TTE 2015: Airlines are at the NDC gate waiting for the GDSs to open it

Technology built around Iata’s New Distribution Capability (NDC) standard promises to help all stakeholders in the distribution chain to improve the offers they present to clients.

Technology built around Iata’s New Distribution Capability (NDC) standard promises to help all stakeholders in the distribution chain to improve the offers they present to clients.

Speaking to Travolution at last week’s Travel Technology Europe trade show, Jim Davidson, chief executive of Farelogix, said NDC is indicative of where all business sectors are going.

Farelogix is the XML data standard that Iata chose to base NDC on, although the original concept caused consternation in the non-direct distribution channel, a truce has broken out.

GDSs and agents are now working closely with Iata and third party technology suppliers on the roll out of NDC capabilities, as well as airlines for direct sales and new entrants.

Davidson, who spoke on the day that a tie-up between web optimisation specialist Triometric and Farelogix was announced, said:

“Historically airline distribution was just to throw stuff out there and eventually someone walks into your store and buys something, but you had no idea how many times someone didn’t buy something.

“The data which Tiometric offers closes that loop so you have the ability to iterate those offers and to analyse and adjust them. Clearly optimising offers is now possible. The most important thing is using data to close the loop to improve your offers.

“The consumer will not necessarily notice, but they will get less non-relevant offers – less things that you are either not looking for or did not ask for. That’s the ultimate idea, honing down the ability to provide product there’s a higher probability a customer has of taking.”

Davidson added what that means for airlines’ relationships with retail partners is that they will be able to start tailoring their strategies according to their specific expertise, much like channel management technology is allowing in the hospitality sector.

“What we are focussing on is better offers. Historically airlines treated all agencies as one homogenous group and they are not even close to being that. As an industry airlines need to get better at segmenting their customers, be that travellers or agents.”

This changing dynamic is placing an onus on the GDSs, which have dominated the airfare distribution world for decades, to modernise as other forms of connectivity offer apparently more cost-effective routes to market.

“Certainly they [GDSs] have a role but their role is changing and they really have to be more of a true marketplace manager than just an aggregator of raw data, which is really what they have been.

“Frankly, all they sold was price and schedule and they did that very well and efficiently. Now the challenge is they are trying to use the systems that were originally put in place to do that and today that’s a very expensive proposition.

“From a technology point of view the cost of distribution is going down. A long time ago it was very costly to connect with an airline, today the cost of computing is down at disposable levels.”

Davidson said these reduced technology costs will help suppliers keep a lid of the rising cost of customer acquisition through dominant online channels like search, or Google.

However until airlines see NDC in operation at the agent desktop level, airlines may still need convincing it is the answer to both their direct and indirect sales challenges.

“The general consensus now is that this is the way airlines are going to distribute in the future, particularly airlines that are interested in differentiating themselves through products and services.

“The question now is timing – when will the technology be ready? The GDSs are looking at how they can connect to this technology.

“Until it comes down to the agent desktop it’s going to hard to convince the airlines of the value. They are ready. Literally the airlines are standing at the gate waiting for the GDSs to open the pipe up.

“The problem is they cannot prove day-to-day return on investment. Once they can it’s game over for everyone and everybody wins.”

Davidson said since NDC was first controversially announced more than two years ago, the GDSs and agency community has gone through the classic seven stages of grief.

He said first there was denial that it would work, then there was anger and that has moved through to reconciliation and an acceptance of the reality and the sides are no longer angry with each other.

While the old GDS Edifact messaging protocol’s days may be ultimately numbered Davidson said it would stay around for a while yet, but what will end is forcing it to do things it was never designed to do.

“Some things that are not dynamic are going to be falling by the wayside. The first stage is the ability to democratise the coach cabin by being able to buy into additional services.

“As a leisure customer I may only fly two or three times a year but I may want your extra services because this is a special trip.

“I would certainly expect to be offered that. As an infrequent leisure customer I may want to be treated as a frequent flyer. Why, because I don’t fly that often, should I be treated like a sub-citizen?

“The next stage is attribute shopping – you have what I want, an upgraded meal, isle seats and a bottle of Champagne, and that gets put into the search criteria. We are a long way from that. GDSs are all working on it, we are all moving in the right direction.

“What I see is a bigger pie being created for everybody and agents given a better opportunity to be sales people for the airlines and the GDSs to extract more revenues from the airlines because they will pay someone to help them offer more products and services.

“The most efficient path for an airline to deliver its content to the corporate and specialist markets is the GDS. The networks are there, the challenge is the point of sale is not there and the connectivity is not there.

“They could solve both those problems relatively soon. There will be some GDS bypass but it will be in those areas where the GDSs do not provide value, where all you are doing is being a pipe.

“For the longest time GDSs have taken on the role of policing the marketplace, dictating how you, as a supplier, can display your product.

“That role really belongs at the travel agency level. They can disaggregate differences on behalf of the consumer and compare different product offers not just on price. That’s the value the travel agent offers.”