IN FOCUS: Why IATA wants to shake up the airline distribution sector

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This story is sourced from Airline Business
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IATA's plans to shake up the airline retail world with its New Distribution Capability has met with a mixed response, but the association's distribution and financial services chief Aleks Popovich believes the sector is in vital need of modernisation

The New Distribution Capability (NDC) represents a unique opportunity to modernise air travel distribution towards a unified customer-centric retail experience. Today there is a gap between the travel shopping experience on an ­airline website and the information that is available through travel agencies powered by global distribution systems (GDSs).

Thus customers visiting an airline website have more knowledge about the various product offerings available; and airlines are able to tailor their offerings based on the customers' prior travel purchases.

This is not the case for the indirect channel, where the travel offer is assembled outside the airline by third-party intermediaries. An airline that offers some extra leg room or a special meal option cannot entice the customer with this added value because the GDSs cannot present that information effectively and attractively. Further­more, in most cases, the airline knows nothing about the customer until the reservation is made, making it difficult to personalise the offer.

And that is where NDC comes in. NDC is about building the technology standards that will close the gap between the modern retailing experience available at airline websites and the legacy pre-internet model used by indirect distributors of air travel.

By creating a common XML-based standard that defines a format for how airline products and services should be displayed, NDC will enable a dynamic, vibrant marketplace that is not possible with today's closed proprietary systems.

Look at the mobile phone business: common technical standards enable different phones to talk to one another. Imagine how simpler global travel would become if countries could agree on a standard electrical wall socket.

The NDC foundation standard was approved in October 2012. Now we are working on XML standards to support its implementation. There is an excitement in the industry about this project. Rightly so, NDC will be the biggest enabler of innovation in air travel distribution since the e-ticket.

But there are some misconceptions that need to be addressed. One of the biggest is that travellers will have to supply reams of personal information to benefit from the value offered by NDC. This is not true. Yes, consumers will benefit by providing more data, but they will not have to surrender their privacy to compare fares or services and amenities. In this regard, buying air travel through NDC will be no different than other shopping experiences:

Grocery/department stores provide discounted offers to "club members"

Online merchants present offers based on past experience/preferences

Airline websites make offers based on frequent flyer status, affinity credit card and prior purchases

Another misconception is that it will not be possible to compare fares using NDC and that the intent is to cut GDSs and travel agents out of the system. Not so! There is a "content aggregator" role in NDC, which is essential to enable comparison shopping.

GDSs and travel agents are participating in the standard-setting process. And given their industry knowledge and know-how, GDSs and agents are well-placed to take advantages of the innovation NDC will make possible.

Additionally, NDC will help travel agents add value to their clients by allowing for comparisons of information that is today only available on individual websites. It will facilitate the easy sale of ancillary products. And by allowing the traveller to be identified even when booking through a travel agent, the airline has the opportunity to add value to the traveller experience.

Change always brings challenges - and naysayers. IATA experienced both when it led the transition to e-tickets last decade. But no one would argue that consumers are worse off for not having to carry a paper ticket or agents for not having to safeguard ticket stock. As an enabler of innovation, NDC will bring change. And the market will determine which aspects of that change are valuable to customers and offer business opportunities to the value chain.

NDC will lead to a better informed shopping environment for air travel that will deliver value to passengers and create business opportunities across all aspects of the industry. And building it on principles of transparent standards, openness to innovation, fully informed consumer choices and collaboration across the value chain will make for a better tomorrow.

Aleks Popovich is IATA's senior vice president industry distribution and financial services. A graduate in mathematics, he joined the association in 2005 after more than two decades with British Airways