APEX Insight: With the release of NDC 17.2, IATA is confident that its distribution standard has matured since its chaotic inception. To drive adoption and correct the misconception that NDC is a GDS bypass, IATA is continuing to prioritize communication about what the standard is and how it can benefit the travel industry as a whole.
Yanik Hoyles, director of the New Distribution Capability (NDC) Program at IATA, acknowledges that the group of people who understand NDC is still minor compared to the size of the global industry. The standard was devised to address two questions: “What can we do to improve the customer experience by working together across the value chain?” and “How can this contribute to sustainable profitability across the airline industry?”
Hoyles explains that, when airlines developed their own websites, their distribution strategy became about selling as much as possible through direct channels, but the split between sales through direct and indirect channels remains about 50/50 today. Despite this, travel agents feel they’re at a competitive disadvantage to airlines, because the technology behind the global distribution system (GDS) they use hasn’t changed since the 1970s. Airlines can decommoditize, differentiate and personalize their product offerings, while Hoyles claims GDS systems are designed to simply “carry a flight with the price.”
Since travel agents remain such an important source of revenue, Hoyles says airlines are recognizing the need to use indirect channels to sell more by replicating what they can do on their own website. This can be achieved using an NDC-certified airline API, which gives control over offers back to the carrier. Hoyles points out, “NDC is very similar to the way LCCs sell their products. EasyJet had its first API with Amadeus in 2007. It’s not a revolution.”
“NDC is very similar to the way LCCs sell their products.” – Yanik Hoyles
It is a substantial change for GDS systems, though. Rather than constructing an offer and handling booking, payment and ticketing, in a world of APIs the complexity of their role decreases to aggregation. “The GDS knows which airlines to ask based on the request, and a GDS aggregator will collate the offers, display them and send them back to the travel agent,” describes Hoyles.
“GDS’s are very well placed to be the best aggregators in the world tomorrow,” he continues, “because they’ve got the reach to all these travel agents, and their value is also visible in the back-office and mid-office functionalities they offer travel agents as an intermediary.”
According to Hoyles, there are three ways to build an API: 1) As part of a deal with the airline’s passenger service system (PSS) provider 2) The airline can build one itself, on top of a PSS 3) A third partly like Farelogix or OpenJaw Technologies can build it on top of the PSS. Now that there’s some stability in the NDC standard, Hoyles says deployment is cheaper and faster.
Inevitably, there are some barriers. “If you’re building a new pipe, you want it to be robust before you switch another one off,” says Hoyles. “NDC is business model agnostic, but it takes time to get everyone together and reexamine their relationships. Some contractual agreements between players also slow things down.”
With Amadeus, Sabre and Travelport all working to become NDC-certified, corporate travel buyers taking it seriously, and meta-search engine Skyscanner as an advocate, IATA is confident that it’s just a matter of time before NDC is widespread.