Since I last wrote about this subject three key things have happened.
- GDS providers have moved on significantly with their NDC solutions
- Most TMCs have communicated their strategy for booking NDC content to customers
- Outside Europe there is very little interest in this subject
It is important to try and unpick these points to understand truly where we are today.
GDS readiness
When NDC was first launched as a concept in 2012 by IATA it is fair to say that GDS providers and TMCs took a quite defensive stance. This stance under-estimated the determination of the airline community in Europe to force through the first major changes to the distribution system since agent commission was cut in 1997.
As airlines pushed on and engaged with innovative third party technology solutions, such as TravelFusion who already connected TMCs to airline websites, it became clear NDC was not going away. GDSes started to engage further and determined how they would connect their systems to the new airline protocol.
Booking a small amount of airline direct-content, such as easyJet, is relatively simple through the third party systems. Booking this content at scale is a completely different proposition - and still is. The GDS providers have therefore had to take their time to work out how to integrate this new protocol.
All three now have solutions they are testing with the TMC community. The solutions differ slightly in that Travelport has a separate search (within the agent desktop) whereas Amadeus and Sabre are integrating that search within the normal "native" search request. One has recognised the need for an immediate quick fix and the other two presented what they believe to be the long term solution required. The best option, as always, is probably in the middle.
The major sticking point to delivery now is commercial not technical. The GDS providers charge airlines for distribution, whereas third party technology solutions charge the TMCs for the service - this is typically why your low cost carrier fee is higher than a normal GDS booking fee. GDSes obviously do not intend to provide this access to the TMC community at scale for free and at the same time the airlines are holding out lower prices versus their existing GDS costs.
This should ultimately be resolved but might take a little more time. When delivered, the TMC community will then provide NDC content via the GDS, but with a different revenue stream and a less efficient work-flow. It is likely that TMCs will then reduce their new NDC fees slightly to reflect the GDS integration, but that NDC will carry higher costs than the traditional GDS route. Customers can therefore expect to see potential cost increases over the longer term. I believe this is the biggest debate NOT happening in the corporate travel sector.
While the airline community in Europe will say that it is about better retailing opportunities and all the other benefits - and there should indeed be opportunities - the key point is a need to drive down distribution costs. Corporate customers should be under no illusion that the transaction fees they pay now will increase in time as airlines drive a harder commercial deal with the GDS providers.
TMC strategy for NDC content
Most TMCs have now communicated a cost proposal to their customers for NDC content. The starting point of these fees will be high simply because the work-flow required to access this content is more cumbersome and time consuming. It should reduce over time as the workflow improves and when the GDS providers get the commercials agreed with the airlines.
The big question is how much of this content will be booked this way? If the airlines are simply trying to lower their distribution costs on the very cheapest tickets (the ones they compete heavily on price with internet-only operators) it is likely we will see just a certain amount booked this way.
My personal view on this is that we will potentially see a change in the type of tickets booked in a corporate environment. Right now, anything other than the very cheapest tickets can be changed, upgraded and worked on by a TMC. This is unlikely to be the case with NDC cheaper tickets. As such it is possible that the price difference for a ticket booked through the native GDS channel will be marginal, once the TMC NDC fee is applied, and as such you effectively get a type of corporate ticket used by clients and TMCs that differs from the leisure ticket the airlines are trying to reduce costs on.
There will naturally be customers who will focus on tickets that are the very cheapest, but as most TMC's analysis demonstrates it is better to book a cheap ticket than can be easily changed than a non-changeable not refundable one that can't.
An OTA selling leisure tickets through a GDS platform will need to better qualify the value they provide to the consumer, versus a client using a TMC for many more things than simply issuing a ticket. When the typical leisure consumer searches on — for example Skyscanner - in future the NDC style fares will be cheapest on the airline's own website.
NDC outside Europe
The general view of TMCs, clients and GDSs in the USA is that NDC is of little relevance or concern right now. While there is low-cost competition on certain routes, the remaining legacy airlines ruthlessly compete for business in the corporate market. Some of the leading national carriers in Europe have calculated that they can make this move, effectively increasing the price to corporate customers, based on native travellers having little alternative on many routes or simply that they want to keep their mileage benefits. And, if they want to use a TMC to do that then they will need to pay an increased part of that distribution cost. The USA is different.
With this in mind, it brings us back to what does NDC really mean? Is it simply a sledgehammer to crack the lower-level distribution cost problem for airlines in Europe or is it truly an opportunity to provide a new and beneficial retailing experience? Several years on, I'm still to be convinced…