Travel Analytics Blog

The Opportunities and Challenges of NDC and ONE Order


NDC Challenges and Opportunities

Part two of this blog series takes a deeper look at the technical and cultural challenges that airlines are currently grappling with as part of their NDC  and ONE Order plans.  As an introduction, part one summarised where we see NDC adoption today and some of the obstacles that remain, while part three focusses on some of the specific challenges facing ONE Order adoption.  Ultimately parts four, five and six will address the analytical layer that can be bolted onto an NDC implementation to deliver the missing insights that can help segment customers and help shape the airline offers.

Some excellent assessments of the ‘Future of Travel Distribution' have recently been published by IATA, Amadeus, Skyscanner and SKIFT, all discussing the post-NDC world, but there are some real challenges to overcome to get to the point of industry lift-off.  Although NDC and ONE Order are interdependent initiatives, they present different challenges so we’ll look at them separately, starting with NDC.

NDC Challenges

NDC is not a new technology, it’s a communication standard based on XML. At its core, NDC is about the principles and workflows that facilitate the offer creation process. This involves devising schemas that enable the airlines to create and deliver their respective offers to any distribution channel or third party via APIs. A standardised schema makes it a scalable, repeatable, and over time economically beneficial process. So as in any process improvement programme, there is a need for investment by the airlines and also their distribution partners in the pipes and plumbing that facilitate this communication. This investment needs the commitment at the highest level.

Standards ultimately make it easier for the different systems involved to talk to each other so that the definition of seats, fares, bags and all the other ancillary possibilities are clear to both the buy and sell sides.

There are two key challenges related to NDC adoption:

  1. Standards -- NDC is an emerging standard that will continue to evolve to meet market needs especially as a result of experiences witnessed in early pilots. Consequently, while the NDC standard is being released, the actual implementation may vary from airline to airline. Some airlines may have customised the schema or message content to suit their product offering. The differences between individual airlines will present a challenge for NDC’s industry-wide adoption.
  2. Business Case -- Airlines have to build a business case that helps them determine how far down the NDC / ONE Order road they want to travel and at what pace. Basically the full stack, or only partial depending on the degree of customer centric approach they want. This means making the investment to adopt the full NDC and move away from GDS, or sticking with the current position and leaving the GDSs to make the necessary modernisation investments.

NDC is not just a set of technical challenges, but also requires a total industry mindset shift. It requires airlines to take back control of their relationship with customers by evolving their role as travel retailers. This means redefining their relationship with customers and how they innovate and sell their own products using technology to adapt to the new fast moving age of commerce where the customer and not the product is at the centre. Making this system work, however, requires a new level of technical sophistication, involving more direct access to the end customers through direct third party partnerships while at the same time creating more agile back-end systems.

Although quick to emulate the success of the Low Cost Carriers (LCCs) in their online retailing via their own airline websites, legacy systems and processes have meant that airlines have struggled to replicate the flexibility and richness of their offerings sold through travel management companies and agents.

An un-level playing field between direct (airline.com) and indirect (GDS) channels has opened up that cannot be ignored. Unbundling fares, developing new products and services (ancillaries) and getting to know their customers better are still aspirations more than reality in the lucrative third party travel segment where 50% of sales still take place.

Specifically in distributing through GDSs, airlines find it difficult to:

  • Establish what preferences a customer is looking for when searching
  • Find out what has been offered and to whom – (hence no insight into how to make those offers better to sell more)
  • Develop customer profiles that help them to build usable customer segments
  • Innovate their products to develop differentiated offerings aimed at the different segments

The GDSs with their legacy technology have clearly failed to adapt fast enough to enable the kind of customisation and differentiation that airlines need to respond to the changing world of retailing driven by consumer buying trends as well as their own revenue management objectives. While GDSs are now updating their technology to include NDC, there is some industry debate about how nimble these giants can be when new disruptors such as Farelogix, Datalex and Openjaw, with merchandising and distribution platforms built for purpose, are positioning themselves to meet the NDC needs of today not tomorrow.

IATA’s NDC is therefore all about a standardised method of distributing both core flight products as well as ancillary services, using a network of APIs. No more tightly closed off proprietary sales platforms and data links needed. NDC consists of a series XML-based schemas that will enable participating airlines to improve how third parties, including GDSs and travel agencies, search for and book flights.

You could say NDC is joining up the dots between airline flight booking systems and third party retail channels, thus levelling the playing field.

Why NDC Alone is not Enough

Given that at its core IATA’s StB programme is about transforming airline retail capabilities, laying the foundations for airlines to be able to create the offer direct to the customer is a great start but does not lead to full control of customer relations or deal with legacy inefficiencies post sale. Selling is a two part process, persuading the customer to buy (i.e giving him what he wants), and delivering what has been purchased. In NDC terms this doesn’t just mean carrying the passenger to his destination, but simplifying the whole purchase experience – and improving that experience. Using data and insight from the context of the search is important, but the revenue generation only happens when the offer becomes an order. This surely means that achieving order management efficiencies has equal weight.

Without NDC, airlines currently have little or no visibility into what travel options are being searched for. With NDC they are able to offer the service bundle, the price, and the ancillary options that are deemed most suitable to passengers while they are shopping rather than after they book, or after they place an order. This is giving rise to new technology platforms such as merchandandising platforms that enable the handling of rich content, ancillaries, pricing and availability – eventually feeding the bookings to the airline’s PSS.

A lesson to be learnt from the retail sector or from an airline’s own website performance monitoring is that searches and subsequent bookings provide a lot of insight into customer buying behaviour.  In other words options and ancillaries that what work well offer options that don’t’ work so well and for which category of traveller. It is well known that business and leisure travellers have different needs and price points. Taking control of the offer process also means developing business rules that will bring the right offer to the customer at the right time. Learning from experience provides the iterative framework to refine and improve the offer creation process in a continuous loop. A business intelligence platform bolted onto NDC APIs and merchandising platform can deliver the depth and breadth of insights needed.

Ultimately the NDC vision is a combined offer and order management platform – an NDC platform. Only when you get to a combined offer and order management platform with real-time business intelligence thrown in will airlines be able to offer an efficient and seamless customer experience and where possible develop personalised services based on a passenger’s previous travel itineraries and preferences, derived from past choices which reside in the order management system. For this airlines need NDC and ONE Order working together, supported by an intelligence platform.

In the next blog we will talk more specifically about ONE Order and what it means for airlines.

A full and complete copy of our white paper, "The Challenges and Opportunities for Airline Distribution from NDC and One Order"  will be first available at IATA's inaugural Aviation Data Symposium, where Triometric is joining a panel of experts discussing "The Cycle of a Passenger Transaction: TheHidden Value within the Value Chain."  If attending, we will be delighted to see you at our stand (No. 3). Click here for more details.

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