Should We Join the NDC? The Big Question

Ann Cederhall Joins AeroTime as New Columnist to Discuss Airline Distribution Strategy

AeroTime is thrilled to announce the addition of Ann Cederhall as a columnist, bringing her expertise in airline distribution strategy to our platform. With a rich background as an instructor with the International Air Transport Association (IATA) and Aeroclass, Ann is a sought-after speaker at industry events and has authored numerous articles and white papers in the travel sector. As a co-owner of the consulting firm LeapShift, she leverages her extensive experience in project and product management to deliver significant business value globally.

As the airline industry evolves, understanding the intricacies of distribution strategies, particularly the influence of low-cost carriers (LCCs), is crucial. In the mid-2000s, LCCs revolutionized the market by significantly reducing distribution costs. They bypassed traditional Global Distribution Systems (GDS) and instead adopted a direct connect approach, selling ancillary services like baggage and seat selection directly to consumers. This shift has raised questions about how traditional network airlines can adapt to maintain competitiveness.

The Rise of Low-Cost Carriers and the Need for Change

Low-cost carriers have proven that focusing on direct sales can lead to lower costs and better customer engagement. Here are key takeaways on the impact of LCCs:

• Direct Sales Model: LCCs sell directly to customers, avoiding high GDS fees.
• Unbundling Services: They offer ancillary services separately, enhancing revenue streams.
• Technological Advancements: Many LCCs have developed their own Application Programming Interfaces (APIs) to facilitate direct sales.

In contrast, traditional airlines remained tied to the GDS framework, which not only increased their distribution costs but also limited their ability to unbundle services. This realization prompted network airlines to seek solutions through IATA’s New Distribution Capability (NDC), introduced in 2012. NDC aimed to modernize airline distribution by establishing an XML-based messaging standard to replace outdated systems.

Challenges in Implementing NDC

Despite its potential, NDC adoption has faced hurdles:

• GDS-Centric Systems: Travel Management Companies (TMCs) primarily rely on GDS, making it challenging to integrate NDC.
• Inertia in Technology: Many agencies are reluctant to shift from established GDS processes due to operational complexities.
• Lack of Incentives: TMCs receive incentives for GDS bookings, complicating their willingness to transition to NDC.

Interestingly, while NDC has not gained traction on airline websites, it serves as a standard for travel sellers like OTAs and TMCs. Airlines can choose to implement NDC through their APIs to enhance direct connections with sellers.

Evaluating the Need for NDC

As the landscape evolves, airlines must ask themselves critical questions regarding NDC adoption:

• Do you have control over your API?
• Are your travel sellers primarily using GDS?
• What percentage of your sales is generated through GDS?
• Are your competitors embracing NDC, or are they lagging behind?

By addressing these questions, airlines can determine whether to adopt NDC as part of their distribution strategy. It’s essential to recognize that NDC is not a one-size-fits-all solution. Instead, it should be viewed as one component of a broader retail strategy focused on enhancing customer experience.

Conclusion: The Future of Airline Distribution

As the airline industry navigates these changes, the role of low-cost carriers and the implementation of NDC will be pivotal. Ann Cederhall’s insights will be invaluable as we explore these developments further. For more information on airline retailing strategies, consider reading our previous articles or sharing your thoughts in the comments below.

For further reading, check out the IATA’s official NDC resources and explore how LCCs are transforming the industry.

Stay tuned for more insights from Ann Cederhall as we continue to delve into the future of airline distribution strategies.