Q&A: Air France-KLM on why NDC remains core to its distribution strategy

By
|
Air France Airbus A320
Amadeus and Air France-KLM announced a new agreement which will enable the GDS' customers to access NDC content from the airlines in the future. Photo Credit: Shutterstock

Last week Amadeus and Air France-KLM announced a new agreement which will enable the GDS' customers to access NDC content from the airlines in the future.

The deal has a number of interesting elements such as the bilateral agreements needed between GDS and agencies and the airlines and agencies and the surcharge to be paid on bookings.

PhocusWire spoke to Emmanuelle Gailland, Air France-KLM's vice president for distribution, to get her thoughts on the agreement, the group's NDC strategy and the wider importance of the IATA-backed distribution standard.

Q: Air France-KLM had already built an NDC engine, tell us a bit about your NDC journey so far?

A: It's a long journey as for any airline and we started a few years ago. We built our own APIs and have quite a complete set of APIs so we are connected to several aggregators already.

In the month of July we had 15% of travel agency bookings done via NDC so we are live, it is working and it is starting to be significant.

We have aggregators and direct connects. The aggregators we are connected to are not GDSs, they are companies such as Travelfusion and others.

The question of whether you have to use a GDS is a key question so we had very long discussions and negotiations with Amadeus and ended up with the agreement.

We think it is key to have Amadeus as an NDC aggregator especially for agents that have more complex needs, travel management companies for example. So, it was important for us to complete our NDC distribution network. We have many aggregators but it was an important step.

Q: Where do you think you are in the NDC journey, do you think you're relatively mature in terms of technology?

A: Our APIs are quite complete, they manage booking and servicing and, as you can see, quite a big share of bookings are done via NDC already. We belong to the IATA NDC leader board, we are an active player in this area and support IATA in this roadmap. 

Q: If the Amadeus partnership is to round out your distribution capability, has it been leisure bookings up to now?

A: Agents connected up to now are mainly leisure agents.

As for many airlines we are confronted with TMCs saying NDC is not mature yet from a standard point of view. It's a huge work to transform the legacy distribution way of working to new way of working.

NDC is really different from what exists today and TMCs resist it but TMCs are big players for the airline. It's a big part of the industry that needs to move to NDC.

This is not specific to Air France-KLM, it's an industry issue and we're confident that with Amadeus acting as an NDC aggregator it will widen our NDC network and it will be welcomed by agents enabled to access NDC content from Air France-KLM.

One other thing about our NDC journey and the way we distribute is that the agreement with Amadeus is not a classic agreement in the sense that we give them the content and they distribute to whoever they want.

We keep full control of the content and our distribution network and we will choose the partner agents we want to work with. The bilateral agreement is about 1) we choose the agents we want to work with, 2) we discuss the content with the agent, not with Amadeus or anyone.

We are in complete control of our content and our distribution network.

Q: Air France-KLM was one of the airlines to introduce a surcharge on bookings in 2018. Now with the bilateral agreements for the NDC bookings made via Amadeus, there will also be a small surcharge, what's the thinking behind that?

A: Some aggregators, the ones we are connected to today, have a business model that is very different to that of the GDSs, airlines don't pay those guys.

We consider it a good model, in a way, because it is not up to the airlines to pay for their content to be distributed.

Amadeus has a different model, it wants to be paid. We had very long discussions about this and it comes with a cost for us.

It's very important for Air France-KLM to keep a level playing field. NDC is a new world, a more open one than before and we want to keep it open, we want to keep many players live. That's why we have this surcharge because we have a cost of using Amadeus as an aggregator and we have a surcharge to compensate for this.

Q: A lot of NDC bookings talked about up to now are seats and bags type bookings, where are you in that part of the journey?

A: We cover most of our products -- seats, bags, public fares, private fares -- all that is in our API and Amadeus will have to integrate all our functionality. They have to catch up with other aggregators who have integrated our functionality already.

As an airline, we are live with what we call continuous pricing -- introducing new price points between two booking classes, decreasing the price gaps and offering more prices to customers.

It's really very important because it's more attractive prices for the customer and it's live for Air France-KLM in several markets and agents connected to our APIs are already connected to it.

We are building our bundles also. We will package our products adding flights, ancillaries, Wi-Fi, lunch and all types of packages. It is a work in progress but will come soon and also be distributed via our API and need to be integrated by the aggregators.

Q: When do you anticipate those type of bundled services being accessible using a) your technology b) that of your aggregators?

A: Via our technology it will be in the coming months but we will build different packages so it will be a gradual ramp up.

We will also test and experiment to ensure it is focused on the customer's needs such as corporate packages. The COVID situation is not good for testing but it's ongoing work and will be live soon.

For aggregators, it really depends on their own roadmap. All have their own roadmap and also work with many airlines so this is not 2021 with Amadeus, it's for later on.

Q: From a distribution point of view, what is it that makes NDC still part of Air France-KLM's strategy as opposed to Delta's decision to put it on hold?

A: It's a key question and I don't think many people understand it.

Some people like to say NDC is just a standard. That's a very narrow way to look at it. NDC is a key change in the process for airlines to interact with agents.

In the current world, when you use a GDS, as an airline you provide unique components such as fares, schedule and availability and the GDS builds the offer for the agent, when it gets a request from the agent.

We are not part of those interactions, we don't even know the customer demand.

If you think about it, it's a situation that not a lot industries are experiencing. You are a travel provider and for something like two thirds of your customers, those that buy via travel agencies, you don't know their demands or requests.

It's a black box between the GDS and the agent. NDC is changing that completely. We will get the travel request, be it via an aggregator or directly from the agent if it using a direct connect, the request comes to the airline.

Then, we know the request, we know the demand, be it personalized or not, be it anonymized or not, and we build the offer in the best way possible.

We can provide 200 offers, 20 offers or one offer, we can package, we can do it dynamically ultimately. It's really a new world that NDC is enabling. That's why it is so strategic for us. The aggregators are just a technology intermediary for the agent that don't want to invest in connecting directly to the airline. For an airline it's key.

Customers expect the airline to meet their requests in a better way. If a corporate wants all its travelers to have free Wi-Fi or free lunch on board, we can build specific requests for this company with which we have an agreement.

Q: Many people have said that each airline is forming it's own flavor of NDC so it's not a standard. If one airline backs away from it for their own reasons while others go for it as part of their strategy, does it create more technology fragmentation in the market and therefore confusion for customers in how they are presented with products?

A: I don't think so. Customers already compare what they buy -- they look, they search, they shop. In the GDS you don't have low-cost carriers, you don't have full-content anymore.

When they claim they have all the offers and are the best to compare and enable agents to work, it's not true.

Customers are already facing a world where they have many ways to search and compare and products are not the same because everyone wants to differentiate.

It's a fact of life, it's the internet and we think it's more transparent and fits the needs of the customer.

When a customer goes to an OTA he is able to customize if he wants to see only direct flights or airlines that offer free Wi-Fi, he's setting his own rules for what he wants to buy.

Q: Do you think the pandemic is going ot accelerate adoption of digital technologies and retailing for airlines? 

A: I think digitalization is key and we have to go on. If you get closer to your customer, you know their need better and you also reduce your costs. For me there is no reason to stop doing that. The pandemic is helping NDC, we have to go on.

If we don't it we will be less competitive because most of our competitors are doing it.

Source: PhocusWire

Comments

From Our Partners

2020 Florida PLUS
Florida PLUS
Register Now
Enterprise
The Right Rental for All Occasions
Read More
2020 Enterprise Webinar
The Return of International Travel | Enterprise & National Offer a European Perspective
Register Now

JDS Travel News JDS Viewpoints JDS Africa/MI