What will it take to sustain the momentum of the NDC pilots?
Airlines will have to invest in new technology that will not be cheap and the GDSs will have to invest in new aggregation and trade selling capabilities, writes Ai Correspondent Ritesh Gupta.
How is the NDC XML-based standard shaping up?
The International Air Transport Association (IATA) announced a spate of pilots and live deployments to test the NDC schemas in the second week of June. It is imperative to assess what sort of preparation does it require to capitalize on the opportunity.
Ryan M. Harris, e-commerce and ancillary products manager, InselAir and InselAir Aruba says it’s important to understand that the NDC initiative is still in relatively early stages. For its part, InselAir, too, is gearing up to complete a live NDC deployment, selling flights and ancillaries to corporate users and travel agents.
“Within the IATA NDC workgroups and the PADIS (Passenger and Airport Data Interchange) committees, we have had the chance to see several different pilot projects at different stages of maturity,” mentioned Harris. The range of the current projects goes from basic, single-function proof of concepts to full-scale live deployments that are running today.
“The majority of the projects have been able to reach their stated objectives, but some have had their issues, which is to be expected. We have been able to take the feedback from the pilot projects, both good and bad, and incorporate it into the standards process, hopefully successfully,” shared Harris.
“For the most part, we have the business goals of the project documented and agreed to and we have made significant progress into the technical specifications that will serve as a blueprint for the standards. There are still many functions in development and there are organizational processes that need to be completed, which takes time,” said Harris. He further added: “The main goal of the entire project is to take the industry from where we are today, which uses a fixed, “proprietary” communications format that is very rarely used outside of the travel world and move it to a more open XML standard that has the ability to consume and feed data from/to several sources.”
“Given the open-source nature of the XML language, the base of available programmers and service providers that can provide services to the industry expands dramatically, which should spur additional innovations and lower the overall costs of solutions,” said Harris.
Investment in new technology
NDC is a standardized definition of connectivity messages designed specifically with the notion of airline differentiated products delivery in mind. Number of carriers that have participated in NDC pilots/ deployments or announced their intent to do so now stands at 24.
Sharing his viewpoint, Jim Davidson, CEO, Farelogix says as NDC is simply a standardized message set and much of the opposition has either disappeared or gone “underground” some real work can finally start.
“Remember that until the airline competes in product strategy, invests in new technologies such as their own merchandising and pricing engines, and the GDSs complete their scalable connectivity, display and transact capabilities, not much transition will occur in the indirect channel,” he said.
“Frankly, most of the “testing” has been more hype than reality. Airlines will have to invest in new technology that will not be cheap and the GDSs will have to invest in new aggregation and trade selling capabilities before we see scale,” stated Davidson.
Harris believes it is still a little premature to replace all the airline systems with NDC-compliant systems, especially since there isn’t yet a standard to define “NDC-compliant”.
“While the messaging format is still under development, companies can begin to ready themselves for the data that NDC will bring through their life-cycle management approaches. Any data systems that are currently nearing end of life should consider adding XML connectivity into their replacement requirements. By taking this simple, and highly available, approach, airlines can prepare the canvas for the NDC picture while maintaining their governance and avoiding obsolescence,” explained Harris.
Single point of content creation
Airline distribute data to indirect channels via ATPCO OC, IATA EMD and XML technologies.
Until EMD-A comes to full implementation, any ancillary sales will continue to be recognized as a separate transaction; however, that does not prevent an airline from selling it, it only makes it difficult to associate it to a specific flight activity.
ATPCO Optional Services does allow most airlines to file and sell products related to the flight through third-party channels, including through GDS and interline partners.
“The big advantage in transitioning this from the simple ATPCO filings to an API or other XML-based technology is that it allows an airline to better perform revenue management on those products in real time. Even with the frequent updates to and from the ATPCO databases, the pricing remains relatively static and is difficult to personalize. For that, you really do need that direct connection to the airline’s merchandising system which is only achievable through the direct connection, which is a major goal of the IATA NDC initiative,” says Harris.
Davidson says right now the airlines and the GDSs seem to be going through what he refers to as “unnatural acts” to bring about this new distribution science.
“The unnatural acts are - for the most part the airlines and the GDSs attempting to utilize technology and processes that were never intended to do what we are asking them to do. Take ATPCO filing of merchandising – we are attempting to utilize a process and technology that was designed to manage static price information,” he said.
He further added: the concept of even a personalized price, let alone a set of products and services of which many are dynamically controlled inventory, was never conceived when the ATPCO filing system was set in place. “And even seven or eight years ago when the OC project was started at ATPCO, the architects never envisioned a time when a price and offer would be dynamically generated at the exact time of the request to the airline and distributed by the airline in milliseconds. Yet we created an add-on to the traditional ATPCO process to attempt to distribute dynamic airline ancillary products and services using same file, store, forward, utilizing a third-party to generate to the best of their ability, the offer.”
“While a number of airlines and GDSs are feverishly trying to hang on to this process, the reality is, it’s history. While I can’t predict when, the airlines will adopt the process of dynamically generating offers across their entire distribution network through a single point of “content creation”,” said Davidson.
Analytics associated with NDC
Airlines adopting the NDC model of distribution will be the ones creating their offers one at a time, and they in turn will have a tremendous opportunity to get immediate feedback on the offer – i.e. did the customer buy or not.
As Davidson says, the analytical opportunity to improve offers and corresponding take rates will be a major breakthrough for airlines in how they market their product. This is a major change to how the airlines distribute today in the indirect channel with virtually no feedback on offers until someone actually buys something.
Once the airlines get a taste of the immediate feedback loop and how they can adjust offers, it will revolutionize airline distribution as we know it.