Ai Editorial: Optimising Indirect Distribution

Airlines must up the ante as they strive to optimize indirect distribution. Airlines expect to be in better control of their own distribution when industry technology standards are implemented. But, they also need to optimize results now, as Airline Information’s Ritesh Gupta finds out.

How airlines intend to sell and how travellers plan to buy is something that has garnered attention over the years. Let’s say a carrier intends to yield-manage priority boarding on 50 routes, but only intends to offer a chauffeur service on 25 routes, then how efficiently and quickly can this be done? While airlines and service providers/GDS companies are ready to collaborate, are airlines in complete control? It seems to be a work in progress.

The industry is in a transition phase as various stakeholders attempt to facilitate greater transparency and choice for consumers in comparison shopping. Even today airlines are concerned about consistency in brand messaging and customer experience across all indirect channels.

Consistent brand promotion and messaging is always a challenge when dealing with indirect distribution channels because of your reliance on a third-party to interpret and communicate the message correctly and effectively, says Fort Lauderdale, Florida-based Ryan M. Harris, CISA, E-Commerce and Ancillary Products Manager, InselAir and InselAir Aruba.

Being in control

When a passenger chooses to use the direct channels, such as the airline website, ticket offices or contact centers, airlines fully control the message that the passenger receives. 

“When passengers choose the indirect channels, especially in the leisure segments, everything generally comes down to pricing and schedule, unless you have previously built enough brand awareness and brand loyalty to drive passengers to your product,” says Harris.

He further explains: most global distribution systems (GDS) offer some sort of a marketing package through their specific GDS that will help to deliver marketing materials and messages to their end users, which does provide some continuity. However, the biggest issue with that approach is that the audience shifts from the passenger to the travel agent, at least in brick-and-mortar travel agencies and corporate travel offices. “Going through to the online travel agencies does provide some additional capabilities to pass through the marketing and fare differentiators to the end passenger but then requires further agreements outside of GDS agreements to distribute those messages to the passenger,” he says.

As observed over the past year or so, the single biggest development in message continuity is still forthcoming in the IATA New Distribution Capability project, or NDC. 

“This project, if successful, will allow the airlines to directly and consistently pass their brand message and product information to the agents and, eventually, the passengers themselves.  Control of the message is important, and direct communication is always best.  NDC will allow the airline to directly control the content and delivery, providing that consistent brand identity that is essential to building loyalty,” explains Harris.

Answering GDS’ concern

For their part, GDS players or travel commerce facilitators stress that a hurdle in maximizing a multi-channel, multi-device merchandising strategy is the discrepancy in how carriers distribute their ancillary content. Harris agrees and says for the most part, this is absolutely true.  He explained that the biggest part of this issue is that offering ancillary products is a reversal of the business strategy that the industry had been using for decades, which all of the hosting and GDS systems were designed for. 

He added: When unbundling first came onto the marketplace in the early 2000’s, e-commerce was still a minority channel for most airlines and the e-ticket was just becoming the global standard. When unbundling began, the majority of technology systems, which are really the backbone of any airline’s sales process, just didn’t know how to handle these new non-ticket products. “The situation required developments by several airlines at the same time and very few of them were coordinated, leading to a patchwork of different technical abilities and methods, some of which didn’t play well with others.  The commonality in all of these development projects were the GDSs themselves.  No matter how an airline solved the problem, it had to be able to distribute through the GDS,” said Harris.

Even today, the distribution problem still exists.  “There are products that simply cannot be properly marketed, or sometimes offered at all, through a GDS or other third-party distribution channels.  The root of the problem is the lack of a standard,” he said. Harris sees this as a need for IATA to address on behalf of the industry and is doing so through the NDC project. 

And the IATA has shown the way in the past.

“I know there are some people who are against IATA “dictating” the way that technology standards are defined; however, IATA does have a good track record of successfully implementing these types of projects.  The IATA Simplifying the Business (StB) program was the driver for the global implementation of the e-ticket and the Electronic Miscellaneous Document (EMD) initiatives, without which the future of ancillary product distribution would remain cloudy.  The StB program also brought about the 2D bar code standards, which has become ubiquitous in today’s airports and has allowed the development of mobile applications that work in almost any airport in the world,” reasoned Harris. 

Is this an airline problem? “Absolutely, and I think it is clear to all of us that a solution needs to be developed,” said Harris.  He recommends that there is a need to develop one solution as an industry through IATA, instead of having “180 different solutions” to the same problem.

Way to go

Airlines need to evaluate all options as they disseminate their content to several indirect channel partners and gear up for the NDC era.  Airlines can evaluate the promise of speed-to-market via one standardized XML API. As rolled out recently by Farelogix, such solutions are worth assessing. Airlines should evaluate PSS-agnostic offerings, reduced PSS/hosting costs etc. as they incur new expenditure.

Today airlines are being given an option to set up a connection to the airline host system, chart out their pricing and merchandising engines to their offerings, and eventually distribute their desired content to travel sellers via XML API.

There is also a need to adjust, both internally and externally when it comes to dealing with IT specialists, as far as the NDC is concerned. The focus should be on aligning internal business and technology systems in order to meet objectives pertaining to how to target a specific audience via a specific channel. This way airlines would be able to optimize their indirect distribution mix in a desired manner.

Many of the latest developments pertaining to NDC will be dicussed at Airline Information's Mega Event Asia-Pacific (01 & 02 September 2015, Singapore) and the global Mega Event (04 & 05 November 2015, San Diego.) You will find details and registration for these events at: www.AiConnects.us