Fear of unknown grows rampant as IATA pushes its NDC initiative

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MIAMI — IATA’s New Distribution Capability (NDC) has suddenly become the travel industry’s bogeyman, with opponents convinced that it will end GDS/agent distribution as we know it, while proponents insist there’s nothing under the bed but a benign standards initiative that will bring efficiency to the way computer systems talk to each other.

While NDC is, so far, simply an attempt to define a set of standards, it also has far-ranging implications. And since its actual impact won’t be known until it is implemented, a nagging fear of the unknown has grown rampant in some parts of the industry.
IATA describes NDC simply as a “collaborative industry initiative to define a messaging standard that will enable retailing opportunities through the indirect (GDS/travel agent) channel.”

But opponents smell an airline plot to rid the industry of GDSs and accumulate data on passengers as a means of setting fares and seat availability at the individual level.

ASTA simply sees reason for caution.

“It is a reinvention of the travel agency distribution system,” said John Pittman, ASTA’s vice president of industry affairs. He called the Society’s position on NDC “neutral but not passive.”

ASTA, he said, continues to ask “probing” questions to determine what NDC could mean for the agency distribution system.

On the plus side, he said, NDC could mean an end to the dreaded debit memo. But he also said that IATA’s attempt to standardize the language used for direct connections already being built between airlines and distributors such as GDSs, agencies and travel management companies, could complicate interline agreements.

And there are other fears.

One is that NDC will upend the current economic model under which airlines pay segment fees to GDSs, which in turn pay travel agencies and travel management companies (TMC). Those fees can mean the difference between turning a profit or losing money for TMCs.

A second concern is that NDC’s authenticating capabilities — revealing to the airline exactly who the traveler is — will mean that carriers will offer passengers fares derived from their past purchasing behavior or from other demographic information rather than offering a full range of fares.

Some consumer advocates and travel managers fear that this could mean airlines will not offer any fare on a high-yield flight to a budget passenger, or will offer higher-priced tickets to a passenger living in a ZIP code with a high proportion of passengers who fly business class.

NDC’s defenders argue that market forces created the current airline distribution model, and those same forces will create the next model.

But however the model changes, speakers and delegates attending last week’s UATP Airline Distribution Conference in Miami seemed to agree on two points: First, the changes will not take place overnight; and second, they will not be predictable.

Moreover, NDC supporters say, some concerns being voiced by opponents exist already and are not unique to NDC or even caused by it.

One thing appeared clear at the conference: Despite constant griping by airlines about GDSs, no one believes they will be going away in the foreseeable future for a simple reason: GDSs deliver the airlines’ highest-yield passengers, without whom the carriers can’t survive.

Even American Airlines, which has led the drive for direct connect, an effort seen by many as a way to bypass GDSs, whose fees airlines consider so onerous, is willing to pay the GDSs for those passengers, especially when they are business travelers.

Cory Garner, managing director of sales and distribution for American, said TMCs consistently book the airlines’ highest-yield passengers, “so it’s worthwhile to pay more for TMC volume than for the typical leisure channel selling the lowest fare.”

Airlines still pay agencies for their sales, though exclusively on a performance basis.

Another argument offered by NDC supporters is that the technology will enable agents to sell the airlines’ ancillary products and services.

Graham Wareham, senior director of distribution and consumer direct sales for Air Canada, said airlines want to display their products on as broad a shelf as possible, and that not only means selling through travel agencies but also making sure agencies have all the information they need about ancillary products.

“Of course travel agencies have a role in the current environment,” Wareham said. “Their relationship with an airline should involve compensation.”

GDSs have what Jean Charles Odele Gruau, regional director of the Americas for IATA, described as a “privileged position with airlines and travel agencies.” He said he sees GDSs as continuing to play a “key role” in the evolution of distribution.

To support that assertion, he cited Travelport’s recent announcement of a new merchandising platform that enables comparison shopping for ancillaries and fares.

That kind of platform enables airlines to display what they have to offer in the most effective way, he said.

Garner compared NDC to the rollout of high-definition TV, and he compared Farelogix, which is building the pipe connecting American with Travelport, to the trucks that rolled out huge spools of multicolored cable when HDTV first arrived in a neighborhood.

Garner compared the dramatic improvement of HDTV to the enriched content that travel agencies will see with the implementation of NDC.

Though optional, NDC is an initiative to standardize the XML language that airlines use to connect with indirect channels and enable them to display in the GDSs such ancillary services as WiFi and extra-legroom seats far more effectively than they can today.

Addressing fears that a new XML standard is an effort to do an end-run around GDSs, Garner pointed to American’s agreement with Travelport. XML is simply about the pipe that delivers information about all the services an airline is selling, he said. The resulting direct connection can be made to a GDS or to a travel agency, Garner said.

Delta Air Lines, which began selling its Economy Comfort seats on Travelport last week, is also using a direct-connect pipe to Travelport. But its pipe is not XML-compatible. Chris Phillips, managing director of distribution strategy for Delta, said that’s because XML is still an evolving standard, whereas currently “APIs are easy.”

APIs are openings in software code that enable developers to insert their own instructions — in this case, communications links between an airline and a third party.

Delta is also building direct connections to travel retailers, including leisure agencies, Phillips said, adding, “We think agents will be better informed and provide more value to the customer” with direct connections.

IATA representatives also denied that NDC would hinder comparison shopping, one of a number of concerns about NDC raised by opponents, particularly by Business Travel Coalition Chairman Kevin Mitchell.

Addressing that concern, Odele Gruau said that under the NDC proposal, airlines would only authenticate travelers who opt to be identified.

“Authentication is optional,” he said, comparing it to offers consumers see from Amazon when they allow cookies on their computers.

Odele Gruau said that right now, travelers can be “trapped” on airline websites, entering their frequent flyer numbers and seeing only what that airline has to offer, while NDC means consumers “will receive different airline offers.”

Flint said that today, many consumers will first check fares on a site like Kayak and then jump to the airline site to make sure that carrier isn’t offering a lower fare there.

“If you’re in indirect distribution, this should drive you nuts,” Flint said. “The idea of NDC is to close that gap with the indirect channel so you’re not necessarily jumping over to the airline site.”

Addressing privacy concerns, Flint said that NDC would have no impact on any privacy rules and regulations that already apply to airlines, GDSs and agencies, nor would it require agents to share their customers’ information.

Flint said commercial aviation is a hotly competitive industry, and any airline that does not present a full range of fares to its customers will lose market share.
Perry added,“The marketplace enforces discipline.”

At least one travel agency is clearly supporting NDC.

“I want to be able to do exactly what the airlines do on their websites,” said David LeCompte, president and CEO of Short’s Travel, a TMC that also arranges travel for sports teams.

“To have airlines each do their own thing would be chaotic,” he said. “To have standards makes total sense. … If I can offer additional services that the consumer or the corporate traveler wants to purchase at the time of sale, it’s a win-win-win.”

For that reason, he said he was “perplexed” by the widespread opposition to NDC as laid out in Resolution 787, which IATA has filed with the Department of Transportation.

LeCompte acknowledged that selling ancillaries does add steps to the sales process, which some agencies have seen as creating more work. But he said he sees ways to use technology to sell ancillaries efficiently and cost-effectively.

Follow Kate Rice on Twitter @krtravelweekly.

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