Adoption of IATA's New Distribution Capability (NDC) is growing throughout the industry. According to IATA, 36 airlines were using some form of NDC as of early June, and another 80 were expected to come onboard in the near term. GDSs, technology providers and even agencies are also being certified to send and receive NDC messages.
IATA has said from the outset that NDC will enable airlines to personalize offers and sell all their products, including ancillaries, through travel agencies. But that promise does face some impediments.
The concept behind NDC is a simple one: an XML messaging standard designed to be easier and more flexible than the existing Edifact standard that NDC is designed to replace. However, while the concept might be simple, its implementation is not, and it tends to vary by airline.
In March, a Phocuswright report by analyst Bob Offutt titled "New Distribution Capability (NDC): It's Only Just Begun," cautioned that while NDC is a "common data standard ... airlines could be on different versions of the NDC standard or have different interpretations of how to use the standard. This has made each airline implementation unique."
Nevertheless, the pace of adoption is picking up after a slow start, according to Daniel Friedli, the managing director of the travel industry consulting firm Travel in Motion.
Friedli, who was master of ceremonies at a two-day NDC Summit organized by American Airlines in late June, said that most major carriers are making use of NDC to some extent.
Alexandre de Juniac
But IATA director general Alexandre de Juniac said the organization wants to see more widespread application of NDC technology, even by carriers that are already employing it.
"We have a lot of companies but not enough volume," he said of NDC-supported distribution.
Like Offutt, Friedli said technical problems are slowing adoption of NDC. Notably, he said, airlines aren't selling interline tickets through NDC-supported connections.
"As long as these problems aren't completely solved, we're not going to see the skyrocketing of adoption," Friedli predicted.
Among the airlines that are using NDC, American has been a leader. In fact, Cory Garner, the airline's vice president of sales and distribution, asserted that IATA adopted much of the NDC standard from technology American was using a decade ago.
The airline currently has NDC-enabled direct connects with 60 travel agencies, he said. And all of the U.S-based OTAs use NDC connections with American in some form. Combined, those connections account for approximately 4 million ticket sales per year, about 10% of American's U.S. point-of-sale travel agency volume.
When American announced last month that it would offer a $2 per segment incentive to agencies to book through an NDC-enabled connection to the airline, several agencies quickly said they would participate. Among them was HRG, whose global travel services director, Ian Windsor, said that participating in initiatives like American's are important.
"Customers need to be able to buy in whichever channel best suits them, and you can't force everything through the same channel," Windsor said. "And I think an open-channel way of doing it, this 'omnichannel' that people talk about, it's the way the business is going to be going forward."
He added: "It's not for me to say 'embrace it or lose it,' but I do think there will be an element of, you have to at least be involved in the conversations that dictate where the future is going to be and have a say in it rather than just sit on the outside and say, 'No, it's another fad, it's not going to happen.' Because I seriously think this one is going to happen, and people are going to find out the hard way if they don't join in the conversations."
Windsor said that going forward, HRG is committed to building direct connections with airlines.
W Travel, a travel management company (TMC) based in New York, is also committed to NDC. In fact, it recently became the first TMC to achieve NDC certification from IATA, which certifies airlines, travel agencies, aggregators and IT providers at one of three levels. Level 3 denotes the highest level of compliance.
W Travel CEO Sarosh Waghmar said that the Frosch affiliate currently has an NDC connection with American Airlines, and it is looking to establish further direct connections with other airlines. W Travel is Level 2 certified and on track to reach Level 3 certification by the end of the year.
Waghmar said that investing in NDC is a priority for W Travel because it is about giving W's clients the best options possible.
"We are betting on this," he said. "We believe that customers come first, and from a TMC or technology perspective, it is painful to use the existing way of booking a ticket and pushing out ancillaries. It's broken, right? You can [only] do so much in the GDS."
Waghmar said he believes NDC will improve agents' workflow and help present clients with more relevant, personalized offers.
"Through NDC, [the workflow] matches a product and offer for who it is, when it is and what they are consuming; that's the magic that will happen," he said.
Still, direct connects remain controversial among many travel agents who prefer the more unified workflow offered within the GDS environments.
Moreover, some airlines aren't taking the gentle, incentive-based approach that American has embraced. Two years ago, the Lufthansa Group shook up the agent channel when it began imposing an $18 distribution fee on bookings made within a GDS. The move was an effort to drive more distribution into direct channels as Lufthansa sought to get away from the full-content agreements that the GDSs have been able to extract from airlines.
This November, British Airways and Iberia will follow suit with a $10 one-way fee on GDS bookings. When the carriers' parent company, IAG, announced the fee in May, it emphasized that it has invested substantially in NDC over the past few years and that agents can book via NDC-enabled direct connections.
"My forecast is that this will be the future, not to have full content through the GDS," said Harry Hohmeister, a member of Lufthansa's executive board and a former head of the company's worldwide distribution strategy.
The direction many travel agencies and airlines go with NDC could ultimately be determined by how quickly the GDSs develop the capability to use the standard for displays and sales of the full suites of ancillary products offered by airlines. Currently, the vast majority of ancillaries sold through the GDS are for seat assignments. Notably, American made its $2 per segment incentive offer valid even for NDC-supported bookings through the GDSs.
Across the industry, NDC implementation is still in its relatively early stages, according to David Doctor, Amadeus' vice president of provider offer management.
"We're going through the process, all the parts and players, of learning about it," Doctor said.
Amadeus itself has been able to integrate XML connections (NDC is an XML standard) since 2007, when it started to do so with low-cost carriers. The company currently holds the highest level of NDC certification from IATA as an IT provider. Its distribution business, or GDS, is working to achieve certification.
According to Doctor, Amadeus currently has NDC-type connections with United and Delta for ancillaries, and it plans to work with American after the carrier announced its ability to offer NDC product bundles within corporate booking sites. The carrier also said it hoped to work with GDSs to present its full suite of ancillary products, but for that to happen, GDSs would be required to have Level 3 NDC certification, which none yet have.
On Sabre's most recent financial earnings call with analysts, CEO Sean Menke discussed the three levels of NDC certification and what each entails.
According to Menke, Level 1 certification is attained when a GDS has the ability to offer ancillary shopping, something Sabre does today with American; Sabre is Level 1 certified. With Level 2, the airline creates the inventory and pricing on an offer, but Sabre still handles order management. With Level 3, Menke said, order management is shifted over to the airline.
When it comes to NDC implementation, Doctor said Amadeus would proceed in such a way that it addresses the needs of travel agents.
"Adoption is really driven by creating the least disruption, and what we're trying to do when we address NDC is find a way to make it least disruptive for the agency community," he said. "That's the way we feel will, No. 1, be better for the agency community; No. 2, will also drive better adoption, which is obviously something that we believe the airlines want, as well; and No. 3, it allows, once you have adoption, to get all those additional benefits out into the marketplace, which is better for the industry as a whole."
Travelport is working to achieve Level 3 NDC certification by the end of the year, according to Ian Heywood, the global head of product and marketing for the GDS. While he said incorporating NDC into Travelport wasn't particularly complicated, making sure the portal could function with both Airline Tariff Publishing Co. and API interfaces was complicated, and airlines use a mixture of both.
Wade Jones, president of Sabre Travel Network, also said NDC brings some complexities with it.
Speaking at Sabre's recent TTX technology conference, Jones said, "There are things that we have to figure out from a standards perspective, from a commercial model perspective, but we already have NDC connectors for branded fares, paid seats, ancillaries, and we certainly believe in the opportunity to do dynamic pricing, dynamic availability, packaging, personalized offers."
Menke said that complexity is further driven by the fact that NDC standards are constantly changing. Sabre's goal is to prioritize what to develop around NDC so as not to develop "one-off solutions for specific carriers."
He also said the complexity that comes with NDC will likely only emphasize the importance of GDSs in the distribution landscape. Most agencies do not have the technology or financial investment required to make direct connections with airlines, further driving the importance of GDSs.
"I think what we will continue to find is that the best way of actually selling products and services is through the GDS, but we need to continue to invest in capabilities to be able to do that," he said.
Jones also emphasized that contrary to industry assumptions, Sabre -- which is Level 1 certified as both an IT provider and an aggregator -- is not anti-NDC.
"We have been and will continue to be advocates for new technologies, APIs, messaging protocols that enable our customers to do the things they want to do," he said. And NDC and XML as a standard is one of those things. So we are supportive. It would be silly for us not to be."
If the GDSs don't innovate fast enough, they might well face competition from the non-GDS, NDC-supported marketplaces that are now emerging, such as Ireland-based OpenJaw and German startup Flyiin, both of which offer several NDC products that provide shoppers with price comparisons and offers from multiple airlines.
Offutt also mentioned another NDC innovator, Air Black Box, which has developed a product that enables airlines to cross-sell another airline's product line in its online sales channels.
It also has an NDC product, AirADD, that "allows for the easy alignment and sale of ancillary products, irrespective of how disparate or unique they may be."
Offutt wrote, "The airline is completely in control of branding, pricing, presentation and bundling. This means that airline A can sell airline B's ancillaries to airline A's customers on airline A's website with airline A's branding and approach."
Offutt said that NDC as a whole is beginning to gain momentum. In his Phocuswright report, he wrote, "Travel agencies (brick and mortar or online) and TMCs, it is time to lead, follow or get out of the way; if you don't, the result will be declining market share."