NDC aims to transform the airline industry by addressing the current limitations in distribution. Get the scoop on what NDC is, how it works and what it means for airline retailing.
- What is NDC?
- Who’s Involved in NDC?
- Third Party Distribution Today and Under NDC
- How Can NDC Be Implemented?
- How is NDC Being Used Today?
- What’s the Future Outlook for NDC?
1. What is NDC?
New Distribution Capability (NDC) is a new technology created by IATA to streamline the airline distribution process. It’s an XML-based communication standard originally developed by Farelogix in 2010 to create direct connections between airlines and third party distributors.
This was standardized in 2012 by IATA to replace the old EDIFACT messaging standard, which global distribution systems (GDSs) rely on. EDIFACT can only display information such as fares and schedules and has not kept pace with technology or the products offered by airlines.
In contrast, NDC can communicate information such as ancillaries, seat selection and rich content (pictures and videos of products). It will eventually allow for dynamic pricing and personalized offers – think “Amazon”-type suggestions.
NDC was orginally created as a way to bypass the GDS providers, but slowly these providers have become more involved in the process. The basic idea is that NDC is supposed to give indirect distribution channels, such as GDS and metasearch, the same capabilities as an airline’s website.
2. Who’s Involved in NDC?
There are several different players involved in the NDC process: travel agents, airlines, aggregators and IT providers.
Travel agents and airlines are straightforward. The aggregators are the different intermediaries involved in communicating the travel agent’s request to different airlines. This can be GDS (Travelport has recently been certified as an NDC provider) or metasearch (Skyscanner has been the fastest adopter). The IT providers are responsible for integrating NDC into the airline’s IT infrastructure.
3. Third Party Distribution Today and Under NDC
Today, the third party distribution process works as follows when a traveler needs to reach their destination at a certain time and price:
- The traveler goes to their travel agent who then queries the GDS system.
- The GDS pulls information about schedules and fares from a third party.
- The GDS builds the offer, then goes to the airline to get information about availability.
- When the offer is available, the information is relayed back to the travel agent and passenger who can then see the airline, price and schedule.
In a complete NDC solution, the process goes like this:
- A travel agent will create a shopping request which will be sent to an aggregator.
- The aggregator will then create an offer request to be sent out directly to airlines.
- The airlines will then determine a product that fits the offer.
- The product is sent back to the travel agent through the aggregator and the offer will “evaporate” after a certain amount of time.
According to IATA, this process will eliminate confusion over what’s included in the offer. It will also be able to simplify the airline ticketing process.
Direct XML connections already exist. For example, Meridiana has created an XML-based API similar to NDC for travel agencies who wanted to bypass GDS and book directly. NDC is basically a way to standardize this so companies don’t have to reinvent the wheel when creating direct connections. Instead of using multiple APIs, they can use the IATA standard for connecting to travel agencies, aggregators/GDS, etc.
4. How Can NDC Be Implemented?
There are two recommended ways of implementing NDC. One is by integrating directly to the airline passenger service system (PSS), the other is an integration layer outside of the PSS.
The integration layer method is less complicated, and companies such as Openjaw, Farelogix, and Paxport have created solutions by sitting above the airline’s PSS. This is done by creating an XML API that communicates with the PSS, then allows connections through the intermediary. This way, the PSS does not have to directly communicate through the NDC standard. In order to set up a full NDC suite, airlines have to create an offer and order management system, which will interact with the PSS.
5. How is NDC Being Used Today?
There are currently 62 airlines who are either NDC Certified or XML-capable. Airlines with NDC connections mostly use it in limited cases, and not to its full potential. United has partnered with Amadeus to have an NDC connection to their GDS for selling their economy plus product.
Many airlines are piloting these simple types of connections through NDC (instead of developing their own direct connection) as it will be easier to increase the scope with other distribution providers. Other carriers such as GOL are using NDC connections for offer and order management, providing ability to purchase seats, bags, upgrades, meals, car rentals, and travel insurance, as well as ability to bundle the products (this is being done with Navitaire as their IT provider).
Since the standard only really rolled out to the market in early 2016, it’s not clear exactly what impact NDC will have on the industry. Like other technologies such as HDTV, it takes a long time from product introduction to widespread adoption by the market.
6. What’s the Future Outlook for NDC?
In the future, there are hopes that NDC will be able to connect to chatbots, allow purchasing and upsell through things such as Amazon and Alexa. Part of the challenge is getting airlines, travel agencies and GDSs to spend money on the infrastructure needed to implement NDC. Additionally, implementing NDC-capable solutions instead of wholesale adoption of NDC adds complexity to the airline distribution process.
Airlines are hoping that by using NDC connections either through GDS or directly to travel agents/metasearch they will be able to pull in additional revenue for each ticket sold. Some airlines such as Lufthansa, IAG (British Airways, Iberia, Aer Lingus), Meridiana, and Ukraine International Airways are introducing fees for tickets booked through GDS, however the fees are waived for tickets booked through NDC connections.