicing issues many agencies worry about, as the company noted in a presentation in July. Air France-KLM and Amadeus expect to finish the full integration with servicing capabilities in the first half of 2021.
That’s an aggressive timeline for a complex project. Air France/KLM is one of many airline groups that had to furlough staff this year, and Amadeus has had to seek some cost efficiencies, too. So the planned speedy pace for rolling out the system for agencies suggests that both companies have prioritized this effort despite the crisis.
Amadeus is acting like an information technology (IT) aggregator, whose travel platform will consume NDC content from a number of IT providers, such as its own passenger service systems Altea and Navitaire, and from external providers and airline in-house systems. Air France/KLM uses a proprietary system, for instance.
“Once we have the primary integration of Altea and Navitaire into the Amadeus travel platform for NDC content, we can then quickly scale and benefit from the airlines distributing NDC in a variety of ways, because we’ll then maintain the version control,” Buckman said.
The attempt to modernize airline distribution hasn’t ended with the Air France/KLM deal with Amadeus. Some travel agencies will critique this announcement, looking for all the caveats. There are probably some exceptional circumstances that agencies have to handle for customers that may be more difficult to cope with when the content is in the NDC format as it stands today, rather than the older Edifact format.
“I can empathize with certain industry partners who might look at NDC and say, ‘It’s not ready for me,” Buckman said, in response to a Skift question. “There are segments of our industry that, I would say, today, NDC probably would not serve the best. Yet those use cases, those segments, are being worked on at an industry level.”
“We have to keep some perspective that, in the race to the moon, we didn’t get there overnight,” Buckman said. “Our journey with NDC is no different than any other large-scale, ambitious journey. It will take a lot of planning and collaboration, but the sector will make NDC successful for all parties.”
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Tags: air france, air france-klm, air france-klm group, air france/klm, airline distribution, amadeus, distribution, gds. global distribution systems, global distribution systems, ndc, new distribution capability, travel agencies, travel distribution
Photo credit: Computer simulation of one of 60 Airbus A220-300s ordered by Air France for 2021. Air France-KLM and Amadeus have signed a deal with commercial terms to enable modern airline selling for travel agencies via NDC, the New Distribution Capability. Airbus