Q: I have been reading quite a bit about IATA's so-called New Distribution Capability (NDC), and it doesn't seem as dastardly as you made it out to be in your March 11 column, "AA and Sabre settle, but GDS wars continue." You quoted Sabre as alleging that NDC is "an agreement among the airlines to withhold content by not publicly filing their content." You concluded that NDC is a "conspiracy to harm the GDSs and a group boycott by the major airlines and IATA." Can you explain exactly why NDC would be bad for my agency?
A: Think of NDC as like American's Direct Connect except that, instead of being pushed by just one airline, it is going to be backed by all 240 IATA airlines, including all U.S. legacy carriers, at the same time. IATA has asked the Department of Transportation (DOT) to approve the agreement setting up the rules for NDC, and interested parties have until May 1 to file comments.
NDC would be a disaster for every agency because:
First, the airlines acting together could pressure your agency to book through NDC only, bypassing the GDS process. This would lead to the same loss of GDS incentives that Direct Connect would have caused, but you will have no alternative because you cannot book away from all the world's carriers.
For most large agencies, GDS incentives are the single largest source of supplier revenue and the only revenue source promised under long-term contracts. Without it, agencies would have to raise fees so high that many clients would be lost.
Second, NDC may well kill off the GDSs, which would lose booking fees on which they depend. Although the proponents of NDC have stated that the NDC functionality would be available through the GDSs, the technical explanations in support of the IATA's application show that NDC will be designed to operate without them, and in any case, the GDSs would probably not be around long enough for that availability to matter.
Third, the GDSs would no doubt be replaced by a system in which carriers charge agencies for access to carrier content, instead of one that pays agencies for selling carrier content. Don't forget that a former American CEO said, "I could see a day -- and maybe I am dreaming here -- where those folks who are the intermediary between us and our customers have to pay for access to our product."
Fourth, agencies would have to spend money to reaggregate all the information from an NDC bookings with information from other non-NDC supplier bookings such as hotels, cars, cruises and tours, all of which are aggregated in the GDS today at no cost to agencies. For corporate agencies, the reaggregation process will cause major headaches in compiling accurate management reports.
Finally, as others have pointed out, NDC is designed to curtail airfare transparency so that the carriers can charge higher fares to all their customers, especially those who can afford to pay more. Agencies will then have a much harder time offering the lowest fare.
The DOT should deny IATA's request, thereby killing NDC. If it does not deny it, the DOT should at least defer its decision and consolidate the issues into the pending rulemaking proceeding covering channels for disclosure of ancillary charges, as the issues in the two cases are similar.
Mark Pestronk is a Washington-based lawyer specializing in travel law. To submit a question for Legal Briefs, email him at [email protected].