Complex Made Simple

Understanding IATA’s infrastructure revamp and what it means for travel

A few years ago, IATA set in motion an initiative that looks to drastically reshape the customer purchase experience - even if it's taking time to be more widely accepted.

Today, customer personalization is the name of the game NDC. the new initiative by IATA, seeks to bring the travel sector into the 21st century The transition, however, has been far from smooth

A few years ago, IATA (International Air Transport Association) realized that consumer expectations were rapidly evolving, with personalization of the user experience at the forefront of many modern day transactions. The old system it had in place to relay information with travel agencies, which relied on the outdated data exchange standard EDIFACT, was only capable of transmitting basic information such as schedules and fares.

With EDIFACT (Electronic Data Interchange for Administration, Commerce and Transport) predating the internet (conceived in the 80s), it was clear something needed to happen to update the existing infrastructure. 

Enter the NDC (New Distribution Capability), which updated the data standard to the highly flexible XML (Extended Markup Language) format. NDC would bring airlines and travel agencies into the 21st century, with highly specific details becoming conveyable at last. 

The old guard: GDS’s

Originally, Global Distribution Systems (GDSs) offered airlines the ability to convey very basic information to customers through indirect channels such as OTAs (Online Travel Agencies), meaning their sole point of individuality when advertising through third-party websites was often price. 

“Indirect channels’ common use of GDS makes it difficult for airlines to differentiate their products,” a report by pwc on updating airlines’ business models explains. “As a result, consumers’ buying decisions are heavily influenced by price.”

With the new system, airlines could finally convey detailed information across the network such as the type of meals served, a seat’s leg room space, images and videos of the travel product, Wi-Fi availability, and more. This allowed for tailored suggestions and recommendations on the consumer end, à la recommendations on Amazon or Ebay for example, and maximized competitiveness.

“The [NDC] initiative by IATA is an effort to remedy this problem by offering a new XML-based messaging standard to give travel agents richer content via GDS,” the pwc report continued. 

“The long term plan to allow travel agents to harness more cloud based technology using a single, yet adaptable platform means that there’s to be more cohesion between passengers, airlines and agencies alike – providing more competitive choice and more tailored travel solutions,” Saj Ahmad, Chief Analyst at StrategicAero Research, concurred.

Getting with the times

The GDS’s of old such as Europe’s Amadeus and the US’ Sabre and Travelport are still finding their place in this new world. With the introduction of NDC, their traditional business model is in jeopardy. However, like GDS’s, many airlines are sticking with the old way of doing things.

“Ideally, it would be the easiest if the GDS’s would just unplug the EDIFACT pipeline and plug in the NDC pipeline,” Michael Strauss, CEO of Miami-based PASS Consulting Corporation, explained. “However, not all airlines will migrate to NDC at the same time which would mean a transition period and among the challenges, there is also the unresolved problem of who does the ticketing: ATPCo airlines, ticket in the GDS, while NDC API (Application Programming Interface) bookings are ticketed with the airline. And that’s besides commercial aspects. Consequently, this won’t happen overnight.”

As it currently stands, and “given the prevalence of GDS in the industry, airlines are likely to seize on any opportunity to integrate or enhance their ancillary merchandising capability with the GDS,” the pwc report states.

Image: IATA

The 3 major GDS’s are all NDC-certified at this point, hoping to integrate themselves into the data standard of the future – even if airlines have been slow on the uptake when it comes to the standard in question. 

“NDC was orginally created as a way to bypass the GDS providers, but slowly these providers have become more involved in the process,” Ryan D’Souza, Product Research Analyst, writes for the Yieldr Content Hub. “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.”

“Part of the challenge is getting airlines, travel agencies and GDSs to spend money on the infrastructure needed to implement NDC,” D’Souza continues. “Additionally, implementing NDC-capable solutions instead of wholesale adoption of NDC adds complexity to the airline distribution process.”

He concluded: “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.”