Ai Editorial: Is disruption happening with IATA’s NDC standard?
First published on 6th September, 2016
NDC, as a standard, has challenged the whole airline IT and distribution set up. Existing entities are trying to sustain their supremacy, and start-ups are trying to sneak in, writes Ai’s Ritesh Gupta
NDC has been around for 3 years or so, and to what extent this standard has disturbed the status-quo isn’t an easy topic, though signs of evolution have emerged - GDS integration to NDC-style API, a carrier’s business rewards program tying into its XML API, big OTAs counting on direct connect deals etc. The likes of travel B2B conglomerates Sabre, Travelport and Amadeus assert they are gearing up for modernisation of retailing, plus the likes of Farelogix, Datalex, OpenJaw, JR Technologies etc. are moving swiftly and exuding confidence, too. And then there are other relatively smaller IT specialists that are trying to plug in gaps in the arena of differentiation via delivery of content, IT connectivity, distribution etc. Of course, NDC is posing questions - are airlines going to manage Order IDs on their PSS? How to maintain a record of every offer? How to support integration with revenue accounting systems and tracking payments? Many more of such queries are being contemplated as the change is upon us.
Old on its way out or just a passing phase?
There are new IT, B2B and B2C players that are emerging.
But can they challenge the transaction processing model of B2B conglomerates, deeply entrenched in this industry with their distribution and IT competencies?
GDSs say there is a favourable cycle emanating from their current business model, driven by synergistic businesses and thrust on investment in R&D that will keep them afloat. “Just see the number of carriers and agencies, multi-year content agreements, shopping, booking, and fulfilment functionality as well as our assets in terms of data centre and local managers in over 190 countries,” asserted a senior GDS executive, who underlined that this binds the interest of airlines and agencies. Network is difficult to replicate, and when we talk of technology, these conglomerates are trying to improve as quickly as they can.
But at the moment there are gaps in their offering. “What’s the point of putting rich, personalized content in a robust API if it will end up being sold using selling system that strips the offer down to a commoditized “everyone looks the same” display?” questioned Farelogix CEO Jim Davidson in a recent interview.
Another industry source mentioned, “GDS have done a poor job in upgrading their reservation system so that the airline product is no longer seen just as a fare, i.e. as a commodity. That’s one of the reasons why LH (Lufthansa) went ahead with their DCC initiative: get the GDS to do a better job in marketing airline product and services to the agency channel. And that makes sense. Airlines spend millions in their product in order to deliver superior experience to passengers, these must be reflected on the screens of the agents when they have a choice between two products of two airlines at equal fares.”
For their part, Amadeus is looking at a sophisticated merchandising system, enhanced airline content at the point of sale and integration of their systems into their PSS.
In a recent interview with us, Sabre did refer to featuring advanced merchandising capabilities including enhanced product information on their new platform. “Suppliers can count on improved consistency across channels – whether it’s branded fares and ancillaries or personalised offers and integration of rich, visual and descriptive content, we can support it utilising a wide array of technology standards,” said Kathy Morgan, Director of Transportation Product Solutions, Sabre Travel Network. Referring to Sabre’s competencies, Morgan also mentioned that by using insights around the business processes and workflow of users in this channel, “we can drive up sales of their premium products to increase revenues”. She also added, “Evolution in technology standards is nothing new, nor is the use of XML technology standards in the air distribution business. But I would say that usage is on the rise. Sabre has been utilizing a variety of technology standards, including a mix of XML and EDIFACT standards, for a long time and we’ve actually developed our platform to have the flexibility to manage the new ways that new technologies are allowing content to be sourced and distributed.” Among other developments, Morgan also mentioned that from airline IT perspective, Sabre’s offering will be available to all distribution channels via the NDC XML standard. “Our solution enables airlines to join customer data (such as trip history and tier status) with their fare and ancillary catalog to generate flight, branded fare, and ancillary bundles and discounts that are both relevant and personalized to the individual traveler.”
The question then is where are the likes of Amadeus, Travelport and Sabre trailing? So if we are already witnessing “Out of the PSS” route in the NDC world, it would be interesting to see where these organizations are headed. Are we bracing up for strategic alliances in the near future?
Opportunity for new entrants
I spoke to a couple of start-ups and evaluated what they are trying to capitalize on. Interestingly, GDS is still in the picture in one venture, and in the other it isn’t.
B2B: Going forward, one of the biggest challenges will be ensuring interoperability between the various industry standards during this evolution period – to ensure consistency in access to products and services across airlines and channels. India-based Airlines Technology is looking at being an aggregator and as well as offering an “adapter” for airlines to start offering NDC services without amending their respective PSS systems. The company has achieved IATA NDC Level-3 capable certification with implementation of 15 IATA’s NDC schemas and also completed a pilot with British Airways. “Our adapter for OTAs will showcase both NDC offers with rich content along with normal reservation details from existing GDS/ PSS on one single page. OTA can offer best customised offers and shopping options along with rich content from NDC enabled airlines along with non-NDC airlines. OTA will not lose on business from NDC enabled airlines ancillary offer sales or normal GDS options,” shared Paras Kumar, co-founder, Airlines Technology.
B2C: Berlin, Germany-based flyiin is building an online marketplace exclusively dedicated to air travel. According to Stéphane Pingaud, Co-founder, CEO, flyiin, travellers would be able to search and shop flights and any ancillary services directly with a multitude of airlines, while airlines would be able to distribute and sell their entirety of their product offering, with the same level of control as through their online direct channels. “We are developing our own, API-based search and booking technology, rather than using a GDS. Thanks to this new and superior technology, we are creating a completely new and digital experience for booking air travel online and gathering and sharing with airlines data currently not available through OTA and GDS” he said.
He further added, “The key asset of our API-based search and booking technology is the capability of accommodating any NDC-based API from our partner airlines, regardless of the version of NDC they use, and their specific “interpretation” of that version. For instance, it can send shopping request messages to multiple airlines, using the latest version of NDC (16.1) as inputs, translate these messages in the version supported by the airline, and doing the opposite process for the shopping response messages from the airlines,” explained Pingaud.
The team intends to certify their NDC Gateway with IATA within the next few weeks.
“Our understanding is that the application to get certified is quite straight-forward, as soon as you’re able to demonstrate a live deployment. In our case, the live deployment means showing how the “search and booking engine” behind our online marketplace - which we referred to internally as ‘NDC Gateway’ - sends shopping requests messages to multiple airlines, and how it processes the responses returned by these airlines,” explained Pingaud. “We also understand the certification comes at a cost, since companies need to pay a one-time application fee, and then yearly renewal fees, to become and remain NDC-certified. The good news for us that IATA applies reduced prices for start-ups, a move which confirms the faith that the industry has in companies like ours to drive innovation in airline sales and distribution.”
Pingaud stated that airlines would “see in this new, “semi-direct”, consumer-focusing, digital channel” the opportunity to finally achieve what they’ve long wanted to achieve through third party channels:
· Control and time-to-market of their product
· At a lower cost
· While keeping the ownership of the customer, as with their direct channels
The emergence of start-ups is always exciting, and when the status-quo is seemingly or even verge of being challenged, it means processes and infrastructure would get refined to change for the better.
So is such disruption deep-rooted or will GDS/ IT conglomerates find their way out? Hear from senior industry executives at the upcoming 7th Mega Event Worldwide 2016, The Event for Loyalty, Ancillary & Merchandising & Co-Brands, to be held in Toronto, Canada. (25 -26 October, 2016).
Twitter hashtag: #MegaEvent16
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