NDC 101 — A Crash Course
One of the core challenges of being a travel provider today is how to get broad sources of offer content (flights, rooms, tours, etc.) to customers in a myriad of distinct markets around the globe.
Today airlines typically distribute flights and seats to Travel Agencies via intermediary GDSes. This model has up to now facilitated distribution by providing a synergy of providers, systems, connectivity, aggregation of content, and reach into the 79,000 Travel Agents across the world who account for about 60% of the value of all travel sold (ref: “Remarks of Tony Tyler at the TAAI-TAFI Symposium on Future Aviation Trends, Mumbai”).
But the legacy way of distributing flights has its limitations. For both Airlines and Travel Agents, air content has been restricted to flight price, schedule, and seat availability. Travel Agents can supplement the flights with their own additional products such as insurance or hotels, but due to the technology it is usually difficult for a Travel Agent to include additional airline content such as bundled offers, or unbundled premium seats or extra baggage in their offer, not to mention cross-sell content such as hotels or insurance.
The other limitation is that the both the Airline and the Travel Agency is still dependent on proprietary or otherwise obsolete (ex: TTY or EDIFACT) technology and connectivity, meaning that they can’t unplug/plug-and-play one system for another as it usually entails significant redevelopment of the system integration.
So what & why is NDC?
In 2012 International Air Transport Association (IATA) initiated New Distribution Capability, aka. simply IATA NDC.
NDC is intended to overcome the technical Tower of Babel in today’s travel tech and establish a modern common language between travel suppliers and consumers.
IATA describes NDC as “an XML-based data transmission standard to enhance the capability of communications between airlines and travel agents”.
IATA Resolution 787 further defines the scope of New Distribution Capability as to
“enable airlines to respond directly to shopping requests from travel agents, manage order processing and enables true comparison shopping.”
It is important to note that NDC is not a system or a software or a database but it’s only a standard to exchange information between airlines and travel agents. It’s the various IT Providers who make it into systems and software. IATA is the industry body that manages the NDC message validation and certification process.
Also it is worth pointing out that NDC is not intended to replace the core business systems or processes, meaning that airlines will still need to rely on a PSS/CRS system to manage their business (flight inventory, schedules, routes, pricing, bookings, etc).
NDC “The end of the GDS”…. (maybe not)….
Initially the initiative was seen by the travel industry as potentially the end of GDSes and the rise of the airline direct connect. The idea was that Airlines could cut out the middle man and become the source directly to the Travel Agencies, reducing associated costs and limitations.
The reality is that this requires the provider to not only implement the technology on their own offers, but also to rebuild a complex network of connectivity to both other providers such as other airlines. Hotels, insurance, etc. integrate to the travel agents, as well as the business rules and shopping/booking capability around it. Not to forget the Travel Agents as well who will need to connect to & aggregate content across multiple NDC content providers.
The reality is that the GDSes already do this and will continue to provide content & reach to a well-established network of both Airlines and Travel Agents including the capability for availability & booking of itineraries with complex content. From a cost & complexity standpoint, both Airlines and Travel Agents will still benefit in outsourcing with an intermediary provider of aggregated content & booking rather than rebuilding it themselves. The GDSes are all strongly engaging on NDC and will likely continue be well positioned as an NDC provider. That said, the open technology makes it an area ripe for disruption if the proper newcomer can get in there.
Loose ends
There are a challenges with NDC that have not been completely resolved. For instance, IATA provides some recommendations and ideas on how to manage payment in an NDC environment that need to be taken into account (ex: who is the merchant of record travel agency or airline, how to manage BSP/settlement arrangements) but it is still not completely settled. This does open up a bit of “grey area” which may be different from setup-to-setup and NDC provider-to-provider.
Getting Started…
For an airline, enabling the technology is pretty straightforward. More and more, existing providers of airline Passenger Service Systems (PSS = inventory, booking, check-in, etc.) are offering NDC connectivity. Some new 3rd party providers can add an NDC layer on top of the more popular PSS systems. In many cases, it is a contractual arrangement after which the services can be simply switched on.
From a business perspective, both the Airline and the Travel Agency will need to reconsider their distribution product offering, notably how they want to extend their other services such as extra bags or chargeable sports equipment check-in. Once defined, the airline can proceed with setting it up into inventory, pricing, etc. .
Once activated, it is time to try it out. IATA NDC is gaining momentum and defining and deploying real-world business cases, but it still in its early stages of adoption. Like any new technology today, working with in-house or 3rd party developers and taking a bite-sized approach with small targeted proofs of concept may be the better approach versus trying to reconceptualize an airline’s entire distribution.
Conclusion
For a domain which is all about “moving”, the travel industry tends to move very slow when it comes to tech and NDC is no different. Nevertheless it is a positive step towards a richer and more agile approach to travel distribution.
