Explainer: IATA’s New Distribution Capability

By | May 13, 2016

The International Air Transport Association’s New Distribution Capability has been in the making for about five years and many still don’t get it. Depending on your interpretation and where you sit, it’s either a promising or unsettling development for business travel distribution.

NDC is neither a new airline reservations system nor a massive database of traveler information. It’s not meant to remove distributors from the chain. It doesn’t represent a brand new airline pricing strategy. Rather, NDC is a standard. It is based on XML, a language for structuring and sharing data (a follow-on to HTML, used to build web pages). XML is a successor in travel to the Edifact international data exchange standard that has facilitated messaging between industry parties for decades.

IATA positions NDC as a better way for airlines to send data to partners like global distribution systems. The goal is to overcome the industry’s “current distribution limitations.”

Said another way, airlines for a while have been interested in customizing and better presenting offers. Regardless of where customers shop, the idea is to match a traveler to the right set of products and services at the right price. In that sense, NDC is an evolution of yield management. The concept isn’t new, but some travel buyers are wary of anything that helps airlines extract more money from customers.

Last September, consultancy Festive Road published a report, commissioned by IATA, to find out what travel buyers know about NDC. Among 17 interviewed business travel managers, there was, at that time, “a considerable knowledge gap” that led to “a sense of unease,” according to the report. “The main concern by travel managers is that airlines will increase the practice of price and content variance by channel.”

NDC

Image: Thinkstock

As for offers tailored to travelers’ characteristics and purchasing patterns, Festive Road found a mixed reception. The travel managers were optimistic that it could increase value for travelers. But they expressed concern about them straying from policy.

“Travel managers have a right to be concerned about how they will be sure travelers have the ability to do a like-for-like comparison,” said Henry Harteveldt of Atmosphere Research Group. “There will be many shades of gray here. There’s a possibility that while the intent is to make things more straightforward there may be some complexity that arises.”

From the airlines’ perspective, NDC promises efficiency. Not every airline is buying into the voluntary initiative, but many see it as the best path to displaying and selling their products the way they want in indirect channels. That includes GDSs, and therefore corporate TMCs and booking tools. Within the standard there are components related to shopping, booking and servicing, payment and ticketing, and other functions. NDC also would let airlines request offers and other services from interline partners, and then manage the resulting bookings.

Jim Davidson is CEO of Farelogix, a central player in NDC development. He explained NDC the context of a new Farelogix-Airline Tariff Publishing Co. partnership for distributing ancillaries.

Traditionally, airlines file fares, fare rules and optional services through airfare publishing firm ATPCo. ATPCo, Davidson said, in turn sends a feed of that “raw data” to various distributors and others with pricing engines — GDSs, online travel agencies, ITA Software, Farelogix, whoever. “They take a feed of all this raw data and through the engine make pricing and then hook on availability and schedules,” he said. Those are separate processes executed by each distributor. Bringing ancillary products into the mix requires individual implementations with airlines. Those take a while.

Using NDC, airlines that sign on to the new partnership (none announced yet) would pull the ATPCo raw data feed through the Farelogix merchandizing engine. That’s where actual offers and prices are assembled. Those are spit out through an NDC-compliant application programming interface and prepared for display in various channels.

A GDS need only connect to that API to grab many airline offers at once, Davidson said. “Rather than one airline being able to put their fare families in a GDS and that GDS sends it through to Concur, all airlines can do that, at the same time.”

“The airlines,” Davidson continued, “will simply say, ‘Instead of you guys doing my offer, my offer will be delivered to the GDS. I will unplug my Edifact and plug in my NDC API. That way I maintain one API across my internal and external links. You guys get really good at connecting to that the way you are really good at connecting to Edifact.’ That’s the definition of NDC. That’s where you’ll get scale.”

Davidson noted that NDC is based around XML today, but maybe it’ll turn to other languages in the future. From his perspective, it doesn’t matter. “What matters is a centralized point for the offer,” he said. “The technology that comes out of that end will evolve over time.”

New Kinds Of Control

A key point of NDC is that the airline would control and customize the offer based on knowledge of the customer.

The upside for airlines is they can be the ones responding to shopping requests coming from travel agents. The downside for GDSs, Davidson said, is “they’re not the center of the universe in terms of creating the offer.”

The Farelogix-ATPCo offers engine would show how NDC can furnish a one-to-many approach. There already are plenty of airline-specific implementations of certain functions.

United, for example, is selling Economy Plus seats through Amadeus using NDC. According to IATA, NDC is well-suited for the task because United “dynamically prices each individual United Economy Plus seat.” Similarly, Sabre is selling American Airlines’ Preferred and Main Cabin Extra Seats using the NDC standard.

Many other deployments and tests are underway at Air Canada, British Airways, Emirates and Qantas, among others. Lufthansa has said NDC will play a role in its development of direct connections.

How does any of this help the corporate travel crowd? NDC program director Yanik Hoyles said the standard would actually support comparison shopping — and therefore transparency — because distributors can better aggregate content.

“Of course the buyer still retains the capability to filter what they want to give to who — more choice, more real-time access to the airline perhaps,” Hoyles claimed in an informational video on IATA’s site. Rather than more noncompliance that some fear, the result “probably will be less out-of-policy bookings.” He also said that because corporate channels would “capture more information on more components of travel,” managers would have better reporting.

“It will enable them to shop based on value not just commoditized price and schedule,” Hoyles added. “And if the travel agent channel provides similar features as the richness of the airline channel today, there will be a much more consistent shopping experience.”

Atmosphere’s Harteveldt agreed that NDC has great potential for selling to corporate travelers based more on value than current processes. He also said airlines will abide by the wishes of clients with preferred agreements. “Say a company wants XYZ optional products included; that will be presented,” he said. “If they tell the airline, ‘When our travelers are shopping through the corporate booking tool or if they enter our number on your website, do not show them’ business class or first class, or lounge passes, or extra legroom or premium economy seats or whatever, the airlines will listen to that.”

But, Harteveldt added, when there is no preferred agreement, “all bets are off.”

IATA’s report on 2015 NDC testing said work continues with travel agencies on integrating content from NDC and non-NDC sources. IATA said this year it would focus on gathering feedback from corporate buyers and travel management companies, and connecting them with IT providers to support NDC projects.

This content is protected by copyright. Link sharing is encouraged but duplication and redistribution is illegal.