While New Distribution Capability air bookings are showing significant growth, bookings through direct connections with airlines comprise most of that growth, airline and technology executives said at UATP's Airline Distribution 2023 conference in Boston earlier this month.
Speaking on an NDC-focused panel, ARC chief commercial officer VP of global customers and data products Steve Solomon said that last year, about 7 percent of ARC's total transactions were NDC, largely through the ARC Direct Connect platform. For this first two months of 2023, ARC is "well ahead of where we were" in the same period last year in terms of transactions, he said.
"Dollarwise, 2021 to 2022, the value of those sales almost doubled, to about $12 billion," Solomon said.
Accelya director of product Jan Douglas said he's seeing NDC volume growing, though "not as fast as we like," and each year it is building. In January 2023, for example, NDC volume was up 250 percent compared with January 2019, and he said that largely has been direct-connect growth as well.
"We'd love to see the [global distribution systems] go faster and implement more quickly," Douglas said, citing American Airlines' plan to require agencies to connect to the carrier's NDC technology or lose some content access, effective April 3. "I think that will be pushed by the American announcement and others, a bit of the carrot and the stick, with either encouraging the model along or forcing the model along."
The comments gibe with data from earlier this year, when the International Air Transport Association reported that 10 percent of agency sales were NDC-based bookings. Amadeus, however, said in its fourth-quarter earnings call that NDC represented a very small percentage of its bookings.
The two airlines represented on the panel, Hawaiian Airlines and Southwest Airlines, each have focused on direct connections for NDC, and Southwest director of B2B strategy Eric Hall said that would remain Southwest's strategy for the immediate future.
"We're not in the stage where we're actively communicating with GDSs around an NDC partnership," he said. "We're very happy with the more standard deals we signed with the GDSs over the last couple of years, and corporate customers we did those deals for have told us that's what they're looking for with Southwest at this time."
While Hall said he imagines conversations with GDSs over the next few years will include NDC discussions, "none of the agreements we have with them even contemplate NDC at this time."
In a separate session, a question was posed to Finnair SVP of strategy and fleet Christine Rovelli about whether the push for more direct bookings will similarly require airlines to boost staff to be able to service them. Finnair has taken one of the most aggressive stances with NDC, with plans to sunset traditional EDIFACT distribution entirely within the next few years.
Rovelli said the potential need to staff up is "less clear" but added that, like agencies, airlines are working on more touchless service options.
"We also have people, we also have the website and we also have the app, and we're trying to make those more and more functional," Rovelli said. "With the ticket rules, a lot of times it's easier to deal with us directly."
One travel buyer in attendance expressed frustration with the discussion, saying corporate travel needs are getting "lost in the shuffle." Those needs include being able to shop across platforms and make changes and cancellations, use a travel management company for reporting and not lose content or face surcharges until those capabilities are there.
"If you don't see us embracing NDC or direct booking, that's why," she said. "We're not at the table letting you know what our needs are. It's been all about B2C in terms of individual travelers and leisure travel, but there's big corporates spending a lot of money and need this functionality."
George Bryan, senior director of distribution for Hawaiian Airlines, said one of the key missing components for NDC on the airline side is the capability to work with interline agreements. While there are currently workarounds—it's possible to do "traditional interline" on the back side of Accelya and then put it as interline on the front side—there needs to be more focus on the NDC interline standard, he said.
"You can get travelers to see 90 percent, but for that last 10 percent, you need interline to achieve that adoption, and for a lot of corporates, that interline is important," Bryan said. "Until we get there, we'll never be able to provide a full solution."
A Silver Lining of Covid-19 for Airlines?
In perhaps one of the more provocative statements of the conference, APG Airlines president and CEO Sandrine de Saint Sauveur said that, in the end, Covid-19 has been "great for the airlines."
"Out of this, the airlines are now seamless, and some have been able to restructure," she said. "In some parts of the world, that would not have been possible, out of Europe at least."
She also pointed to the increase in airfares, saying that "we now see price at levels that are acceptable. Since 2010, prices have been going down and down, while the cost for the airlines have been increasing."
Airlines certainly are seeing the benefits of higher fares. In his opening remarks to the conference, UATP president and CEO Ralph Kaiser reported data showing that "travel budgets are almost back to where they were pre-pandemic." That didn't translate to more flights or more transactions, however, but come largely from those increased costs.
Rovelli, however, said the increases have been a necessity for airlines, not simply trying to make up lost volumes.
"Ticket prices have gone up, but so has inflation," she said. "You're always chasing the yield. You have to have higher ticket prices if all of your costs are much higher."