January 13, 2016

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New Direct Capability- IATA initiative

All global airlines are trying to increase their ancillary revenue in a variety of ways.  Traditionally the majority of the ancillary revenue was generated as change or cancel fees, baggage charges, etc. For generating additional revenue and with a desire to provide better service to its customers, airlines around the world are creating more personalised service offers at a variety of price points to suit different customer profiles.

While traditional travel agents aren’t a critical source of bookings compared to years past – Airlines are missing out on the opportunity to drive additional Ancillary revenue through these agencies and OTAs. 

NDC- IATA initiative

NDC (New Direct Capability), the XML based transmission standard set by IATA (international Air Transport Association) provides a set of guidelines for communication between airlines and travel agents. NDC standards will enhance the capability of communication between airlines and travel agents and it will also be open to any other third party distributor, IT provider or non –IATA member for implementation and use.

NDC will enable travel agents to sell ancillary products such as baggage, seating, meal, lounge, etc. Using the NDC standard - airlines and travel agents will transform the way airline products are retailed; something which they are unable to do with the current GDS (Global Distribution system) technology in place.  NDC enables travel agents to sell ancillary services at the time of booking or at a later time.

Advantages

Airlines will benefit by selling unique ancillary products, customised and personalized offers leading to increased revenues and customer satisfaction.

Travel agents will have the ability to sell the ancillary services provided by airlines for sale as well as real time product data. Travel agents who lose out on customers due to their inability to sell preferred seating for example or provide this service by executing this for customers on Airline websites will now be able to cater to these customers in a more productive and seamless way.

Passengers will have a one stop shopping experience, with the opportunity to shop the right products at the right price.

Challenges

NDC remains in its early stages of development, full development of NDC may take several years to complete. Some airlines may or may not decide to deploy NDC as it is not mandatory for airlines, travel agents or other parties.

NDC will change the way these products are sold via traditional channels.  But the biggest risk remains in Airlines not adopting these standards quickly or alternative platforms coming to the marketplace and undermining NDC.