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Traveler satisfaction and revenue connects airline needs. To satisfy customers, carriers seek ways to learn more about their clients and provide a set of additional services like baggage insurance or onboard food. Those services are also called ancillaries, and are offered for additional fees. Given the small margins for core transportation services, the fees help to generate profits. To sell ancillaries to the passengers and be more profitable airlines struggle to deliver personalized content to their travelers. Considering that getting in touch with the end user is nearly impossible via the channels provided by global distribution systems, a new standard emerged to resolve the issue.

New Distribution Capability will enable the travel industry to transform how air products are retailed to corporations, leisure and business travelers, by addressing the industry’s current distribution limitations: product differentiation and time-to-market, access to full and rich air content and finally, transparent shopping experience. ​​​​ 

The NDC standard enables the travel industry to transform how air products are retailed to corporations, leisure and business travelers, by addressing the industry’s current distribution limitations:

Product differentiation and time-to-market

Access to full and rich air content

Transparent shopping experience  

Airlines, travel management companies, online travel agencies, corporate buyers, global distribution systems and other technology players contribute to the NDC Standard. Through a collaborative approach, participants ensure that the supporting schemas are functional and can be used by all regardless of business focus, geographic location, size, target markets and individual commercial policies.

An industry standard will facilitate a more efficient airline distribution system, thereby benefiting airlines, agents, GDSs, IT providers and travel start-ups.

Structured around seven distribution-related functions, the NDC Standard provides the opportunity to address the end-to-end airline distribution process, e.g. shopping, booking etc., and to deliver enhanced customer experiences.​​​​

New distribution Capability is important because:

It provides personalized shopping experience and access to customer information. Currently, most of the customer personal data remain in the hands of middlemen, OTAs and GDSs. This means that airlines get just basic information about their clients, which doesn’t allow for personalizing the shopping experience, the thing that has become a standard in modern travel eCommerce. The NDC standard’s goal is to provide airlines with direct information about their customers.

There is content and pricing autonomy. Another benefit of personalization is pricing autonomy. Currently, most airlines publish their tariffs via ATPCO, the tech provider and main source of pricing data. Having a third party as an intermediary between revenue management and distribution channels means that airlines miss the opportunity of dynamic pricing. Dynamic pricing is the ability to create personalized fare and travel package offers based on individual client information. The new XML standard allows airlines to build their own APIs and change prices independently adding value to their offers and adjusting prices individually to each customer.

The traditional GDS model only permits airlines to display prices and schedules. While tariff metasearch engines and OTAs make it easy for travelers to compare pricing, airlines can’t market their added value services and fully compete. Rich content, that includes all service details, solves this problem.

There is a reduced reliance on legacy systems. Most airlines use legacy passenger service systems (PSS) that contain reservation info, fares, and schedule. The main purpose of the PSS is to show which seats are available for a given flight. PSSs may have poor performance, a number of other restrictions, and most PSS providers really lag in modernization. NDC will act as a separate engine outside of legacy systems that allow for presenting data stored in PSS databases using airlines’ private interfaces.

The distribution system in the air travel industry includes many players in the field. To link end customers with the actual airline, there are a number of intermediaries, represented by travel agencies, tariff publishers, GDSs, and so on. Most of the major players appeared decades ago or morphed from the older formations and continue to exist.

Currently, representatives from nearly all parties in airline distribution have embarked on the NDC initiative one way or another. According to the latest IATA NDC program update, the list of certified deployments reached 65 carriers. The number seems to have grown significantly since 2017 when IATA reported only 50 airlines adopting NDC. But, compared to the overall number of airlines connected to the major three GDSs, which is over 400, NDC adopters seem to be a minority. In 2018 IATA published a presentation of NDC standards, that includes new data on the number of airlines adopting NDC and IT providers.

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Major airlines managed to develop their NDC solutions, which sometimes differ in implementation. Here are some examples of airlines that adopted and implemented New Distribution Capabilities

Lufthansa was the first one to introduce a GDS surcharge and implement direct booking connection in its distribution. Currently, Lufthansa’s direct booking includes several distribution channels: travel agencies direct, aggregators, supplier mobile application, and supplier website. While its NDC version allows for offering rich content, the support of personalized bookings is still to be reached.

British Airways developed an NDC solution and integrated it with Kayak. Now their tickets are available directly through the Kayak platform. British Airways API allows for distributing through the following channels: direct connect through OTAs, IATA’s travel agents, GDSs, and online booking tools. Similar to Lufthansa’s API, British Airways doesn’t support personalized bookings yet.

Air Canada allows their API to be used freely across all channels. It seems that Air Canada presents the fullest range of NDC “advantages” for the moment, providing rich content, personalized bookings, airline profiles, air, and non-air related ancillaries.

Flydubai also has a competitive NDC implementation, being relatively equal to what Air Canada offers. The only difference is that Flydubai allows for distribution only through travel agencies and OTAs.

So, only a few among the NDC adopters have managed to present the full range of NDC benefits. Others are still establishing the connectivity between the distributors to get their direct channels to work.

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There are two IATA initiatives known as New Distribution Capability (NDC) and One Order that are evolving. If successfully adopted by the airlines, these practical initiatives have the potential to transform the fragmented distribution process that is in place today. They offer airlines a clearly signposted path towards modern retailing by putting the customer and not the flight at the heart of their distribution strategies. There is a lot of jostling for position in the lucrative corporate passenger segment. To succeed airlines know they need to increasingly drive higher yields through higher non-seat ancillary revenue streams, which can build brand and loyalty. IATA’s vision for the indirect channel is to simplify the current airline distribution process and systems with a set of standards that will enrich the selling of the tickets at one end and streamline the customer record fulfilment and payment process at the other. 

NDC is an XML-based data transmission standard that seeks to address many of the limitations of the air travel industries current distribution channels. It’s a well-established data protocol that facilitates interchange of electronic information between airlines and travel agents. It helps airlines to deliver the same rich and dynamic content to agencies as on their own web site (including ancillaries). One Order builds on the standardized communication approach with a view to replacing the multiple and rigid booking, ticketing, delivery and accounting methods with a single and flexible order management process.

Thus closing the existing capability gap between their direct and indirect channels.

Adopting the new standards will allow airlines to sell what they want, when they want, to whom they want through all the channels. Not only will they be able to make better and more relevant offers, explain what is included in bundled pricing and what isn’t, but customers too can begin to pick and choose what they wish to pay for and what not. 

The benefits of IATA’s initiatives are very clear and powerful and a game changer for the industry. But what are these benefits and who stands to gain? Let’s take a quick look at IATA’s new distribution landscape and the stakeholders involved. We can see the key stakeholders involved in making NDC happen are the:

Airlines supplying the products and services

Intermediaries and aggregators (resellers),

Travel agents acting on behalf of Travel Management Companies (TMCs) and corporate buyers who purchase the travel trips

Travellers the ultimate customers making the trip.

So let’s take a closer look at what the potential benefits are of an NDC enabled retail environment for each of these groups:

For Airlines

NDC completely transforms their ability to merchandise their offers and take control. They can:

Distribute all their products, including ancillaries to agencies and travel management companies.

Offer value-added products and services when applicable, on the basis of personal information, should customers choose to disclose it

Display more details about their products (bundled and unbundled) including rich descriptions of differentiating facilities with media such as photographs, etc.

Increase innovation and differentiation opportunities by bringing new products faster to market, which helps differentiation

Take advantage of personalisation opportunities by delivering a shopping experience based on customer preferences

For Intermediaries / Aggregators

This represents a key step change in the way airline distribution works currently. Today the intermediary is a GDS who accesses inventory and fare databases to create the offer and then enables to book, pay, and issue a ticket. Those are complex and very diverse functions. For example, credit card payments are processed directly by the GDS, interacting with a payment service provider to authorize the payment. In an NDC environment the aggregator is solely transmitting both shopping and ordering requests to the airline host environment.

The concept of aggregation is a key component to NDC-based distribution model. The intermediary is an aggregator and its role is to transmit the information back and forth from the travel agent to the airline. Aggregators, do three things:

Determine which airlines to ask when receiving shopping requests from travel agents

Forward shopping and other requests to the relevant airlines

Consolidate the offer responses from airlines and present results to travel agents

They too benefit from NDC by having:

Access to the entirety of the airlines products and content, including ancillaries and promotional fares.

Access to dynamic pricing and product information

The ability to offer better comparison shopping for traveler based not just on price but also the perceived value of ancillaries.

The ability to provide tailored services based on a customer’s travel history and preferences, if they chose to be recognized.

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For the Travel Agent

Travel Agents are in fact the prime target audience for NDC. They represent the 50% plus portion of business that is still transacted through them. And as you know, it also represents an even higher percentage of their revenues as the type of itineraries that stick to the indirect channel tend to have higher face value (we estimate approximately 40% higher on average) as these tend to relate to corporate travel often with complex itineraries and long-haul travel.

Rich content view of travel options

Greater transparency of fares across providers

Ability to personalise offers based on context

Greater reporting capability

Simply put, for Travel Agents and TMC’s, NDC facilitates an increased transparency of travellers total spend. The premise of this is that instead of travel managers having access to the fare cost only, with the traveller then individually booking and expensing ancillary products, NDC allows all costs of a flight to be captured within the original booking.

For the Traveller

For reasons of saving time and money, travel expense management, contract negotiations and customer support corporations in particular continue to channel their staff travel needs through agents. The traveller and the company paying for his trip are prime beneficiaries of the new NDC merchandising world.

One of the biggest selling points of NDC is the facilitation of personalised fares. Giving airlines the ability to service travellers with a fully customer-centric approach, dynamically pricing and personalising their products. This means, if the traveller agrees, elements of personal information are released to airlines when the initial fare is searched. Airlines then return a fare considering these details. To an extent, this feature is already exercised when booking flight directly with an airline via their websites, where they are able to identify and engage their customers with specific offers based upon their previous journeys. For corporate travel managers this is a positive development as it encourages employees back to booking through their TMC rather than arguing that a more attractive fare is available direct.

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