Travel management companies or TMCs have been sourcing air travel content from the Global Distribution Systems (GDS) since the 70s. Airlines load fixed fares into the GDS for agents to sell on to their clients on a per seat or flight basis. Added extras like early boarding, preferred seating or lounge access have had to be booked separately and outside the GDS. The problem has been that no single GDS had access to all airline content or services, so deals could fluctuate wildly depending on the TMC used. New Distribution Capability (NDC) is meant to change all that. The brainchild of the International Air Transport Association (IATA), NDC is an XML standard that will enable TMCs and other third parties to present the full range of airline products and services in one seamless transaction.
Why does it matter?
NDC aims to ensure the best available deals are available through indirect as well as direct channels. Corporates will benefit because their travelers will enjoy more flexible and personalized products in an Amazon-style shopping experience. And yet, five years after being announced, adoption of NDC amongst airlines and TMCs is, at best, slow.
What are we waiting for?
At the start of 2017, Airlines International announced that 15 of the 20 largest providers by revenue had begun to implement aspects of NDC, including British Airlines and Qatar Airlines. By August, IATA put the number at 36 with a further 80 expected to come on board. Airlines are keen to ensure NDC isn’t seen as an excuse for surcharging, so they are positioning NDC as a retail outlet for their products, putting them all into one digital megastore under their direct control. Airlines have different strategies to drive NDC adoption amongst TMCs. American Airlines now has NDC-enabled direct connects with 60 TMCs and OTAs and has announced a $2 per segment incentive to book through an NDC-enabled connection. By contrast, Lufthansa has imposed an $18 distribution fee on bookings made within a GDS to drive more distribution into direct channels. British Airways and Iberia have followed suit with a $10 one-way fee on GDS bookings, citing its investment in NDC.
What’s our take?
We believe NDC will enhance the role of the TMC by emphasizing the value of our consultative role. Only a TMC can aggregate and distil the available content into the best options based on corporate and individual traveler’s needs with minimal disruption to either stakeholder. We recognize that consumers are accessing content in a variety of different ways, so TMCs have to keep up with that trend and personalize their offerings to take full advantage of fare-bundled deals. However NDC isn’t the only show in town where airline distribution is concerned. Yes, TMCs will be able to change itineraries and pre-check bags. Yes, we will be able to provide extra additional reporting, account support and traveler services. But we will also be using direct connects so we are able to aggregate rich content and offers from a range of channels using direct connects. Travel reservations are not just about fares, schedules and other services.
Get the party started
However there’s still a long way to go with before NDC is fully live and functioning. In the medium term, adoption will be determined by how quickly the GDSs develop the capability to use the NDC standard for retailing the full range of ancillary products offered by airlines. The GDSs recognize that NDC is coming and have publicly welcomed the opportunities for dynamic pricing, availability, packaging and personalized offers, even if there are issues around standards and commercial models. In reality, they have no option but to embrace NDC. If they don't, they will face competition from non-GDS, NDC-supported providers offering price comparisons and offers from multiple airlines.
What this means for you
Everyone involved in the air travel supply chain is still information gathering about NDC. In a recent survey by the Association of Corporate Travel Executives (ACTE) it emerged that few corporates have a coherent policy around ancillaries – and are not desperate to create one either. The explosion in choice through NDC will place the responsibility on TMCs to ensure that corporate travelers have access to the whole market but filtered so their travelers access tickets at the lowest possible price. There’s also an education exercise to be undertaken.
As ACTE Executive Director Greeley Koch says, “many travel managers are unclear whether [NDC] is a new booking tool or a sales protocol. Without clarity, buyers are going to resist implementation.”
It’s the job of the TMC to guide and educate their clients about the brave new world of distribution and to assist them by bringing NDC-enabled content into their travel programs with minimum disruption. There are challenges too. By offering business travelers upgrades and food, airlines can charge more for a booking. So budget holders need to make sure their travel policies manage this effectively. NDC could also make it tougher to compare products as airlines bundle extra services into fares according to demand and customer profile. Travel managers need to make sure they are comparing like-with-like so buying decisions are informed.
Ultimately, however, business travelers should see little change to the service from their TMC other than a wider choice of products becoming available in a booking process that will be slicker and more personal. NDC simply adds another string to the TMC bow. Direct connects, smart apps and other AI-enabled technology will continue to be a major focus. The market-leading TMCs will develop omni-channel digital end-customer platforms that enable them to communicate in any and every conceivable way with their clients. NDC is just the next step on the journey.