BCD Travel's recently announced partnership with Lufthansa Group airlines Austrian, Lufthansa, Swiss and Brussels is one of several agreements the travel management company has in place surrounding IATA's New Distribution Capability (NDC). The Lufthansa partnership specifically enables BCD to book the airlines' NDC content. Senior editor Jamie Biesiada spoke with Thane Jackson, BCD's vice president of global distribution and channel strategy, about the partnership and the future of airline distribution.
Q: Why enter this partnership?
A: We obviously have a significant presence in the German marketplace -- we're the market leader by a pretty long way -- so we have an ongoing relationship with Lufthansa Group. It became challenging, I think, for the industry when Lufthansa made its strategic moves around distribution a number of years ago, but we always recognized there was going to come a point where we may need to step into that. (Editor's note: Lufthansa in 2015 announced a new distribution strategy that imposed a fee for any GDS bookings and a direct-connect strategy utilizing NDC technology.)
The timing, we felt, was right now. We've seen a beginning of maturity in what you might call NDC -- only the beginning of it, because it still needs to be solved at scale, but we're seeing the technical capabilities start to come out, to be better available.
Q: Were there other reasons you partnered with Lufthansa specifically?
A: They were first to market with the new strategy back in June 2015, so they are further down the line in their strategy, and therefore, their development of their longer-term capability is probably a year or two ahead of a lot of carriers.
Q: This partnership enables BCD to book Lufthansa's NDC content. Are there other facets to this partnership?
A: The bigger picture that we're looking at here is NDC was created initially as an IATA airlines design to change the face of distribution, to have a more flexible approach, more of a resale model. But it has taken a long time for traction to really be gained in the marketplace, for the industry to recognize the high degree of collaboration that is needed. It's now starting to take shape. We're starting to see it beginning to come to life, and so it's an industry-level problem. We'd rather be part of that solution and helping it be shaped, because it's going to touch a lot of our businesses.
Q: It's costing BCD to invest in NDC solutions. Why do it?
A: I'll turn that around and say if you don't do it, then your relevance is going to diminish over time. We're a customer-driven business. Airlines and other operators out there want to provide more choice, want to be able to, in effect, sell more, and our customers are asking for that. If you don't move with the times, if you don't look to further your value proposition and acquire the right content, your value will ultimately diminish, and the end result of that is no business.
Q: You also have partnerships around NDC in place with the three major GDSs. How do you view that channel with regard to the future of distribution?
A: They're going to continue to play a pivotal part in this. They're very large organizations. They have great scale, great capacity. ... They're not going to just let their business model completely disappear. They will evolve as well. They will be the ones, we think, that will truly solve this at a level of scale that solves the industry problem. It will take longer, I think, than anyone expects. But they will be a principal part of what we do, which is why we have these strategic relationships with them.
Q: What do you think airline distribution will look like 10 years down the road?
A: I think the travel industry has a unique way of revisiting itself over the long term. Look at what has happened in the hotel space over the last, say, 10 years. Hoteliers some time back wanted to either lower their distribution cost or get greater access to the customer and went ahead and created relationships with new-technology providers. They became OTAs, they became the large hotel booking agencies out there. And they've found themselves in a world now where they're trying to take back some control over their distribution, because they're paying a higher fee in some cases to be part of those new technologies that have matured and now have an awful lot of their market share.
I worry for the airline industry that they create new channels, new technology. They grow, they emerge and ultimately, the airlines find themselves in the situation that the hoteliers found themselves in: trying to gain back control yet again. So we do have a unique sort of circular thing that happens in our industry.
I think the technology behind airline distribution will be better, it will be more flexible. I think GDSs will still play a big part. But I can't really say what it is going to look like in 10 years. We may still be talking about NDC in some form or another.