decode
5 years ago
 

The real NDC: Decoding the planned (r)evolution in airline distribution by IATA and airlines

A proposed dramatic overhaul of the technological standards for how airlines provide airfare content to end users probably won’t lift carriers out of the grasp of middlemen.

But that doesn’t mean the effort is useless.

Last autumn, the International Air Transport Association (IATA) announced its plans for revised standards, called the New Distribution Capability (NDC), to reform how airline content, such as airfares, routes, and seat availability, reaches passengers through websites and travel agencies.

IATA aims to kick off the first industry trial for the NDC by this March.

During the pilot tests, airlines will load fares and test messaging with end-users, who will be able to pull some information directly from airlines and ignore the GDSs. The first pilot tests won’t include code shares and other complex itineraries, say committee sources.

Results will be presented in October 2013. So business adoption won’t begin until 2014 at the earliest.

The story of the NDC is the story of a battle between suppliers and distributors over fees and IT investment at a time when digital technologies appear to be causing the airline distribution industry to fragment.

It’s a call for revolution. But is evolution more likely instead?

The official goal of the NDC

The industry routinely updates its universal standards, which spare airlines from developing unique interfaces for each distributor. The NDC is a much bigger-than-usual re-thinking of how information flows.

If the NDC succeeds, it will signal a multi-billion-dollar shift in the distribution balance of power from intermediaries to suppliers.

According to IATA’s official goals, the NDC will first focus on creating standards that impact the business of every company and organization that’s involved in airfare shopping and search comparison.

Airlines will build a platform where airfares and availability are combined with personalization tools, to allow airlines to tempt passengeres with custom offers and ancillary services that are personalized because airlines will, at last, collect passenger histories and profiles.

delta personalization

Winners and losers

Some airlines are gung-ho at the idea, namely, Air Canada, Air France/KLM, American AirlinesBritish Airways, DeltaEmiratesLufthansa, and United.

The NDC and related initiatives could devastate the three main GDSs: Sabre HoldingsAmadeus, and Travelport.

One prediction by Henry Harteveldt, who at the time was working for Atmosphere Research Group, says that, by 2017, the GDS share of worldwide airline reservation volume could drop to 7%, down from today’s roughly 60% share.

The NDC could lead to supplementary work for IT companies, such as FarelogixHPConcurOpenJaw TechnologiesSwitchflyEverbreadITA Software by Google, and Datalex. Some of those companies, itching for revenue, are goading IATA to move quickly.

Many of the world’s travel agents—who process $300 billion a year in tickets globally—think they “own” their customers. They may feel threatened if airlines try to bypass them to obtain passengers’ personal information, affinities and purchase histories.

The NDC and related airline moves will definitely impact ATPCO, the main fare filing company, and OAG, the main schedule filing company, one way or another.

OpenTravel Alliance and Open Axis will need to coordinate, as each has been developing its own XML standards.

The NDC is a bid for relevance by IATA. Some airlines, such as Easyjet, try to ignore it, and some of IATA’s current members bridle at its membership fees. If IATA can play a role in helping airlines get a larger cut of fast-growing sales of ancillary products, it could become vital again.

Travel management companies (TMCs) are participating in NDC talks, too: American Express, CWT, HRG, and BCD.

Online travel agencies like Expedia will need to adjust as well. Under United’s vision, customers would see the same seat maps and same personalization and ancillary options whether they shopped for fares on United.com or Expedia.com.

united seat map

NDC cheat sheet

Throughout the debate, Tnooz has heard provocative statements from all sides. Some of the assertions strike us as oversimplified or, in a few cases, downright misleading.

Here’s our cheat sheet to the debate.

*****

“GDSs are fully capable of handling the merchandising of airline fare content as it is.”

 

Alas, no. To coin a hashtag, #GDSfail.

Today, many argue that GDSs simply cannot handle the merchandising of airline content.

This is not a technical issue. The GDSs are quite capable of selling complex ancillary products by building supplemental or doing what the airlines want for distribution with modern languages, like XML. Sabre, for one, touts its 2012 ranking of No. 26 on the InformationWeek 500 – a list of the top US technology innovators. A third of its transactions are processed using XML, say company sources.

No, it’s a commercial issue. The GDSs have lacked the vision, interest, or execution, according to the airlines.

Exhibit A: Air New Zealand’s Economy Skycouch, a product that is sold in a way that GDSs haven’t been prepared for: essentially, buy two seats and get a third one free. The airline debuted Skycouch in spring 2011.

As of today, none of the GDSs sell it. Agents have to go direct to Air New Zealand if they want to purchase the product.

True, we don’t know if Air New Zealand was non-cooperative in fulfilling its share of responsibilities in making that product available in the GDSs. But let’s assume that the airline did its share of the work fully.

For 20 months now, none of the GDSs have been willing to handle the innovation of three-for-two pricing.

One example doesn’t make an argument, of course. But airlines cite other similar examples.

“GDSs have stifled ancillary sales.”

This perception appears to be the biggest lightning rod.

A key impetus for the NDC is the billowing of ancillary revenue products. Jay Sorensen, an analyst at Ideaworks, thinks that this year’s $32.5 billion revenue in global ancillary sales could rise to $100 billion in the future, as additional airlines get in on the act.

The real issue is whether the airlines are getting value for money from the GDSs. On that score, the airlines inevitably say no, but is their case more compelling?

GDSs say they’re happy to process all airline ancillaries. More than 200 ancillary types have been defined as programming standards.

Yet airlines accuse the GDSs of not training agents on how to use the ancillaries for upselling passengers.

For instance, KLM Economy Comfort has been available via GDS since 2009 but agents cannot sell it in the US, Asia, South America or Africa because of a lack of GDS investment and agency training, according to a senior vice president at Air France/KLM.

Another example: Fare families from Air Canada.

Back in 2002, Air Canada began trying to compete with its low-cost rivals by offering its services in two packages: unbundled (with passengers able to pay for only what they want such as a bare bones seat and no meals, lie-back seats, or free checked luggage) and bundled (a full service plane ticket, with one big fat ticket price and great value).

Air Canada struggled to get its ala carte products displayed in the GDSs. GDSs weren’t very interested in doing the investment to get the product out.

It wasn’t until 2010 that GDSs began to display so-called fare families for Air Canada and other carriers, where search results could be grouped in buckets according to similar characteristics such as cabin, refundability, and booking class.

It’s true that the supplier must be willing to make the product available in a way the GDSs can use and pay their share of the cost. It takes two to tango, and we don’t know what Air Canada brought to the table.

Ironically, Travelport now regularly touts its merchandising of Air Canada fare products as a model of GDS/airline collaboration.

Still, eight years is an awfully long time for GDSs to fail to create the infrastructure for selling a product that would be profitable to themselves and their allies, the agents.

Here’s another example of how GDSs have been slow to handle ancillaries:

To quote from a presentation given in December by Eric Leopold, director-passenger for IATA:

GDSs have often said that the reason they are not providing more information is because airlines do not share this data with the GDSs.

But if we look at the example of baggage data, GDSs have access to the data through ATPCO since 2009.

However, as [visiting a major OTA today shows], the consumer is unable to access the baggage data specific to their flight, and instead is presented with generic information.

When it comes to failure to merchandising ancillaries, GDSs need to take the bulk of the blame, though they’ve made some catch-up progress in the past two years.

united airline distribution

Airlines are ready and able to pay for the huge IT project of building a dynamic distribution platform.

We’re skeptical.

It’s not encouraging that no dollar or euro figure has been offered by anyone for the cost of moving to “value creation hubs” by 2017. We’re guessing the bill will be somewhere between the cost of American Airlines building Direct Connect and the cost of Sabre’s annual operatons. That’s a big range.

Until now, airlines have borne distribution costs by paying GDS fees and related third-party expenses, such as agent commissions. Yet airlines want to place the burden of distribution costs on the third-parties selling their airfares.

Case in point: revenue sharing. The airlines say the GDSs need to build out to support the NDC, but there has been no conversation about how the GDS’ get paid for that.  Most airlines state that ancillary products and services sold through a third party are not commissionable.

Some skeptics even question if the airlines will be willing to invest in their own IT systems to prepare for next-generation distribution.

Advocates of the NDC counter that the major airlines are prepared to sink money into this IT project because they are 1) so furious about GDS fees and complacency and 2) financially stabilized after a decade of mergers.

Plus, NDC advocates say the new distribution infrastructure is an investment airlines can afford to make. If the investment enable the airlines to sell profitable ancillaries more effectively and more often, the airlines may be able to quickly recoup its costs.

“Airlines have thought seriously about the role travel agents play in all of this.”

No.

For instance, there has been little talk of how airlines will pay for the costs of getting many of the world’s 60,000 travel agents to adopt the technology. Beyond the price tag of building the interfaces, there’s the cost of day-to-day operations: Will airlines help pay agents to adopt their technology?

For decades, the GDSs have given technology free to agents to encourage them use it, and sometimes even paid them incentives to use the machines.

Will the airlines pay for the agent’s technology costs and any training they may need to access an NDC-based fare feed?

How will the costs be borne? Within IATA’s membership fee? By volume? Per transaction?

One thing is clear about next-generation airline distribution: It means different things to different people, and everyone expects someone else to pay for it.

“By 2017, traditional GDS bookings will account for just 7% of worldwide airline reservation volume, down from about 50% to 60% today.”

A bold prediction!

This prediction comes from Henry Harteveldt’s report, commissioned by IATA. It’s echoed by Delta’s goal of 60% direct connections, stated by Chris Phillips at October’s WorldConnect conference in Monaco.

It is connected to a related prediction that the airlines will make a series of initiatives to de-emphasize their partnerships with GDSs and supplement them with what the report calls “value creation hubs” (VCHs).

Once upon a time, roughly 80% of airline tickets flowed through travel agencies and the GDSs they used, while only 20% were sold directly by airlines. Now in the US that balance is closer to 50/50 and internationally it is 60/40 GDS to direct. The trend is moving away from GDSs worldwide, except possibly in the newly deregulated market of China.

Harteveldt’s report is worth quoting at length:

Value creation hubs will use the new-generation airline commerce technology infrastructure used to power airline CRS/PSS host systems, ecommerce solutions, and more, thus reducing the need for lengthy, costly disruption in a conversion…

Unlike GDSs, which work with individual airlines, VCHs will be developed for each major alliance — Oneworld, SkyTeam, and Star Alliance.…

Because the VCHs will operate at a “group” rather than single airline level, the VCHs will house a “community link”, similar to Amadeus.Net, which will function as the “hub of the hub”.

This hub will connect to various airline CRS and PSS hosts, virtual hosts, and other systems, and serve as the gateway from and between the airlines that participate in a given VCH.

As long as an airline has the appropriate business agreements with the VCH operator, it will be able to connect to their partner through the appropriate VCH’s community link.

To create itineraries, the community link will extract and integrate airlines’ schedules, inventory, product content, prices, customer data, and more, using industry XML standards developed by groups such as IATA, OpenTravel Alliance, and Open Axis Group, conceptual frameworks such as IATA’s NDC, and EMDs for ancillary product sales.…

To reach the airlines that participate within each VCH, agencies and other intermediaries will subscribe to and connect with the VCH, rather than a GDS.

That’s a very broadly painted view. The devil is in the details.

Let’s say airlines build a “pipe,” or an open Application Program Interface (API), in which they pour their airfare content “wholesale” in a standardized format that any large distributor—even Amazon, Facebok, Google Flights, or other company—could tap into and sell, as Harteveldt’s report and a United presentation suggest.

Fares could be marked-up by these distributors, but their customer experience would be the same on a brand.com (i.e., united.com) site and on a co-branded or partner OTA site, according to a presentation on new distribution tools in practice made in October by Chris Amenechi, VP of merchandising & distribution at United.

Yet if any third party can tap into wholesale inventory and price it, how will airlines be able to assert “ownership” over the customer’s personal data?

“It’s all about the fees, stupid.”

A new survey lends support to this view.

“GDS cost/business model”  were the top “concern” of 15 airline marketing, sales, and distribution executives in a December 2012 report by Atmosphere Research Group — a report that IATA commissioned about third-party distribution. (See chart.)

iata

“Airlines spend $7 billion per year on GDS fees…which is greater than industry profits this year.”

That statistic is less solid than it first appears.

IATA chief Tony Tyler quoted the $7 billion figure when he introduced the NDC in October. It comes from a back-of-the-envelope calculation by Monty Brewer, the former CEO of Air Canada.

Mr. Brewer declined to provide Tnooz with the math for his calculation. But he says he it is based on his deep immersion in industry data. He emphasizes that no one has challenged the figure, which implies that it must be reasonable.

Actually, the figure has been challenged by one of the GDSs, but only off the record. (Sigh.) It says that $6 billion in booking fee revenue is a more plausible estimate, but the GDS-that-doth-n0t-speak-its-name wouldn’t provide its math to Tnooz, either.

In short: be skeptical of all these numbers.

“GDS fees are extortionate.”

Doubtful.

The GDSs insist that their booking fees amount to around 2% of the average ticket value in the US.

That 2% compares favourably to much higher commission rates in other travel segments. It also compares favorably with the cut taken by distributors in other, comparable marketplace businesses.

Pressures have kept a lid on legacy airline profits. But GDSs claim that their booking fees for legacy airlines have declined by a multiple of rate drop in profitability of those airlines.

“Airlines can easily take away the corporate travel business from the GDSs.”

No.

If the airlines slash their expenditure on GDSs, how much of that money would they pocket? Not much. They would likely have to spend the same amount of money on their own and other third-party distribution systems.

After all, true personalization in shopping and selling requires lots of hardware, lots of software and expensive analysts to ensure the right offer is indeed going to the right consumer, none of which are in place at airlines now.

Yes, airlines already sell tickets directly to consumers through their own websites, many times with personalized offers and ancillary sales. But most of the tickets sold through direct channels are uncomplicated, low-value, leisure travel tickets.

In contrast, GDSs tend to process the bulk of transactions from corporate travel agents and luxury travel agents, which handle the bulk of high-value, complicated-itinerary tickets. The per-ticket IT processing cost of transactions handled by GDSs is much higher. Airlines will have to pay much more than they have had to in the past to serve these corporate customers directly.

“The NDC was drafted by a cabal, with a handful of airlines excluding other stakeholders.”

Nah.

IATA’s process has been relatively orderly and transparent, though critics disagree.

Like drafting legislation in parliament, drafting a major overhaul in distribution is a project best suited to committees that build outward, gradually incorporating more and more feedback from more and more stakeholders as the project takes shape. It has published its timeline of all of its outreach efforts.

IATA hurt itself when its initial informal presentation was couched in language that only the airlines saw the GDSs as obstacles. They got so much blowback that they opened it up to other groups.

One reason: When they criticized GDSs, they by extension criticized travel agents, who the airlines need to woo to make the NDC happen.

“The NDC lets airlines learn about customers directly, to better personalize product offers.”

Sure.

But personalized offers are a long way off—years beyond 2017—except for airlines’ direct sales via their own websites.

It’s technologically complicated. Transparency, regulation, and competitive fairness form huge roadblocks. There’s also a legal minefield around information-sharing, especially given strict EU laws.

Though IATA insists that:

“It is not true that profiling is mandatory or opt-out, that customer data will be stolen and that customers will not see all the offer.”

“If the NDC initiative fails, we can go back to the status quo.”

Not likely.

Let’s take a deep breath, and think about the big picture.

Over time, the balance of power between suppliers (airlines) and distributors (GDSs) has swung back and forth.

Today, the world’s largest airlines think they have the upper hand. Airline profitability is stabilizing, while GDS margins are under pressure. So the major airlines have invented the NDC as a way to strengthen their negotiating position with the GDSs when it comes to fees and IT investment.

Yet the airlines may be overplaying their hand. While they have enormous power today, they can’t stir up an industry revolt on their own.

For the airlines to win, they will need the support of travel agents, OTAs, and corporate travel managers. But those groups may be satisfied with the GDS-dominated model as it is.

Our hunch is that agents, OTAs, and corporate travel managers may be happier with patchwork evolution instead of revolution. See Flybe’s recent effort to work with distribution partners to incorporate complicated, bundled fare products. See American Airlines’ latest version of its Direct Connect.

So the NDC may fail because the airlines fail to persuade agents, OTAs, and corporate travel managers that it’s in their immediate financial interest to invest in learning a new distribution model.

If the NDC fails, don’t expect the airlines to respond with a “Diet NDC”, a scaled-down version of an alternative distribution channel that the airlines control directly. The airlines see their project as all-or-nothing. The odds of a RoomKey for airlines are zero-to-none.

Yet if the project collapses, expect it to mean something important has definitely changed. The industry balance of power will no longer swing extremely between suppliers (airlines) and distributors (GDSs). In the future, power will be dispersed, and the market will be fragmented.

There’s a macro trend toward fragmentation that is noticeable in other, similar “content distribution” industries. Digital technologies have undercut the ability of a few giant suppliers or a few giant distributors from dominating marketplaces.

See what’s happened to music (from Columbia Records to iTunes, Spotify, and BitTorrent); broadcasting (from BBC to cable networks, YouTube, telecom companies); and corporate email (from Novell and Lotus to a wide range of multi-source, multi-platform tools players like Outlook and Google Mail).

On a related point, customers are developing expectations from their purchases in these other content industries to their purchase of travel, such asf choice (for products beyond a bare bones economy class seat), personalization (tailored product offers based on past purchase history) and transparency (a consistent product offering across platforms).

The airline distribution industry has to decide how to respond to this meta trend toward fragmentation because of digital technology. Does it want revolution, or evolution? Does it want to overthrow the GDSs by 2017 with the NDC, or make a series of patchwork fixes?

We’ll learn the answer soon.

Get broader context on the NDC: 

Tnooz has presented:

NB: This article is the result of briefings and interviews by the entire Tnooz team with many of the stakeholders (GDSs, airlines, IATA, etc) over the past six months. Thanks to all for their contributions.

NB2: Microscope code image via Shutterstock.

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Sean O'Neill

About the Writer :: Sean O'Neill

Sean O’Neill had roles as a reporter and editor-in-chief at Tnooz between July 2012 and January 2017.

 

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  1. Erich Hoefer

    Excellent article – particularly your points about the lack of substance as to what the future of intermediation will look like. As follow up I followed the link to United’s presentation. Perhaps the slides are hard to follow outside the context of the presentation but United seems to be pointing to the examples set by Apple and Amazon where a standardized platform led to innovation in product delivery.

    I wonder whether the speaker intended to use examples of marketplaces where the intermediary captures 30-40% of the value of each sale (shocking margins by airline standards) or whether another point was being made. I frankly wonder if that is a hint of unintended honesty on the part of the airlines. To several of the points you and others have made, I can’t imagine how anyone will be incentivized to recreate an entirely new distribution network unless returns of that magnitude were on the table.

     
  2. Richard Clarke

    I wanted to provide some additional data points and perspectives.
    1. The GDSs are an integral part of the infrastructure and will remain so for some time.
    2. The GDSs largest expense is incentives, our research suggests close to $2.5Bn between the 3 main GDS providers but there is also profit, but there is indeed expense. Systems etc.
    3. Henry has said that GDS’ would disappear before. But leaving them with 7% is something of a record (and I am sure that this is not quite in context) by 2017. I can’t disagree more. They will transform to meet the challenge of the market place.
    4. Sabre and Amadeus account for about 40% of the market for airline reservation systems (the thing that would “power” NDC). They won’t do this for free, even if it’s less work.
    5. There are no challengers to the current providers. Not one. ITA are out of the PSS business, so who will ride in to rescue the airlines ? The airlines ? Nope.
    6. There are just too many people that don’t like the current model, to describe it as obsolete when it sells some 60 to 70% of the $600Bn is, well, just silly.
    7. Customers like travel agents. Expedia, Priceline etc will compete for the business and they and others have shown ability and resilience in attracting customers to buy their products, or those products of others. Competition will continue. The regulators will see to it.
    Better informed is just better.

     
    • Timothy O'Neil-Dunne

      Richard

      If I may I would like to take 2 approaches to responding to your points. One approach is to address your points broadly – the other is to look at what NDC really is.

      I think we have to be careful not to continue part of the miscommunication. We have to separate the GDS Business from the GDS companies. One also must remember that in addition to the 3 Western GDSs there is a very large one in China. Who BTW does not pay incentives.

      I cannot support the supposition that “for some time” is an inevitable outcome. The GDS companies have already coded into their contracts with the agencies the end of the incentives. IE they know the writing is on the wall. They have different names but those capabilities clearly exist. I will once again admonish anyone who signed a GDS contract without reading, comprehending it AND challenging it (and that applies to airlines who signed without understanding the full implication of what they agreed to). The judge in the AA vs Sabre lawsuit was crystal clear on the topic of culpability. He distinguished logically between willing and unwilling participants but gave no quarter on the topic. IE he laid out the legal principle that anyone signing a GDS contract which included bad behavior (such as restraint of trade) would be liable for their actions willing or not.

      That the GDS companies will exist is true. That they will exist in their current form by 2017 ( a notable date if you follow the financial machinations of the GDSs) is in my view highly unlikely. Let me just add as an example that Amadeus’s margins are greater in the PSS business than the GDS business. That should be food for thought as to their willingness to be able to dump the model. That is an elephant in the room for some nice people in boardrooms elsewhere.

      On competition – politely horsepoop. Where were the regulators when the mergers and JVs were approved? If you dont think that had an impact on competition – i urge you to compare prices across the Atlantic over the past 4 years since the JVs were first approved. Where were the regulators when competition from traditional agents (the high street kind) collapsed? The regulators should have addressed the issue of consumer protection and real competition at the pricing level rather than fiddling about with channel conflict which they have shown themselves incapable (or inadequate) in addressing. To wit – how long have we been waiting for a new European CRS code of conduct?

      Let me turn now to what NDC is rather than the rabid debate on the potential of the model change.

      NDC is a schema for data transmission. Today we have 2 separate schemas – EDIFACT (that essentially replaced Type B message traffic) and XML (that essentially replaced type A terminal traffic). Dumping the old one (EDIFACT) and having a common capability is the logical and technically better way to go. At its basic form the adoption of the schema (now approved by IATA as NDC1.0) is a smart thing to do for the airlines to have a SINGLE schema to support peer communication as well as distribution communication.

      In of itself that is a complex tasks and this is why there are a lot of people from all over the industry working on this.

      If I may I would like to address the issue of industry collaboration. There is some misguided notion that the distribution channel has the right to participate. The standards have always been managed by the airlines. Its their standards. So there is no god given right assumed or granted. BUT despite that IATA would be well advised to do two things.

      1. Do a much better job of communicating what NDC is and its impact
      2. Involving the user community in its discussions and design so that it doesnt’ create the perfect Dodo or for that matter an imperfect camel.

      And I agree that better informed is better. But let’s make sure that we present a balanced view of that information.

      Cheers

      Timothy

       
  3. Michael

    Can you tell me, what is the total spent on GDS fees ($6 or 7 billion) as a percentage of total airline revenues? It seems like a big number, but I’m not sure what it means in terms of the bigger picture.

    Thanks for a good article. I wonder what corporate travel buyers make of it all…

     
    • Dennis Schaal

      Sean

      IATA forecasts $505 billion in revenue globally/system-wide for passenger service by commercial airlines.
      GDS fees of $6 to $7 billion are a small percentage of that.
      *Fine print: Not all airlines participate in the GDSs. (Southwest’s $3.6 billion estimated 2012 revenue was not booked through GDSs.

      Some IATA officials feel the more relevant comparison is airline profits versus GDS fees. Global annual airline profits for passenger service/commercial airlines was only about $4 billion worldwide last year, by some estimates. So in that light, GDS fees are quite enormous.

      Fun with statistics.

       
      • Rob

        The GDS fees vs. airline profits comparison isn’t a valid one. Any attempt to compare the two is just spin doctoring (apparently by IATA and the airlines).

        GDS fees are gross revenues, not net profits. There’s a cost to distribution which some (large) portion of the GDS fees cover. That cost has to be deducted from the overall GDS fee revenue before it can be compared with airline net profits.

         
        • Ben

          Isn’t the largest cost just paying the Travel Agents kickbacks for each booking to keep the GDS model alive?

           
  4. Neamh

    If this initiative fails, the real loser will be IATA. They jumped on the merchandising bandwagon a bit late and in an obvious attempt to remain relevant to their airline members.

    They’ve taken on an enormous task and have entirely underestimated the time and effort needed to not only build something like this but to just gain consensus about what in fact should be built.

    If the IATA initiative does fail, it can be fairly easily replicated on a much smaller scale, perhaps by one of the technology providers in the market that creates a usable and effective merchandising solution for their airline customers using more modern technology.

    In many cases, successful standards initiatives are grass-roots based, generated from the bottom up then organically expanded as they prove their efficacy and worth. This heavy-handed, bureaucratic, top-down approach often fails, especially when key audiences (TMCs, travel agents and third party distributors in this case) are vilified or kept out of the process.

     
  5. Bruce Marchionda

    One huge item always left out of these discussions is the interactions between systems and airlines. Everyone focuses on the initial presentation layers and the way people want to shop for products. One thing that does not happen with an Amazon or other online store is this: If you but three products from Amazon, Amazon does not need to tie those three things together and create an interrelated product order that all three product providers need to keep in sync. If you look at travel, the concept of interrelated yet disparate products is at the crux of the whole mechanism. If a consumer wants to combine multiple products in one trip, and they use multiple airlines in the process, all those interconnections need to be established in a somewhat real-time way, or the service provider and the seller data get out of sync. The GDS is the master-controller for hubbing that data exchange and does a remarkably good job given the multitude of systems that play in the travel space.

    There are industry standards for all travel providers to use when interchanging these messages, and until that mechanism can be modernized, all you can really develop is a new way to access shopping and selling, but once the initial product is purchased,it needs to be serviced, The GDS-Airline CRS link is vital to ultimately feed the sales requests into the airline operation systems that allow them to manage the customers.

    Direct sales sound great to AA or UA or DL, but when a customer wants to combine services and have one owner for managing their trip, no airline is going to want to be bothered by someone who had a glitch in their car reservation or ground package.

     
  6. Martin Kelly

    Thanks for the story, I thought it was very well researched.

     
  7. Bert Rivero

    Sean, great article, and I also agree it was a balanced as it can be noting the players involved.

    Kevin, totally agree…. More misery, more opportunity, less transparency less ease of use…but I believe also huge opportunity for new players to join in the fun!

     
  8. Timothy O'Neil-Dunne

    Just a couple of comments on an excellent piece.

    It is balanced as best can be. There is much that people will not say in this debate. Judging by the rush to seal the documents in the AA vs Sabre court case – one can be assured that there is one heck of a lot of dirty laundry that will be locked away – you can be sure that those on the receiving end of GDS incentive fees are going to keep their heads down for a while.

    The elephant in the room is the demand for speed. IE the ability to serve up results fast that underpins ITA’s business. The fact that so many results pages are out of date, incomplete or inaccurate should put the whole industry in the dock for false pretenses. Cache is begotten of need for speed to the impatient user. Because the airline product is a dynamically created one (even before factoring in ancillary services) the control needs of the airlines will not permit all viable permissible answers to be displayed. The winner is a loss of trust, something that few seem to be worried about. I am sure that the regulators are sensitized to the issues. If not now they have a primer on how to become award.

    Finally I think there are a few other companies who have a stake in the game. I would add Vayant and LUTE Technologies to your list. Indeed look for fragmentation to spawn new companies and new services. The GDS companies role as gatekeepers is over. They are just one of many different ways to get to the product.

    But let’s make no mistake – NDC is not an unrealistic concept. The distribution system of airline products has been obsolescent for decades. The convergence of forces is the reason that this time there will be a sea change shift. The consumer will not find things getting better. NDC will spawn more complex solutions for the users (including travel agents) and consumers business and leisure alike.

    More misery, more opportunity, less transparency less ease of use…

    Cheers

     
    • Dennis Schaal

      Sean

      Timothy,

      Thanks for taking the time to offer your thought-provoking, clearly stated comments.

      There’s one point I feel obliged to respond to: I agree that the list of companies who have a stake in the game is longer than the list in the piece. Vayant and LUTE Technologies should be added to the list, among other companies, plus as-yet-uncreated services.

      I really wish some enterprising journalist will get a chance to look at some of those court documents.

      For anyone reading this: Tnooz welcomes any tips, including anonymous ones, about how to get access to those briefly unsealed documents.

      Regards,
      Sean

       
  9. mobileguy

    Your article might have been better balanced had you actually quoted the other side of the argument rather than depend totally on what the airlines and their spokespartners say.

     
    • Sean O'Neill

      Sean O'Neill

      I’m sorry that you feel it wasn’t balanced. I worked hard to try to present the multiple sides, and I also linked to our other Tnooz articles in which we presented other sides.

       
    • Kevin May

      Kevin May

      @mobileguy

      thx for the comment. Just stepping in to assure you that, as the piece says at the end, we have spoken to countless figures on all sides of the debate for this piece.

      It is worth remembering that many people have been reluctant to go on the record beyond the statements they have already issued regarding NDC.

      We’re very confident that the article reflects all sides of the argument.

       
 
 

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