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Disruptions in flight distribution: NDC


These are slides from a talk I gave at the Aviation Show MEASA from 14-15 October 2019 at The Conrad Hotel , Dubai, UAE.


Introduction


I'll be discussing a few topics where multiple viewpoints exist. I'm neither an expert nor do I expect to change any views through this post. But I do hope some of the information below is useful in future discussions.


The story of disruptions in flight distribution, as it goes, is essentially the story of airlines trying to get away from GDS.


The story of Global Distribution Systems (GDS) is in itself a fascinating one. There are three Major GDSes - Amadeus, Sabre and Travelport. All three were started by airlines. When it started in 1976, Sabre debuted terminals designed for travel agents to remotely access airline reservation databases without needing to call in. This was revolutionary at the time.


Over the years, GDSes have made air bookings accessible to many and increased flight loads for airlines. In North America & Europe, majority of air tickets listed and sold go through GDSes. The race on for China & Africa is still on.


Familiarity breeds contempt. And the entire industry became too familiar with GDSes before long...


GDSes' fall from grace started as airline yields fell due to increasing fuel prices and LCCs introducing lower unbundled fares.

Ancillary revenue was being driven by unbundling and could be pushed through personalization, but GDSes were offering little support with either. GDSes have provided stability but not flexibility.


Finally, airlines felt they'd had enough and decided to make a system of the airlines, by the airlines and for the airlines.

With a clever play on words, IATA decided to call it New Distribution Capability (NDC) - a name that was sure to age well.


New Distribution Capability (NDC)


NDC is a set of technology standards, which will give airlines the ability to distribute all their content directly to third parties. It was announced by IATA in 2012, when XML was still new. First guidelines came out in 2015.


NDC came with a promise of greater control, unbundling of ancillaries to increase revenues & personalization. Secondary considerations were reduction in distribution cost and lower barriers for entry.


IATA made a leaderboard of 21 airlines who committed to a goal of generating 20% indirect bookings via NDC by 2020. Strong pushes started in 2017 from Lufthansa, British Airways, AF/KLM through surcharge on GDS, NDC only fares, segment incentives for NDC etc.


But in July 2019, the number of airlines on Level 3 or above (Offer and Order) has actually decreased from 36 to 34. This includes the leaderboard airlines. This change reflects two things:

  • IATA has been fairly strict about imposing the latest standards

  • Airlines outside the leaderboard have been somewhat sluggish with their efforts



Concerns around NDC still exist. A few have relatively straightforward solutions, like:

o Non – uniformity: Different airlines have come up with their own flavor of NDCs. USP of uniformity isn’t working with different versions & levels

o Missing processes: Guidelines for some processes are missing

o Tech burden: Can airlines support the tech burden, especially smaller airlines & agents


While solutions to others will require more thought

o Caching & Interlining: GDSes used to do this earlier, who’s going to do it now?

o Fragmentation: Increasing complexity an increase confusion among customers and also give more power to middlemen

o Revenue distribution: GDSes are fast becoming the primary enablers for NDC. So how does revenue distribution work out? Especially with more players coming in who help airlines implement NDC?

NDC as an idea is progress that cannot be stopped, but the implementation needs to be better. GDSes will be the primary enablers of NDC, since it won’t be feasible to maintain 500 integrations / contracts. If driving ancillary uptake and getting access to more info is the problem, GDSes might figure out a better tech solution.


At the end of all this, if NDC is successful in just spurring GDSes into action, even that would be a worthwhile outcome.


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