A recent trip to IATA’s Geneva HQ provided me with a real insight into the building blocks of IATA’s future. To be honest, I expected to find a traditionally structured, slightly boring office of be-suited middle aged men for some reason, but instead I walked into the cool, cultural vibes of what felt like a tech company. A tech company with a youthful, seemingly vibrant workforce gathering in open groups to debate and update. On the wall was a newly framed set of statements designed to illustrate the focus of the association, the first of which I noticed was “Building Standards Through Expertise.”
This mantra runs through the very veins of IATA as an airline association and manifests itself publicly in the poster-child of standards, the New Distribution Capability (NDC). And unless you’ve had your head in the sand in the last two years you’ll know that this particular standard has courted controversy, and I have been no stranger to that. I personally think this isn’t because of what it will do, we all know it will provide a platform for richer content and more personalised offers, but rather because its impact on the corporate airline market is yet to be quantified. It’s the unknown that worries people.
The importance of standards to set the scene for the future should not be underestimated. I often use a story in my public presentations about the role a Roman horse’s ass played two thousand years ago in ultimately contributing to the size of the fuel capabilities of the US space shuttle to illustrate how standards create legacies. The story was written by the incoming president of the UK’s procurement association a few years ago, and it’s an interesting and humorous tale, but when she presented it, she meant it to illustrate how standards can restrict and the importance of challenging the way things have always been done. This is an important lesson and continued innovation is key to a successful industry, but I see the story slightly differently. For me the story illustrates the importance of standards to create platforms to facilitate growth and innovation. Without the creation of a standard railroad gauge, the first mass transit systems of our age, the railroads, could not have advanced at the speed it did and have facilitated the cultural and economic growth of the 19th century. The creation of a standard railroad gauge was the catalyst for a transport revolution and it allowed for joined up thinking and collaboration to facilitate the mass movement of people and cargo. Sure, the standard gauge then meant there were restrictions many years later, and standards need to be challenged and re-thought on an ongoing basis, but their initial creation can invigorate an industry and change lives. Standards beget innovation and innovation creates the need for standards. The two are inextricably linked.
My big hope for our future is that NDC will do for the corporate travel market what the railroad gauge did for rail, that it will invigorate the airlines and all those in the supply chain to provide a better service to airline customers. If in two thousand years the NDC standard restricts airline delivery just like the story of the horse’s ass it won’t be the standards fault, just our ability to innovate.
Paul Tilstone is Founder and CEO of Festive Road and undertakes the role of “NDC Corporate Envoy” for IATA.
Next week on Tuesday, 24 February, at 13:00 GMT, Airlines International will host a free webinar where:
IATA will discuss the latest developments in the NDC program, as it moves into its deployment phase
SWISS and their technology partner Datalex will share their findings from their NDC pilot project
If you wish to attend this free webinar, please register online.
In the current distribution environment, when a travel agent sells a flight and issues a ticket through a GDS, that GDS needs to know that the agent has been accredited by the airline as a selling agent in order to accept a ticket proposal. In an NDC world, there is still a necessity for airlines to identify the agents and aggregators with whom they wish to work.
So how will the system adapt to the NDC environment? Today, IATA sends a file called ‘ticketing authorities’ to every GDS 12 times a day. This ensures that their systems are aware of new agents chosen by airlines as well as have information on any suspensions or defaults. In the NDC environment, airlines will receive shopping requests from travel agents and can decide whether or not to respond with offers. At the more advanced stage of deciding whether to issue a ticket against the agent’s declared passenger’s form of payment, the airline decides whether to accept the card or cash proposed. For cash payments the airline will need to be confident that the agent is a BSP participant. Hence, IATA will be making a version of the ‘ticketing authorities’ file available to NDC-supporting airlines. Do ask for this file if you are an airline about to use the end-to-end schemas.
Under NDC, the BSP remains highly relevant. Selling through BSP accredited agents gives a 99.9% certainty of receiving cash payments with an average cost of $0.15 per ticket after the NDC-supporting airline submits the sales data to the BSP, while if the passenger chooses to pay by credit card the BSP continues to play its traditional role in ensuring that the airline will receive payment for the ticket – although incurring the merchant fee from 1% to over 3%.
Until airlines have fully adopted NDC, the BSP will continue to hold the selection of agents chosen by each airline in that country as ‘ticketing authorities’ – and will advise airlines when any of their agents cease to be BSP members. So eventually the concept of ‘ticketing authority’ will drop from the airline distribution vocabulary, but the setup between suppliers and distributors will remain important.
Well, here we are at the start of a new year. And 2015 will be an important year for the NDC program as it is now moving into deployment phase. In the video below, Yanik Hoyles, NDC Program Director, will share his perspectives on program achievements in 2014, and what 2105 will hold for NDC.
We hope you will enjoy this video, and on behalf of IATA, we wish all of you a very happy and successful 2015!
On 15 October, IATA announced the creation of the NDC Innovation Fund in partnership with Travel Capitalist Ventures (TCV), a private equity and venture capital firm specializing in travel industry investments. The announcement, which occurred during the recent World Passenger Symposium 2014 in San Diego, generated quite a bit of interest, as was made clear by the number of tweets and re-tweets immediately following the news.
Because the NDC Innovation Fund will become an essential pillar of the NDC program moving forward, we asked Abrar Ahmad, Partner at Travel Capitalist Ventures (TCV), to tell us a bit more about this new fund.
What motivated you to create an NDC-related fund together with IATA?
As a travel-focused investment firm, it is pretty clear to us that the NDC standard will have a positive and wide-ranging impact on how (air) travel will be distributed in the future, and with countless possibilities for new entrants to leverage. With this in mind, we at TCV were convinced that investments in NDC-based solutions providers will translate into strong returns, hence our interest from day one in partnering with IATA for the launch and management of the NDC Innovation Fund.
How big is the NDC Innovation Fund?
The Fund has US$5 million in capital to invest in small- and medium-size companies. We will be looking at pre- and post-seed stage investments between US$500,000 to US$1 million, in exchange for equity.
We believe such ticket size is large enough for these companies to comfortably develop minimum viable products, especially as the partnership with IATA will enable the startup to get easy access to airlines and validate business models with them, and therefore not spend valuable investment money on this key aspect of their ventures.
To what extent do you think this fund will foster innovation in travel? And more specifically, in which areas?
Our primary goal with the Fund is to promote innovation in any technology developments that will enhance the distribution capabilities of airlines, travel agents and other content aggregators, using the NDC standard. Having said this, the Fund will invest in both consumer- and business-facing products
Have you identified possible start-up candidates for the fund? And when do you expect to be able to announce your first investment?
Within days of announcing the Fund launch we had received more than ten applications via the Fund’s website. In parallel, we reached out to four startups we identified prior to the announcement, and which exceed our innovation criteria, so I am confident that together with IATA we will be able to announce a first investment soon.
How will the fund be run?
TCV and IATA will run the Fund together, jointly deciding which ventures and projects to invest in, based on our respective areas of expertise: technical and industry for IATA, while for TCV it is experience in travel and financial management.
Among the many announcements that took place during our annual World Passenger Symposium last week in San Diego, IATA released a new White Paper
on the topic of managed business travel.
Because the managed business traveler is a major source of profitable revenue for all across the chain, we thought it would be valuable for our member airlines, and their technology and agency partners to learn more about them. Based on a combination of quantitative and qualitative research, this white paper addresses the following questions:
- How will managed business travelers purchase flights in the near future?
- Which products, services and experiences will managed business travelers expect from airlines and travel agencies?
- Which value-added/ancillary services will be most popular with managed business travelers?
- Which factors will drive changes in the way airlines, travel agencies, and corporations and the traveler will conduct business with each other?
Here are the key learnings:
- 3 out of 4 managed business travelers are not completely satisfied with the way air travel is planned and booked. The primary reasons are related to the lack of flexibility of booking tools and average user experiences;
- Although it is difficult to draw a standard profile of the managed business traveler, two key aspects bring them together: their avid use of technology and their strong consumption of ancillary services;
- Their views of the future of travel planning and booking is mobile-based, which should lead to greater automation and customization;
- Technology will play a critical role in satisfying the needs of the managed business traveler, namely through improved devices and more flexible communication protocols such as NDC;
- Airlines, travel agencies, global distribution systems and other IT providers will all gain from embracing technology changes for the ultimate benefit of their respective relationships with the managed business traveler.
If you are interested in learning more about this key traveler segment, please feel free to download this White Paper and circulate with your peers and business partners.
On September 26, 2014, the Article 29 Working Party (WP29), an independent European advisory body on data protection and privacy, issued a letter outlining the results of their extensive review of NDC and its potential implications for passenger data privacy, in which IATA cooperated fully.
While the WP29 wants to monitor the implementation of the NDC standard in the future, we were encouraged that they identified nothing to warrant any action at this time.
Imagine my surprise then, to read in the media that my colleague Christoph Klenner, the Secretary General of the European Technology and Travel Services Association (ETTSA), had described the WP29 letter as a “stern warning” to IATA and “the strongest possible position” against NDC.
I wonder whether the WP29 is not just as surprised. But perhaps it is all in Christoph’s over-heated imagination. After all, over the past year, he has continually peppered the WP29 with the tiresome allegation that NDC will eliminate anonymous shopping. He has continued to recite this charge even as IATA has committed to both the WP29 and to the U.S. Dept. of Transportation that anonymous shopping will be preserved.
Of course Christoph knows this to be the case, because ETTSA is a member of Open Allies for Airfare Transparency. And it was Open Allies, working with IATA that offered DOT specific language to include in its approval of Resolution 787 to preserve anonymous shopping. Which raises an interesting question: Was Christoph being disingenuous when he helped craft the language that contributed to DOT’s approval of Resolution 787? Or is he being disingenuous now?
Earlier this month, the US Department of Transportation (DOT) granted final approval to Resolution 787, effectively completing the inception phase of NDC. It is great news for air travelers, airlines, travel agents and distribution technology providers--and for competition.
Now, the question that many are asking is what happens next?
First and foremost, we are about to release the first comprehensive set of end-to-end NDC schemas, covering shopping, order management and payment and ticketing. This means that developers will now be able to get their hands on the schemas and start ‘playing’ with them.
As the schemas become publicly available, increasingly our focus will shift toward market adoption. Although NDC will be a voluntary standard, it is in the interest of air travelers and the industry at large to see NDC widely adopted.
With that as background, here are three priorities the NDC team will be pursuing in the coming months.
Expand airline knowledge and participation
The NDC pilot phase will continue throughout the rest of 2014 and into 2015. Concurrently we expect to see rising interest from more and more airlines to learn about implementing NDC and standard deployment. As our experience with the pilots grows, we will share learnings and best practices with airlines - and their technology partners - that have chosen to test or to deploy the standard.
Strengthen our relationships across the value chain
Over the past 12 months or so, NDC has transitioned into a true industry initiative with broad participation across the travel value chain (an example is our agreement with Open Allies for Airfare Transparency on conditions to the implementation of Res. 787). The upcoming release of the comprehensive end-to-end schemas presents the opportunity to take our engagement with global distribution systems and other technology providers, travel management companies, online travel agencies and travel metasearch engines to the next level.
Get travel technology innovators behind NDC
Lastly, as we work with Open Allies and the GDSs, we want to extend our outreach to be inclusive to travel technology innovators looking at ways to re-invent the flight shopping experience. Reaching these smaller and less well-known firms will take some fresh thinking and we expect to have a big announcement in this regard at World Passenger Symposium 2014!
Timothy O’Neil-Dunne is usually provocative and always interesting and his recent thoughts regarding specific technology and commercial issues linked to NDC are no exception. While ultimately concluding that, “Airlines and other stakeholders in the airline distribution marketplace need to focus on adoption of NDC, rapid deployment and sponsorship of innovation,” Timothy is unsparing in his critique of NDC as having “lost its way,” while its goals and promise have “become clouded by different agendas and competing forces.”
With regard to different agendas and competing forces—we have certainly reached out to other players in the travel distribution value chain whose agendas may well diverge on some issues from those of IATA and airlines—but there is more that unites us than divides us. And we want NDC to be an inclusive standard, broadly supported across the value chain.
Unfortunately, much of his most thought-provoking analysis lies outside of the scope of IATA’s activities—we do not get involved in or comment on commercial issues involving our members and we have emphasized that NDC is a standard, not a business model.
However, we can respond to one of his biggest concerns: that NDC is taking too long to arrive in the market, which in his view ultimately is putting at stake the very benefits it promises to deliver to the industry.
I’m sure everyone associated with NDC would like to move faster but in building a standard that isn’t always possible, particularly one that offers such a dramatic change and which is being developed with broad input from a number of different participants in the travel value chain. Think about the transition to e-ticketing, which also was a multi-year project. Arguably, NDC touches on even more stakeholders and more business activities.
And in fact, NDC has achieved significant progress, particularly over the past twelve months, especially in the areas of:
- Standard development – where working with 30+ industry partners, IATA has been able to put together a complete set of business requirements and XML schemas for the most critical steps of the airline distribution process (Shopping, Booking, Payment & Ticketing, Interline and Servicing)
- Industry stakeholder management – where through regular contacts with the travel trade global distribution systems, industry suppliers and corporate travel buyers, IATA is gaining acceptance for NDC from more and more industry stakeholders.
Other aspects of NDC are not entirely under the control of IATA for example:
- The need for airlines and their technology and distribution partners to prepare their respective organizations to NDC and evaluate and execute the process change and investments associated to NDC;
- The technical limitations of market-leading Passenger Services Systems (PSS), which prevents developers to source airline’s rich and unique content in an easy, agile and immediate manner;
Still, there is a need for greater speed in standard deployment and greater access to the schemas by the developer community and we expect to see progress accelerate as the Resolution 787 approval process at the US Department of Transportation is completed this summer.
As IATA increases its focus on industry adoption of NDC during this second phase of the program, we are excited about upcoming developments which include the release of the end-to-end schemas, a new study on business traveler needs and two other exciting projects which we expect to announce at the World Passenger Symposium, 15-17 October in San Diego. These initiatives will move us further down the NDC path. And they will help to deliver the key success factors that Timothy cited: “deliver value, deliver speed, deliver what the user and his/her consumer want”.
If you have visited the NDC web page recently, you may have noticed that an “Alignment” tab has been added to the top of the page. But what exactly is an "Airline Alignment" session?
Conducted by 2 experts from the NDC team, these sessions, which are approximately four hours in duration, bring together senior representatives from different departments within the same airline: revenue management, distribution, e-commerce, sales, marketing, IT, revenue accounting, finance and government affairs.
The session is structured around three well-defined objectives:
- Ensure a common understanding, across the airline, of the NDC Standard and the benefits it can offer
- Review the potential changes in the distribution process (shop, book, pay, ticket and settle) with all impacted departments
- Understand the airline's assessment of the opportunities and their position regarding NDC
And it is organized around four building blocks:
- Description of the NDC program and the scope of the NDC standard
- Review of the end-to-end distribution process today and in an NDC world
- Examples of the benefits delivered by NDC to the airline
- Discussion on next steps
So far this year, five airlines have participated in alignment sessions: SAS, Aeroflot, Emirates, Etihad and Iberia. In the next 3 months, we have another 10 sessions planned with other airlines in the European, Middle East-Africa and Asia-Pacific regions.
These sessions constitute the first step in these airlines’ journey towards NDC, leading to possible pilot projects with their preferred technology and agency partners.