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A simplified look at the New Distribution Capability debate

Written by  Douglas Cooke

During the ASTA Global Conference in Miami, ASTA Counsel Paul Ruden held an ASTA Town Hall meeting to address concerns over the proposed “New Distribution Capability,” better known as NDC.

 

 

What is NDC?

According to IATA, NDC is an XML based communication “standard” between the airlines and travel agents. IATA describes NDC as a “collaborative industry initiative to define a messaging standard, enabling retailing opportunities through the indirect (GDS/travel agent) channel.” It will provide a way for airlines to merchandise their ancillary products through travel agents the way they do through their own websites.

With the growth of these ancillary fees, which generate over $30 billion in airline revenue worldwide, has come a challenge for the airlines and GDS’ on how to effectively market these products through the agency distribution system.

ASTA’s Perspective

According to Ruden, the new NDC will result in high prices, lack of customer privacy and pricing opacity. He referenced the possibility that agents may have to give information about their customers prior to obtaining a fair quote, enabling airlines to come back with packages that match the client’s demographic. For instance, they may offer a higher fare if someone resides in a high-income zip code. He argued it could interfere with the agents’ ability to quote all fares types available. 

Ruden also chastised IATA for its repeated denials in allowing ASTA to be involved in the planning stages of its NDC proposal. This is strange, as the success or failure of the NDC will be largely dependent on the support of the travel trade, OTA’s and corporate travel managers.

IATA’s Position

IATA argues that NDC is simply an initiative to standardize the XML language that airlines use to connect with indirect channels, and enable them to display ancillary services such as as WiFi and extra-legroom seats far more effectively in the GDS. They claim that the technology will enable agents to sell the airlines’ ancillary products and services. (Whether agents will be compensated for those sales is yet to be determined.)

Addressing privacy concerns, IATA claims that NDC would have no impact on any privacy rules and regulations that already apply to airlines, GDSs and agencies, nor would it require agents to share their customers’ information.

GDS Position

Some GDS’ are already using XML standards to deliver fare information however, full implementation of the NDC would require a large investment on the part of GDS’ in both development costs and training agents in the use of the new technology. Additionally, this could radically shift the balance of power from GDS’ and travel agents to the airlines. Another concern is that NDC will upend the current economic model under which airlines pay segment fees to GDS’, which in turn pay travel agencies and travel management companies (TMC). Those fees can mean the difference between turning a profit or losing money.

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.

 

 

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