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Author: Srini Kasthoori |05/03/18

Airline Retailing & NDC - A Win-Win for Airlines and Passengers

International Air Transport Association’s (IATA) New Distribution Capability (NDC) standards have held the alluring promise of improving the way airlines retail their products. NDC was approved by IATA in late 2012 with the promise to transform the way airline products are retailed using a transparent shopping experience, addressing the industry’s current distribution limitations. With airline retailing gaining momentum and with IATA’s NDC certification program(s), the NDC standard is gradually seeing the light of day.

To deliver a seamless and enriching end-to-end travel experience, airlines have begun bringing in code-share partner and offerings from their joint ventures, which require better real-time communication and integration standards for airline retailing with NDC. IATA’s NDC certification program3 ensures that several groups are compliant in offering airline retailing solutions- airlines that deploy an NDC API, agents and aggregators that use the APIs, and vendors that offer NDC products or services to airlines and distributors – all must adhere to NDC stipulations and work as a coherent value chain to deliver a seamless travel experience to end consumers.

Change in Industry Fundamentals

Airlines that previously operated in a demand-pull model are adding a significant supply-push component to their business. They used aggressive advertising in the past, but passengers too would go to them only to buy seats. Due to the intense competition from low-cost airlines and rising consumer demand for rewarding travel experience, airlines now want to sell everything they can - seat upgrades, faster check-ins, craft brews, gourmet meals, extra leg space, co-branded hotel rooms, packaged holidays, car and cell phone rentals, airport concierge services, visa processing and all kinds of merchandise. They even want to allow non-flyers to make purchases like a bottle of champagne for a passenger, mid-flight, as a surprise from a friend.

Airline Retailing with NDC

Airlines must provide travel agents access to merchandising content on their own channels. They must also have the ability to access partner and third-party content and systems. For example, to enable agents to sell upgraded seats, an airline would have to make an NDC API available to the agent. An airline can offer hotel rooms, co-branded with a hospitality partner and bundled with tickets. According to a recent survey by Mindtree, “Expectations vs. Reality: How to Better Serve the Connected Traveler”, a majority (68%) of respondents have purchased extra offers/ancillary services proposed by the travel providers that they use. These include restaurant vouchers, excursion vouchers, additional insurance coverage, etc. This reinforces many respondents’ willingness to spend more money to enhance their travel experience. A travel brand’s ability to meticulously unbundle their own and partner inventory, and effectively personalize and target offers, will help them grab that extra premium from the customer’s wallet. But to make this happen, it needs to show and list room facilities, provide real-time information on availability & pricing and allow travelers to complete bookings. The old, lumbering airline systems, completely insulated from a world of collaboration and external data, are failing to meet these complex requirements.

New Distribution Capability (NDC) is helping bridge this gap. It allows airlines to consolidate and present all travel inventory in a single location, bundle it the way they want, display rich content to customers and become the single point of sale. NDC allows an airline to add products (including those of partners) and increase sales channels at will. But airlines are loath to give up the comfort and security of their legacy systems. However, their resistance has been softened by NDC adaptors. These adaptors simplify life for an airline by making data exchange between legacy systems and partner systems, seamless. As a result, airlines are free to cross-sell and up-sell their products with minimally invasive processes.

Benefits of NDC for Travel Agents

In recent times, GDS and third-party companies are creating partnerships and offer engines, which enable airlines to distribute merchandising across multiple channels with the help of NDC integration and messaging standards. Global Distribution Systems (GDS) are offering travel agents the ability to sell ancillary products that airlines have enabled in the GDS. When airlines use NDC adapters and/or APIs, travel agents will not encounter any difference in their travel business workflows. In fact, they will benefit immensely when NDC standards are enabled on both sides (airlines and GDS) because they won’t have to go through different systems or websites to buy ancillary products for their clients.

Data Analytics - The Key to NDC Adoption

Airlines can’t offer everything to everybody. It must have a clear view of demand behavior at the individual passenger level. This means, employing techniques from the retail industry of advanced clustering analytics using data from GDS, social media & other sources and mapping buying behavior to demographic characteristics. An airline must now address a ‘segment of one’ to ensure ancillary revenue uplift.

Using Big Data, behavior models, customer personas, travel itineraries, past purchases, personal interests, algorithms and analytics, an airline can personalize and position products in a manner that improves their perceived value, improving the chances of a purchase by several magnitudes. Even if an offer for an airline ancillary or partner product is not purchased, there is an opportunity to improve the experience.

Let’s pause here for a moment and dwell on the idea of analytics. It’s not really new. Airlines have historically used analytics effectively to improve operations, ticket pricing and route planning. What they lacked, so far, were the necessary ingredients to develop a full 360-degree view of the customer. This includes several advanced buying behavior attributes along with contextual insights. Airlines must own their customers’ data and interpret the anonymous to known customer-divide successfully, to deliver a more contextual experience for their passengers. When airlines enable NDC across their channels and touch-points, it opens more opportunities for airlines to continuously learn and further enrich their understanding of customers. This, in turn, allows them to make well- informed and personalized engagements with their customers. An airline’s ability to deliver hyper relevant offers and recommendations gets much easier with the level of insights the NDC integrations can produce, across all customer touch-points.

Conclusion

In conclusion, NDC is a win for airlines as it lets them offer seamless omni-channel experience to their passengers. It is also a win for travelers as it lets them enjoy their choice of services throughout their journey at every single touch-point. I am convinced that the vast improvements in, and accessibility to analytics and the science of personalization have set an accelerated course for NDC adoption. Years after the NDC standards were introduced, they are ready to fly and fulfil the promise they held.

If your organization is looking to adopt NDC for making airline retailing possible for your customers , we could help. Write to us at info@mindtree.com.

References:
https://en.wikipedia.org/wiki/IATA_New_Distribution_Capability
https://www.iata.org/whatwedo/airline-distribution/ndc/Documents/ndc-strategy-paper.pdf
https://www.iata.org/whatwedo/airline-distribution/ndc/Documents/standard-presentation-ndc-certification.pdf
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