Several airlines are now testing distribution of their fares to travel management companies using the International Air Transport Association's New Distribution Capability standards, giving select users a taste of what IATA promises will hit "critical mass" next year.
A Quick NDC Primer
New Distribution Capability is a data-transmission standard based on extensible markup language, or XML, that's designed to improve communication between airlines, buyers and everyone in between on the distribution chain. It enables airlines to sell their products via third parties in a more retail-like environment, as they already can do on their own websites. It is one step in the airline industry's plan to become "digital retailers," according to Eric Leopold, director of transformation for the International Air Transport Association, a trade association that represents about 290 airlines and that led the creation of the NDC standard. Other steps in that plan include One Order, IATA's initiative to use a single reference number across a traveler's journey, making the shopping, itinerary management and airport experience more seamless.
Among the more recent announcements, TMC TripActions in June began testing the shopping and booking of NDC content for certain United flights. The TMC plans to spread that out across its full customer base and, over the next several months, to include other carriers. The test makes ancillaries like Wi-Fi, premium seating, United Club access and checked baggage available through the TripActions platform, either purchased as an individual item or bundled into a single fare.
TripActions will tap into its artificial intelligence and machine learning technology to personalize those bundles based on booking history and preferences. "It's really a partnership with United, so we will be creating bundles together and will be creating richer and richer bundles as United's offering and investment in their own NDC evolves," TripActions head of product Anique Drumright told BTN. "We're working with them to surface that rich content that they're making available in our platform, but obviously, United is driving that road map and what bundles are available when and how." For travel buyers who negotiated bundles directly with United, their travelers also can access that content through the TripActions platform.
American Airlines also has launched an NDC pilot program to test corporate bundles and determine how best to build them in the future. The test—which includes Amtrav in the U.S., Copastur in Brazil and Marplay in Mexico—enables corporate customers to get Preferred Seats in the main cabin and includes an extra bag and the ability to change the ticket.
And European business travel management platform TravelPerk has added content via Lufthansa Group Airlines' NDC application programming interface. The connection will enable TravelPerk users to access Lufthansa's NDC Smart Offer fares and to access the "widest range of ancillary options," according to TravelPerk. Over the past few months, TravelPerk has run a beta test of the connection with a small group of its clients and reports that some have had savings as high as 37 percent on the cost of their flights within Europe.
NDC progress is happening outside the corporate space, as well. Lufthansa Group and Expedia Group are working to make Lufthansa airlines' NDC Smart Offer fares, low fares currently available only through direct and NDC channels, also available though Expedia Group channels. They also are working to offer the same options through Expedia Group's corporate platform, Egencia.
The Journey Continues
It's taken several years of discussion, reassurance and testing to reach this level of NDC in action. Still, there is much work ahead. "NDC is here, but is it here effectively and working?" Travelport global head of new distribution Ian Heywood broached at last month's CAPA Centre for Aviation Airline CEOs summit. "No. Maybe by the end of 2020 it will be for a few airlines, but that's all."
That, at least, is what IATA is working toward with its 21 Leaderboard airlines, which together comprise more than 30 percent of IATA passenger volume. Those carriers are working to power at least 20 percent of their indirect sales by an NDC API by next year. That's the critical mass IATA has promised.
One of the bigger changes this year, according to Heywood, is that the travel agency community has gotten more deeply involved. Even as NDC accounts for a tiny percentage of overall transactions at present, a research report by BTN sister publication The Beat showed that almost half of TMCs had processed at least one live NDC transaction for a client as of March 15. TMCs in The Beat's survey expect a third of their airline transactions to fall under NDC standards within two years, though that's an average and individual agencies vary widely.
The NDC certification bar—which applies to airlines, aggregators, IT providers and sellers—has risen in recent months. Until this year, the highest certification was Level 3, indicating that the entity's API can connect to an airline system in a way that displays the airline's pricing and availability in real time. The NDC model includes 49 messages; to reach Level 3, an entity has to adopt only four.
On March 1, IATA introduced Level 4 certification, which requires "extensive use of offer and order management" APIs, as well as the use of servicing messages. As of now, 12 airlines are certified at Level 4, including seven that are on IATA's Leaderboard. And 12 IT providers and aggregators are certified at that level, as well, according to IATA director of industry distribution programs Yanik Hoyles.
Beyond Level 4, IATA also has an NDC@Scale level, which also will include a Business Travel Ready designation that indicates the capability to shop for flights, ancillaries, multicity or open-jaw itineraries and negotiated corporate fares. Open-jaw itineraries are those for which the return flight departs from a different city than the one where the originating trip landed. The first airlines to be certified at that level will be published at the end of the summer, Hoyles said.
Corporate travel requires distribution partners that can "deal with all the process work that travel agencies have, which today through the GDSs are working quite efficiently: applying policy, profiles and preference and negotiated deals," Travelport president and CEO Gordon Wilson said at the CAPA event. "With NDC, we're working out how to do all of that work so we don't take away from the efficiency in the system today."
In terms of the NDC journey, Wilson said Qantas "will be farther out than anyone else" when it launches the Qantas Channel on Aug. 1. It will source content from the carrier's NDC-certified distribution platform. Global distribution system bookings outside that platform will carry a US$12.50, or $17.50 Australian, surcharge per segment, though Qantas already has distribution agreements with Sabre, Amadeus and Travelport to make the channel available sans surcharge. Many of Qantas' agency partners also participate in the channel.
Even as industrywide progress continues, the time for an individual company to execute an NDC strategy remains long, Heywood said. An airline starting from scratch today still will take about a year to 18 months to even get its API into the market. Even then, it takes time to further build out the capabilities, not to mention the revenue strategy change required of airlines. "There is a long time on building the technical capacity and an even longer time learning how to use this new capability, whether by humans, machine learning or a mixture of the two," Heywood said. "You also have revenue managers who suddenly have the ability to have a different price on every seat in the aircraft, and do they know how to do that? You have to retrain people, and there is a lot of learning."
Beyond its "critical mass" vision, IATA projects that "mass adoption" of NDC will not happen until 2025.
What It Means for Travel Buyers & Travelers
With NDC now on the market on a small scale, talk is evolving into what exactly the data-transmission standards will mean to travel buyers and travelers in the long run.
The American Airlines and the TripActions/United pilot programs demonstrate some of the promises long made about NDC's potential for personalization and creation of corporate bundles. IATA director of transformation Eric Leopold said personalization will make shopping for airlines more like Netflix, which tailors films and shows to a subscriber's preferences rather than displaying the same static list for all users. "I wouldn't see that today on an airline, but in the future, it is going to happen," he said. "If I was spending two days in Seoul, for example, they would know I would need Wi-Fi and no checked bags. That is personalizing the offer."
As bookings move toward mobile and voice, personalized options, rather than the need to review all possibilities, will become critical, he added.
In corporate deals, buyers already are asking whether they could select different bundles of ancillaries based on the level of employee traveling: different packages for different layers of management, for example, said Japan Airlines regional VP of global and strategic sales Derek Ho. NDC makes that possible, he said.
Heywood said NDC also could change the way corporate air programs are negotiated altogether. For instance, a corporation could negotiate a rate for a certain number of "units" flying out of a location, with top executives who fly first class, mid-level executives who fly business class and standard employees who fly economy class all paying the same fare per unit. "Does that work for a corporation? Arguably yes, and the airline can deliver that now," Heywood said. "Whether they want to deliver it is a discussion to have with the airline."
Or, an airline could tailor deals for corporate travelers in general rather than negotiating directly with a corporation, he said. "You might find airlines cut fewer big deals and just say, 'Hey, we'll do these things for corporates,' treated as one big pool," which would be good for small and midsize enterprises, he said. "The way that corporate deals are put together is pretty boring—even if you are a big corporation, they are quite static—and it hasn't changed for the last 20 or 30 years. Now, you can put something a lot more dynamic in place."
Airlines also might target, more closely, to whom they sell certain fare types, Heywood said. An airline that has only a handful of business class seats left on a key route might close those off to a leisure travel agency and leave those seats for corporate agencies, he said.
How those possibilities play out will become clearer as NDC moves beyond the experimentation stages. "They're capabilities. It doesn't mean they're going to be successfully used, and that's what we're going to find out," Heywood said. "There's a capability now, and how do you monetize it and grow it for the industry? That's what's going to be learned to do in the next few years."
—Additional reporting by Amanda Metcalf
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