First Published on 27th October, 2017
Ai Editorial: What is the real utility of IATA’s NDC standard in “indirect” distribution as of today? Is the XML-based messaging standard maturing? Ai’s Ritesh Gupta examines.
Questions around the progress and even the viability of NDC continue to crop up, even though the XML-based standard has been around for years now.
Of course, the number of airlines associated is always under scrutiny, but the IATA asserts that the standard is progressing and “maturing”. In their recent update, the IATA referred to the progress with version PADIS 17.2 (went live last month). It has also been stated that by next year, 55 airlines representing 55% of IATA member passengers boarded are slated to be NDC certified.
“Look at the total revenue generation (featuring NDC),” questioned one senior industry executive, who also questioned the utility of XML. Also, “too much flexibility in the initial versions of schema and continuous releases”, too, haven’t gone well with even some of the proactive players in the industry, as the standard is not only an airline topic, it does have an impact on the entire industry.
What is there to be seen as a progress then?
“It is clear that airlines, especially full service carriers, can’t play the waiting game. The game of retailing isn’t just about selling on direct channels. Of course, data-driven retailing (identifying frequent travellers, infrequent travellers, anonymous travellers etc.) is the focus of airlines for their channels, but airlines are looking beyond that. If NDC XML API connectivity can result in bundling of offers for certain routes in an ecosystem such as Alibaba then they need to prepare for it,” said a source, referring to Lufthansa and Emirates’ deal with Fliggy, a part of the Alibaba ecosystem. “Of course, certain, though only a handful of airlines, have chosen to re-work on their respective commercial strategies (for bookings coming via non-NDC channel/ connections) – and if you see NDC it features prominently among them. Every stakeholder has their commercial interest, if there is a way to disturb certain deals or have new ways of doing business then so be it. If an airline wishes to cut down on “costs” in one channel and pump in more money in another channel that’s their choice. That’s the way business goes.”
So direct connectivity, as exemplified by certain airlines, is driving the quest for being in control. “If an airline has worked on something special for outbound tourists from China, and if they believe the shopping experience on Fliggy could be served best by the NDC XML API or it is relatively a faster route to market, then why not? In fact, if there is a provision for rich content, bundled offers including ancillaries, and bookings are being managed via an airline’s reservation system without any 3rd party involvement, it does sound attractive, even though it needs to be added that working on such connect takes perseverance and investment.”
Too slow for some
In case of certain intermediaries, say a meta-search engine, that aren’t as big as Google in terms of garnering traffic but do understand the significance of showcasing the best possible content/ deal from airlines to make comparison shopping easier, the pace with which NDC has progressed has rather been slow. They expected a lot more, still for them, NDC has failed to deliver to an extent.
As Skyscanner acknowledged in one of our recent interviews, the issue has been flexibility with schemas. There are 2000 partners that Skyscanner works with, and there is plenty to deal with as far as APIs are concerned. “We hope to see more airlines adopt it (NDC),” mentioned Filip Filipov, VP, Product Management at Skyscanner.
Explaining the positive side as well the struggle that shackles airlines’ progress with NDC, Umesh Nair, president NDC and Distribution at travel technology start-up Airlines Technology, says, “Airlines want to go ahead with the NDC standard but have this in mind - when to start? How to start?” So where is the void in the market today and how is Nair’s company ensuring NDC picks up steam? “ The void is firstly (the) cost of implementation for airlines and travel agents, secondly travel agents are concerned about their push back from airline. They should understand an airline doesn’t earn profits from ticketing, in fact, ancillaries are the major revenue source for them. If travel agents sell more ancillaries, which means more revenue resulting to more profit. That is the integral part of NDC – whatever you are able to buy on an airline.com, in future you would be able to buy on a travel agent’s website/ brick and mortar.”
As Nair explains, certain airlines have realized that the game of retailing isn’t just about flight, air ancillaries such as flight boarding or bags, or hotels and car rental. In fact, airlines are being advised to dig deeper and target the “second wallet”, offering meals, insurance, events, transfers, taxi etc. Some of these products can result in attractive margin, for instance, meals with average order value of $15-$20, and net revenue of $9-$12.
But, according to Amadeus, the Level 3 is disruptive for agents, changing workflows and processes. As Cyril Tetaz, Head of Commercial, Asia Pacific, Airlines, Amadeus, explained to us recently, the cost and difficulty of integration remain quite high and may be difficult for some parties to address. Airlines have been largely focused on Level 3 connectivity (Offer and Order Management) that would allow airline offer creation as well as order creation, retrieval, change and travel document issuance, payment and refund to be done via NDC-XML technology. IATA has also been highly focused on providing standards around this. But this represents a major booking flow redesign and requires travel agents to invest in NDC interface adaptation and costly IT integration, according to Amadeus. As Tetaz said, there are many ways of integrating NDC, and Level 2 connectivity (Airline Offer Management) is one of them. Here, airline offer creation through search and pricing of flights and ancillary services would be done via NDC-XML technology, without impacting the booking, servicing, payment and ticketing steps. However, Level 2 connectivity has not yet been defined by any industry player, he said. Options for integrating NDC are still in the making and being discussed by all players. Within the context of NDC, “our vision is to develop an integrated solution that can be widely adopted by both travel agencies and airlines to deliver sustainable results at a scale that matters. The objective is to ensure easy adoption in the marketplace with minimal disruption and to meet the business objectives of all parties. Collaboration across the industry will be a key factor in driving success for all players,” he said.
On the positive side, even the certification attained by different stakeholders could vary, specialists have found a way out to get the work done. There are offerings that can normalize different schema versions in real time, enabling connections to work between airlines and aggregators. This has helped in the implementation of NDC. So even if an aggregator could be at different level of certification and an IT player could be at different level, “this is where NDC Adaptors come into play where we make sure that no matter on whichever version they are, we will make sure they are able to talk to each other – backward and forward compatibility,” said Nair.
So progress is being made regardless of schema standard and version.
As of today, different stakeholders have different take on the maturity level of the NDC standard, and expect such mixed response to continue in the time to come.
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