We live in a digital age, but when it comes to the way that airlines communicate their customer offerings to travel agents and tour operators, little has changed over the past few decades. This is about to change since the introduction of NDC.

New times are ahead with NDC

The International Air Transport Association (IATA) is championing reforms aimed at streamlining communication between airlines and OTAs.

IATA’s New Distribution Capability (NDC) is a technological standard which will allow for the sharing of far more sophisticated information. For the first time, online travel agents and tour operators will be empowered to sell ancillaries comparable to those on airline sites.

The initiative is good news for airlines, given that OTAs and tour operators sell a significant proportion of air tickets. Enabling such retailers to also sell additional ancillary services will allow for the capture of significant revenue that would otherwise be lost. The changes also have the potential to significantly lower distribution costs by reducing the need for intermediaries between airlines and OTAs.

The Shift Towards Retail Marketing

While some airlines are taking a wait-and-see approach to the new standard, others have seen the potential for increased revenue and for cost savings and are proactively seeking opportunities. They are rapidly realising that reaping the full benefits of the changes requires airlines to take on a new mindset around their relationship with online travel agents and tour operators.

Currently, the airline’s relationship with such retailers centres on price-management workflows. However, a sales-oriented approach is now required. Airlines will need to provide travel agents and tour operators with the same kinds of material that they publish on their own websites, including rich product descriptions, intelligent packaging, and unbundling. Because such transactions – and dealing with multiple users of the same data – are not typically part of existing customer relationship systems, some changes will be needed to gain flexibility and to take full advantage of the NDC standard.

Likewise, airline staff familiar with working with the current global distribution system (GDS) and having intermediaries between themselves and travel agents will need time to adjust to new ways of working.

Takeaways

• The arrival of IATA’s New Distribution Capability (NDC) has the potential to change the relationship between airlines, online travel agents, and tour operators.
• There are benefits on offer for airlines, including a new revenue stream thanks to the sale of additional ancillaries, and lowered distribution costs thanks to the reduced need for intermediaries.
• To capitalise on the changes, forward-thinking airlines need to shift from a price-management approach to a retail approach. Some culture change will also be necessary.
• Airlines will need to win over OTAs by sharing knowledge of NDC, explaining the benefits, and potentially providing off-the-shelf front-end solutions.