To many, the benefits of IATA’s New Distribution Capability (NDC) are incredibly obvious. Ours is a world where customers are increasingly keen, and increasingly expect as standard, to be able to tailor the purchase they’re making to their exact needs and budget. Hence the imperative for a set of standards that will allow consumers and travel agents to instantly see newly launched products, more intelligently schedule stopovers, preview in much greater detail what the journey will be like, and much more.
Of course, such a revolutionary transformation of travel booking is no mean feat, and requires a huge number of stakeholders to play their part.
Up until the end of last year, good progress was being made by IATA from a technical point of view, but what was needed was greater buy-in from global distribution systems (GDSs), large travel technology providers, policymakers and, crucially, those travel companies with fresh ideas about the many innovative ways the standard could actually be used.
Now, with the three largest GDSs announcing their commitment to NDC, and the recent launch of an NDC Innovation Fund, that tipping point seems to have been reached.
The first turning point of 2014 was of course in January, when IATA and Open Allies for Airfare Transparency, representing GDSs, travel sellers and other parties, filed a joint motion with the US Department of Transportation (DoT) offering conditions that IATA and Open Allies recommended be included in DoT’s approval of Resolution 787. These conditions were accepted by DoT when it approved Resolution 787 the following August. Hot on its heels was the approval of GDSs Amadeus, Sabre, and Travelport, which had previously worried that NDC was designed to bypass them.
Now another important part of the puzzle is falling into place. A fund has been launched to attract fresh talent to the challenge and provide opportunity for a more differentiated and innovative travel marketplace. The $5m fund is a partnership between IATA and travel-focused investment firm Travel Capitalist Ventures, and will invest between $500,000 and $1m in projects, in return for equity.
“Our industry has been distributing tickets the same way using the same technology for more than 40 years. We need to encourage new thinking and new ideas as to how we can leverage the power of NDC to support our customers’ needs. The Innovation Fund is designed to ignite that new thinking on the part of those who may be new to our industry,” says Doug Lavin, IATA VP Member and External Relations, North America.
Lavin says the fact that NDC is based on XML rather than the older EDIFACT system is key to attracting those perhaps new to the travel industry.
“EDIFACT served as a barrier to innovation in distribution because very few developers knew how to code in that language. With XML, we open the doors to innovation, from new ancillary products to new ways to personalize customer offers,” he says.
“We’re talking about new innovation, things people haven’t even thought of,” agrees Abrar Ahmad, partner at Travel Capitalist Ventures. He says that 22 travel start-ups have so far applied for funding and that decisions about funding allocation will be made within the next six months.
He qualifies this, however, by saying that: “If we have something that comes in tomorrow that makes a lot of sense then we can invest straightaway.”
“Presently there’s just a big gap. Travel companies need money, advice, and the kinds of introductions we can make,” says Ahmad.
Lavin adds that Travel Capitalist Ventures’ involvement is now likely to kickstart a whole wave of other interested funding parties. “In addition to encouraging innovation, we also believe the fund will signal to other parties that NDC distribution offers attractive investment opportunity,” he says.
Airlines may well be feeling then that it’s now high time to kickstart their own involvement. Certainly there will be first-mover advantage for those airlines quickest to react, says Gary Doernhoefer, former IATA General Counsel and NDC Innovation Fund Investment Committee Member. Starting now could be important since readying internal systems for NDC could take some time. “It won’t be a big bang. Airlines need to start now because it can take years to revise those processes,” he says.
So what precisely will airlines need to do to set the NDC wheels in motion? Prioritizing their way through the vast array of areas NDC could revolutionize will be key, says Doernhoefer. “The first thing they’ll need to address is the shopping process. The key pain point for the industry is how to merchandize the differences in their product compared with their competitors,” he says.
“Airlines need to understand NDC and how it works, be clear about their distribution strategy, and then look at how NDC standards can enable it. Finally, you need to engage with IT partners and tell them that you want to use these standards,” advises IATA’s NDC director Yanik Hoyles. He advises that airlines sign up to one of IATA’s Airline Alignment sessions and reports that by 2015 he hopes to have developed an airline support pack that will answer the most common FAQs.
Jim Davidson, CEO of distribution technology company Farelogix, says airlines that want to adopt NDC have to do one major thing. “They have to insource some of the technology stuff that they used to let GDSs do around pricing, merchandising, and engagement, and then they have to create an application programming interface,” he says.
In the past, GDSs compiled data to arrive at prices for products, Davidson explains, but in future the GDS will tell the airline “a customer wants a ticket from A to B, their frequent flyer number is X, and they are interested in Y and Z ancillaries” and the airline itself will send back an offer—much as it already would through its website.
The NDC standards will mean that the request and response will be managed essentially the same way for all airlines, GDSs, and agencies, making the whole process more efficient and straightforward.
Indeed, there are plenty of airlines already getting on board to test the standards, with more than a dozen pilots underway or set to begin. British Airways and Qatar Airways are two notable examples of companies signed up.
“What we are hearing now is that airlines just want to start deploying it, at least on a small scale, so we think that in 2015 we will start to see live deployment,” says IATA’s Hoyles. “At the beginning, as it is with any change, people’s reaction was ‘I don’t like it’… but now the tide is turning.”