Has anything changed in this relationship between agents and airlines? This is an important topic for me beacuse of the roll out of NDC at scale in the US. And typically when it happens in the US it is like “the first time it ever happens”.
Additionally, there seems to be a level of frustration when the planned SAS wholesale model was abandoned. I can imagine that stress levels were running high with those agencies affected. There is obviously a lot of anger out there on social media and with the airlines introducing NDC in the US, those emotions seem to be stirring up. I think we can safely say that distribution is broken and has been for a long time. I thought I’d look at what I think is wrong and share my thoughts on whether we can work towards change.
I am not going to go too deep into the history of NDC, but it started in 2001 with network airlines sitting back watching the low-cost airlines (LCC) selling directly to the consumers on the internet and paying a fraction of the distribution cost that the full-service carriers (FSC) were charged. Additionally, the LCCs unbundled their fares and were charging for bags and seats. Most airlines were saying that the LCCs were nothing to worry about and that they themselves were in a different league. This all changed when Air Canada introduced their Tango fares and the FSCs realized that they didn’t have the same technological advantage that the API centric LCCs had. The FSCs let their PSS control their technology. NDC was officially launched in 2012 and the purpose was to agree on a standard to replace the old EDIFACT messaging standard. Personally, I think that more focus should have been put on common technology solutions for airlines with an API first mindset.
Most airlines were told that they had to implement NDC, but we never spoke much of the why. For me it is about the three Cs, but I want to add another C and make it four - Cost, Control, Content and Customer experience.
Cost is clearly a problem.
It is safe to say that distribution costs are astronomical and there has been little change with only four GDSs in the market - Amadeus, Sabre, Travelport and Travelsky. In mid 2005, the GDSs introduced Full Content to reduce costs but the price that the airlines had to pay was high - to offer the same content in all channels, meant killing the possibility to differentiate on its own channels. Full Content I think has delayed technical progress in the industry by at least 15 years. Airlines didn’t invest in their own platforms and distribution stayed as is and ATPCO and the GDS slowly developed selling ancillaries based on the old PNR structure. Agencies took a backseat and continued using PNR centric systems for mid and back office. These systems were provided by the GDS and the financial structure with incentives, minimum volume commitments and excess transactions was much more of the same old way.
But what can be done about cost? If the GDS lowered the cost, would we see less NDC movement? Absolutely, reducing cost is what airlines want but why would the GDS reduce cost? We can safely say that the only other option is for airlines to move the sale of the airline ticket to their own distribution channel. Allow me to plant a thought there. What if airlines issued the tickets and the agents just sold the service? This would reduce costs for all.
Control is a very important element and seldom talked about.
The airlines struggle with GDSs allowing “everyone” to sell and wanted to control who is selling. Sadly, some abusive behaviour was driven by incentives. Airlines had to pay a full booking fee for cancellations within less than 24 hours - this makes no sense as there is no additional cost generated. There are also those who pay cancellation fees - fees that make no sense. Remember that the distribution models and cost structure have not changed in decades. Nothing got less expensive even as technology was getting cheaper in all areas of our lives - not just in the world of airline distribution. Incentives and minimum volume commitments sadly drove those abuses.
Then there is “abuse” by creative agents with more distant points, abuse of point of sale, manipulation of origin and destination - the list is long. It is a cat and mouse game played between agents and airlines resulting in airlines having to invest in revenue integrity products as well as auditing services. Personally, I like creativity and I see it as a sport. At the same time in order to find better fares but use an outdated pricing logic should be eliminated or at the very least, simplified. I can’t help but thinking that couldn’t AI replace the creative behaviour in the future and be able to simplify audits.
But I give you something to think about here. If the airline issues the ticket all of this goes away. No GDS abuse and no NDC manipulation. I recently saw a company who on their website advertised NDC manipulation. If we can get rid of the abuse, there is no need for revenue integrity products and no need for BPOs to audit agencies. Even ADMs go away.
Content is the third C.
It always irritates me that I must make several separate bookings. I want systems that bring it all together. When I go to a meeting, I want to be able to book services for friends and colleagues. I don’t want to be told as a customer that there is content that cannot be booked for me. I think we can all conclude that the PNR centric GDS environment doesn’t manage content very well. Airlines publish ancillary content through ATPCO who transmits it to the distribution systems.
We are not in an ideal environment for selling additional content. If you want to integrate and sell the Uber you need to integrate APIs. This is where the GDS have been painfully slow - with Travelport being the only exception. It is a very closed world and concepts like open source are not top of mind. Companies who have built technology based on the GDS have built PNR centric products not API centric products. Many agencies will tell me that their IBEs, selling platforms and their invoicing and accounting systems are PNR centric and often provided by the GDS. Is this about to change? We are seeing companies emerging that are order structured and can integrate any content that the agents sells. Spotnana is one example. Do I think that agencies must go in this direction? Yes, absolutely. They want to provide value to customers and that is much more than selling a ticket.
Here is a thought then. What if agencies change to becoming a concierge service acting on behalf of the customer and sourcing different content while providing additional services like duty of care? The agencies will no longer need to meet ticketing volumes or GDS volumes. Now they will be able to truly focus on what agencies do best - putting content together that the customer is looking for and it won't matter what channel it is sold through. If the customer wants easyJet outbound and Lufthansa inbound -you sell that. Are there airlines that are selling content today? Yes. Air Asia and their marketplace has already introduced the concept of selling other airlines - not just their own.
Finally, the Customer experience.
As a customer I want to own myself and I want to be serviced both by the airline or the agent or any 3rd party of choice and I don’t want to spend hours being told that “I need to contact the airline” or “I need to contact the agent”. I simply don’t care. I want someone to help me in the most efficient way. I am also willing to pay for that. How can we modernize the way the customer is managed? I believe that we need to enable both the passenger and the agencies to change and refund on the airline PSS and this is technically possible today.
As always, I welcome your thoughts.
