There can be no doubt that NDC is beginning to take flight, but more like a jumbo in a lumbering sort of way, held back originally by scepticism and vested interests and now by the scale of airline transformation required. The complexity of airline distribution, the constraints of decades old legacy systems and the interdependency of the whole ecosystem from travel agents to technology suppliers to airline partners all add to the herculean task of transforming distribution from product centric (i.e. the fixed seat) to customer centric (i.e. the passenger journey aligned with an array of preferences and budgets). For it is hoped that NDC will not only make flight shopping experiences more consistent across multiple sales channels but also more dynamic, adjusting in real-time to changing market conditions.
Five years on, could the industry have been challenged to move more radically and faster down the road of adoption and innovation? Or is fair to say that for a risk averse industry, the need for extended pilots and a parallel universe is the only runway possible. How else can you move from the old way of selling seats through the GDSs to the new way of selling seats, ancillaries and more via direct channels with rich content offers and dynamic pricing?
Wisdom suggests that the opportunity for building more flexible systems reliably lies in the ability to foster new technologies that work in parallel and in tandem with legacy infrastructure to fulfil new business requirements as they emerge. This may mean that for some the industry is not moving fast enough but it can be argued that distribution and fulfilment are an airlines most critical services so it’s simply not feasible to ask airline IT managers to dispense with the old before they are assuredly ready with the new. This means being prepared to constantly reconfigure as business needs change. This willingness to adapt can be seen in the revisions of the NDC schema in line with the experiences highlighted during pilots. This will be the best route to allow airlines to remove the barriers of legacy constraints while simultaneously enabling innovation and differentiation.
This is particularly the case with ONE Order where an evolutionary rather than revolutionary approach is required to transition from the multiple IDs and documents that exist today to the single customer PNR of the future.
The promised benefit of all this modernisation for airlines is the taking back ownership of the offer creation and the customer relationship all in the end for more profit at less distribution cost. Like with any innovation, you have your early pioneers driving through change with others weighing up their options based on the success of their peers.
Having justified the slow pace of change, it must also be recognised that NDC and One Order are two closely related industry-wide initiatives where the full benefits will only be fully realised when the majority of airlines have been mobilised and synchronised to implement them. IATA will have its work cut out for the next few years to steer the airline industry and the travel distributors that depend on it in the right direction. Since XML is new to airlines (although not the travel industry at large), different airlines are moving at different paces of innovation. The appetite to product differentiate via third party distribution channels and the success of the NDC pioneers will ultimately drive market momentum over the tipping point.
At the time of writing (with numbers on an upward trajectory), 113 airlines have expressed an intent to adopt NDC according to the latest IATA survey. Out of 179 airlines surveyed by IATA earlier this year, 48% are planning to adopt the new standard in some degree by 2020. That is 7% up on the previous year. Although worryingly a sizeable chunk (39%) still have no real vision for migrating their airline to NDC.
IATA also keeps an NDC Certification Registry to recognise those companies that have implemented part or all part of the NDC technical standard. Certification confirms the scope and level of capability to receive and send NDC messages.
For airlines, certification can summarised as:
- Level 1 – is attained when a GDS has the ability to offer ancillary shopping
- Level 2 – is attained when the airline creates the inventory and pricing on an offer, but the GDS still handles order management.
- Level 3 – is attained when the airline additionally takes responsibility for order management alongside offer management.
The table below shows the trend in NDC adoption over the last two years according to IATA’s registry.
In reality there are only about 15-20 airlines in the world today that have invested enough in NDC to take control over the offers required for NDC. To get there they have had to diligently implement a number of additional systems to handle everything from pricing and merchandising to scheduling and availability. In many ways the simplification of airline distribution is adding complexities of its own. That said these stats are in line with IATA expectations and point a healthy sense of momentum.
New Breed of Intermediaries
To help airlines distribute their rich content to the many travel agencies and portals, IATA’s NDC has provisioned the role of an aggregator. A new breed of intermediaries are springing up known as aggregators. This is the category in the IATA register that GDSs fit into, but they are being joined by a number of young start-ups such as Flyiin and Airgateway. As well as more established travel consolidators such as Travelfusion and TPConnects.
Similar to the wholesale model in Hotel Distribution, airline aggregators will be the middle layer between airlines and travel agents and enable airlines to show all the rich content and ancillary options available on their websites. They will provide greater reach by acting as a message hub between buyers and airline sales. This is an area where the ability to analyse search and booking traffic could become a bolt-on solution offering for aggregators to help their airline clients understand the search landscape and airlines to understand not only the search landscape, but also the performance of their chosen distribution partners.