As TMCs Praise AA Reveal, Some Question NDC Plan’s Practicality

By | June 27, 2017

Travel management company executives have mixed views on the American Airlines New Distribution Capability program announced Friday. Some are fine with it, acknowledging there is work to do. More are happy with the airline’s creativity but concerned about the technical and process challenges.

Unease about the impact of direct bookings on agent and tech productivity featured prominently in nearly a dozen interviews with TMC officials.

“The GDS is a hub and it should be a spoke,” said AmTrav CEO Jeff Klee, referencing the many systems built off of and dependent upon GDSs. “You still need to build a passive segment to get the booking to properly flow through to the mid- and back-office. It creates tons of inefficiency.”

When they book a supplier directly using NDC or otherwise, most agencies still use GDSs to house passenger name records, build and communicate itineraries, manage customer service and feed onward data collection for negotiations, policy management and duty of care. And that’s the simplified description.

One interesting aspect of the AA program is its $2 per segment incentive, but that wasn’t top of mind for most sources.

“It’s not a financial issue,” said Peter Vlitas, Travel Leaders Group senior vice president for airline relations. “It’s agent workflow, transparency and how we have our agents service customers and be able to do a comparison and shop. We spend more to make the GDSs operate — with middleware, itinerary products, seat assignment searches. We load on top a lot of other software. So if you start adding up all the costs, the $2 is insignificant.”

Atlas Travel and Technology Group president Lea Cahill

Atlas Travel & Technology Group president Lea Cahill similarly is concerned about what a TMC would need to recreate. “How much investment do you need?” she asked. “I’m still thinking about all the pieces.”

Eddie Albertson, senior vice president of industry and vendor relations at Travel Management Partners, said comparison shopping is a big issue. “If I get this content through the GDS and this from another source, how does it slow down the process?” he asked. “Time is money.” Then again, he noted, “We had to figure out a workaround for Southwest.”

“This is not the first time an airline tried to favor one point of sale over another,” Casto Travel president and CEO Marc Casto said. “The industry is frequently providing these inefficiencies that we have to navigate around.”

What’s next is to start building the required infrastructure, said Casto. Using which tools? “I want to execute a contract first before commenting on that,” he said.

Casto is affiliated with Frosch, which along with Concur and HRG was one of the travel intermediaries AA announced as participating. HRG already works with Lufthansa on direct corporate connections enabled by Amadeus Cytric. Asked about comparison shopping, HRG CIO Bill Brindle suggested an evolution:

“I don’t see it becoming more inefficient. The industry today has a lot of overhead. It’s not efficient. We have to jump to airline websites, use recursive fare checkers, etc. Everyone is geared now to pulling in a passenger name record. We at HRG have been storing a digital record of our bookings for some time, and that will instead become the [master] record. It’s easier to deal with than a PNR.

“Our initial clients want to work with the supplier they’re going to. For them it becomes a slightly different approach. Why am I searching another airline? Those tools are becoming available anyway. If the NDC process becomes straightforward, we can use Google ITA to do checks. It becomes something new, whereas the models today are around checking GDS codes, etc.

“If you’re doing massive searches, it probably isn’t the right step at the moment. If you’re supporting one airline, it makes sense. This is the break point.”

If they’re not game to support direct connections like Concur and Cytric appear to be, Brindle said, corporate online booking tools face big challenges. “The standalone OBT has probably had its days,” he said. “To make the industry effective, we need to be omni-channel. We need to acquire and supply through my environment. If a client brings in another booking tool, fine, but that OBT may not have access to the same content.” HRG supports several booking tools, but also provides its own.

AmTrav CEO Jeff Klee

AmTrav’s Klee discussed such concerns in the context of differing levels of sophistication among airlines.

“AA is on an island here,” he said. “Other airlines are not ready to do what AA has done. Great content on one airline but crappy content on another still makes for a pretty crappy booking tool. As much as airlines complain about GDS tech being old, their tech stacks are ancient. There still are lots of square pegs in round holes.”

Most TMC sources said they were impressed by AA’s approach. They appreciated the candid dialogue at last week’s meeting. And they liked that the program is optional, in contrast to surcharging strategies by British Airways and Iberia parent IAG and Lufthansa.

“Where AA is coming from, it is not a circumvention of the GDS and the cost benefits of doing that,” said TMP’s Albertson. “I hear loud and clear they want to jump over United and Delta with sales of ancillaries and customization.”

Some admitted programs like this could eventually shift the balance of power, strengthening TMCs’ loyalty to airlines at the cost of their allegiance to GDS providers.

“It’s a great move by AA,” said Klee, who attended last week’s meeting. “The vast majority of TMCs coming in were solidly on the side of GDSs. AA got them thinking. They’re willing to talk about making them whole financially. The best outcome is it’s a way to provide pressure on GDSs. We have experimented with the [existing] GDS NDC connections, but they don’t work very well and there is lots of finger-pointing.”

“All of us were anticipating an announcement,” said Casto, also an attendee. “Of all the possible responses AA had, this was the best-case scenario. Very little stick and almost all carrots.”

AdTrav Travel Management CEO Roger Hale said he was pleased that AA engaged agencies and recognized the importance of maintaining existing workflows. “If I don’t use the GDS backbone, there will be a significant technology investment needed to reinvent the wheel,” Hale said. “My message to the GDSs is, ‘Get on board. Eliminate any reason for airlines to look anywhere else.’ ”

Skeptical as he was about the near-term feasibility of the program, even Vlitas said AA vice president of sales and distribution strategy Cory Garner “deserves a lot of credit. It’s a clear vision for AA. He’s probably, among the airlines, the foremost authority on all this. I do agree there are some benefits to an NDC environment if and when it’s fully developed. We’re going to look at it. But we’re not going to experiment with our customers.”


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