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CHANGE OF PACE

If I had a pound for every time someone made the joke that IATA’s New Distribution Capability (NDC) is hardly new – it was kicked off more than ten year ago – I would be a rich man. As rich perhaps as some think the GDSs are, or the airlines, or the TMCs, depending on whose views you listen to.

But suddenly, rather like a long-awaited bus, new things do seem to be happening. On 3 April, American Airlines followed through with its previously announced plan to offer its “best available third-party public channel content only through NDC connections”.

Some estimates put the amount of content that is now only available in the NDC channel as 40 per cent of the total. American is keen to point out that the content has not disappeared from the GDS channel – TMCs and OBTs can still see it but they can’t  book it.

The carrier also pointed out that the three major GDSs and several travel technology providers would be ready to provide connections to American’s NDC content by the same date.

“Like any significant technology transition, some providers will offer more servicing features and functionalities in their initial releases than others. The small number of servicing functionalities that won’t be available immediately either don’t affect a significant number of transactions or will become available shortly,” American’s vice president of global sales said in a letter to the industry.

Just over a week later, Sabre announced that travel buyers, agencies and developer partners connected to the GDS are now able to shop, book, and service United Airlines’ NDC content through its Offer and Order APIs, the Sabre Red 360 agency point-of-sale tool, and its GetThere online booking tool.

Air Canada, meanwhile, has announced that it will levy a fee of between US$20 and US$30 on tickets issued via GDS EDIFACT channels from 14 June, while Air France and KLM will withdraw some fares from EDIFACT-based GDS channels in June.

COMING TO A HEAD
So are we at a tipping point for NDC adoption and an end to the old-school EDIFACT method of selling airline tickets that has been in place for decades?

IATA’s director of distribution Yanik Hoyles believes that “things are definitely moving”, pointing to American’s move and Finnair’s recent reiteration that it plans to sunset EDIFACT content by 2025.

Martin Cowley, executive chairman of Travica and former senior vice president for Europe at Sabre, who has long been vocal about the so-called benefits of NDC, says the American development is not a tipping point. 

“It moves the deckchairs but it doesn’t change the game, at least in a positive sense. Delivering content via XML [the technology underlying NDC] is scarcely an original thought. It changes the game negatively as long as the servicing issues are not addressed in their entirety, which they haven’t been,” he says.

He points to the problem that unused tickets issued through EDIFACT channels cannot be exchanged for NDC ones or vice versa, for example. “Do these airlines actually care about service?” he asks.

IATA’s Hoyles is keen to address the servicing issue. “When you bring all the constituents together and talk about the headwinds it becomes easy to identify where the blockers are. One good example is servicing where there has been a lot of talk. Now it is in control of the airline and is automated, it is better for the traveller. There are some myths here but there have been a lot of positive things around servicing by TMCs, such as Amtrav, Navan and Spotnana. Servicing with NDC is better than the legacy world. When you move through a massive transformation like this, people will go at different speeds. Some TMCs want to wait for the GDS but that is their choice.”

Benjamin Park, executive director travel and sustainability at Parexel International, says, “The search and book elements are something that can be solved quite quickly, while servicing like refunds and other booking changes will take more time. The other big challenge for TMCs is that most North American customers are working with the same leading online booking tool, and the only solution is one aggregator to consume NDC content, along with some smaller start-ups entering the market. I am hearing a lot of common concerns on this solution from TMCs. One concern, for example, is that if enabled, all tickets will run through the NDC pipe and GDS content is fully switched off.

“TMCs are working hard but they are in a difficult position. Changing their back-office systems to be NDC-ready is a big investment and there is always the question of whether clients are willing to pay for this. They are all currently working on EDIFACT-driven workflows and, with NDC requirements, the TMCs are indirectly asked to change their mid and back-office systems completely.”

Hoyles says it is not just the disruptors to the legacy TMC world who are making progress with NDC. “We are hearing that larger TMCs are going to be coming on board as well and this is good news for the corporate travel sector. As this piece of the jigsaw becomes more capable we will start to see more products and offers coming through these pipes and buyers will begin to see the benefits of this retailing environment.”

Cowley is not convinced that servicing problems will be sorted any time soon though. “They’ve had more than a decade to prepare. The issues have not changed. Travel is complex. Websites and offers aren’t,” he says.

BUYERS URGE CAUTION
Corporate buyers are not convinced either. Scott Davies, chief executive of the UK's Institute of Travel Management – which has convened a buyer taskforce to address new challenges arising from NDC – says: “The majority of our buyer members do not feel that the business travel ecosystem is sufficiently ready for NDC roll-out due to concerns over data reporting, servicing of certain NDC bookings and the potential for programme leakage. There is a sense that only NDC bookings that are made through the GDS channel seem to currently address all of these concerns.”

Ian Spearing, global innovation and technology leader at EY, says, “NDC was misrepresented in terms of benefits. That vision of personalisation of retailing and benefits to travellers requires a challenging technology change and it has not happened. That is where the difficulty has been. The end traveller is the one being penalised at the moment.”

Spearing continues: “The necessary collaboration has not been happening and it needs a reset. I don’t think we are going at the pace we should. We need to redefine what NDC is, build the pipework and then execute on that. Airlines can’t retail to the level they originally described – they can’t create this pipework yet. I think the industry needs to be building that connectivity and there to be a willingness of all players to come to the table. Everyone is trying to go at their own pace. There was this breakdown of relationship and direction and now we are seeing this forced way to change.”

Parexel’s Benjamin Park says there are two very different approaches with NDC-enabled offerings. “One airline recently announced it will remove many fares from the traditional booking channel, whereas other airlines in Europe are focused on creating a better retailing experience and more customised offerings when it is NDC-enabled, like continuous pricing.

“A potential benefit of the new capability is that with a frequent flyer status, customers can select their seats or get an extra bag for free when booking directly through your TMC. Another benefit is offering many more price points without being limited to the GDS fare limitations. Most airlines want a better retailing experience for corporate customers. This is done by recognising a customer as a business traveller when booking through the corporate channel and providing more custom offerings.

Park adds: “The current booking system is a bit anonymous, and the traveller must visit the airline website to view the benefits included with their frequent flyer status. Airlines are trying to remove any unnecessary, frustrating steps which is a positive aspect of NDC.”

Meanwhile, Andres Fabris, CEO of Traxo, which enhances visibility of corporate travel bookings, believes the American Airlines change “poses some real risks for the corporate travel sector… because the increased breadth of NDC travel bundles offered by airlines create a larger temptation for business travellers to go off-channel.”

THE EARLY EVIDENCE
It is, however, interesting to look at what has happened on the ground since American Airlines implemented its plans on 3 April.

Jeff Klee, the CEO of US travel management company AmTrav, has made some interesting data available since the airline’s content shift which may help the industry decide whether the world has changed irrevocably.

Klee revealed that between 3 and 16 April American’s NDC fares were lower than non-NDC fares on 34 per cent of bookings, with an average difference of $129.66.

Klee said in a LinkedIn post sharing the data: “If your company flies only economy class, but never Basic Economy, and never buys refundable tickets, you are the least impacted group. You'll ‘only’ be paying about $24 more per ticket to book somewhere that doesn't offer NDC rates. For all other companies, like those who mix in some premium cabin travel and/or flexible fares and/or basic economy, the opportunity to save is greater.”

He revealed that the biggest savings were to be found on main cabin flexible tickets – 85 per cent had lower fares in NDC and the average saving on these was $387. On international business class, 33 per cent were lower in NDC with an average saving of $218.

The data seems compelling but it is also true that if you remove lower fare classes from a GDS then – of course – the average fare would go up.

WHAT NOW?
Despite the skepticism of some, many believe a move to NDC is inevitable. Traxo’s Fabris says: “Other major US carriers, such as Delta and United, are carefully watching with keen interest to see how the industry reacts to AA’s deadline.  If corporations and agencies are not successful in booking away from AA, and AA’s direct market share remains neutral or shifts positive, it is highly likely other carriers will soon follow with NDC mandates and deadlines of their own.”

Jorge Diaz, CEO of NDC aggregator AirGateway, believes that others will follow American’s lead. “The feeling here in Europe is that sooner or later, all major carriers will have the sense that they are the only ones who are ‘subsidising’ the GDS model and they will quickly opt out by introducing similar changes,” he says.

Martin Cowley, meanwhile, believes that what works in America – point-to-point traffic flows, limited sub-classes, simple fares with very little interlining – will not necessarily work elsewhere.

ITM’s Davies says American’s distribution strategy has “grabbed buyers’ attention because of its potential to challenge travel programme compliance”.

He said, “Its apparent intention to roll-out progressively over time to include more routes and fare types also makes it a little different to such moves made by other carriers. Significant changes in the past have tended to be limited to large carriers within their home markets. If successful in the medium-term this initiative could indeed prove to be a tipping point.”