IATA’s New Distribution Capability continues to dominate travel industry discussions and stands to transform the airline distribution landscape. We take a closer look at the journey to NDC and its impact on travel distribution.
So what are EDIFACT and NDC and what are the differences?
EDIFACT and NDC are both messaging standards used in the airline industry for electronic communication between airlines and travel agents.
EDIFACT (Electronic Data Interchange for Administration, Commerce, and Transport) is a global standard for electronic data interchange (EDI) that has been used in the airline industry since the 1980s. It is a message format that standardises the structure and content of electronic messages exchanged between airlines and travel agents for tasks such as booking, ticketing, and invoicing.
NDC, on the other hand, is a relatively new messaging standard developed by the International Air Transport Association (IATA) that enables airlines to distribute their products and services directly to travel agents and other third-party sellers through a modern, XML-based API.
NDC allows airlines to provide more detailed and personalised information about their products and services, such as ancillary services, fare families, and seat options, to travel agents and other sellers.
What is XML?
XML (eXtensible Markup Language) is a markup language used for encoding documents in a format that is both human-readable and machine-readable.
It is often used for exchanging data between different systems and is commonly used in the travel industry for data exchange between airlines, travel agencies, and other travel service providers.
XML can be used for a wide variety of applications and is a very flexible format.
Why is NDC important for the travel industry?
NDC enables airlines to offer a wider range of products and services, and it provides a more efficient and effective way for travel agents to access and book those products and services.
Traditionally, airlines have distributed their content through global distribution systems, which are intermediaries that connect airlines with travel agents. However, GDSs are limited in their ability to display all of an airline's products and services, and they often do not include ancillary services such as baggage fees or seat selection.
This can result in a lack of transparency for travellers and can make it difficult for airlines to compete on more than just price.
NDC allows airlines to offer a wider range of products and services, including ancillaries, and it allows for more personalised offers and pricing. This gives airlines more control over their distribution and enables them to differentiate themselves from their competitors.
It also provides a more efficient and effective way for travel agents to access and book airline content, which can result in increased sales and revenue for airlines.
Additionally, because NDC is a travel industry standard created by the IATA, it is being widely recognised and adopted by airlines and travel agents around the world.
This makes it easier for airlines to implement and for travel agents to use, which can result in a more streamlined and efficient distribution process for everyone involved.
The Benefits of NDC for airlines
While EDIFACT focuses on standardised messaging and data exchange, NDC is more focused on modernising the airline distribution landscape and enabling more efficient and personalised sales of airline products and services. However, both EDIFACT and NDC play important roles in airline distribution, and many airlines continue to use EDIFACT in conjunction with NDC.
NDC offers several benefits over EDIFACT for airlines, including:
Increased product differentiation: With NDC, airlines can provide more detailed and personalised information about their products and services, such as ancillary services, fare families, and seat options. This enables airlines to differentiate themselves from their competitors and offer a more customised and tailored travel experience to their customers.
Direct distribution: NDC enables airlines to distribute their products and services directly to travel agents and other third-party sellers through a modern, XML-based API. This means that airlines can bypass traditional distribution channels, such as GDSs, and have more control over the distribution of their products and services.
Cost savings: By bypassing traditional distribution channels and working directly with travel agents and other sellers through NDC, airlines can save on distribution costs, such as GDS fees and commission payments.
Improved customer experience: With NDC, airlines can provide more personalised and relevant offers to their customers based on their preferences and travel history. This can help to improve the overall customer experience and increase customer loyalty.
Faster time-to-market: NDC enables airlines to bring new products and services to market more quickly and efficiently, as they can make changes and updates to their offers in real-time through the NDC API.
Overall, NDC offers airlines greater flexibility, control, and efficiency in the distribution of their products and services, as well as the ability to offer a more personalised and differentiated travel experience to their customers.
Advantages of NDC for travel agencies
NDC offers several advantages over EDIFACT for travel agencies, including:
Access to more content and offers: With NDC, travel agencies can access a wider range of airline content and offers, including ancillary services, fare families, and seat options. This enables travel agencies to offer their customers more personalised and customised travel options.
Real-time pricing and availability: NDC enables travel agencies to access real-time pricing and availability information directly from airlines, which can help to improve the accuracy of their bookings and reduce the risk of overbooking.
Improved customer service: With NDC, travel agencies can provide their customers with more personalised and relevant offers based on their preferences and travel history. This can help to improve the overall customer experience and increase customer loyalty.
Cost savings: NDC enables travel agencies to bypass traditional distribution channels, such as GDSs, and work directly with airlines, reducing costs of using a GDS.
Faster time-to-market: NDC enables airlines to bring new products and services to market more quickly and efficiently, which can help travel agencies to stay competitive and offer the latest travel options to their customers.
By offering travel agencies greater access to airline content and offers, real-time pricing and availability information, and more personalised and relevant offers for their customers, NDC can help to improve the overall customer experience, increase customer loyalty, and reduce costs.
The Challenges of NDC vs EDIFACT
While NDC offers several advantages over EDIFACT, there are also some challenges associated with the adoption of NDC in the airline industry:
Technical complexity: NDC is a relatively new messaging standard that requires technical expertise to implement and use. Many travel agencies and smaller airlines may not have the resources or technical capabilities to adopt NDC.
Integration with existing systems: NDC requires integration with airlines' existing systems, such as reservation and inventory management systems, which can be complex and time-consuming.
Fragmented implementation: NDC is being adopted at different rates by airlines and travel agencies around the world, which can lead to fragmentation and inconsistencies in the implementation of the standard.
Lack of standardisation: While NDC provides a standard messaging format, there is still a lack of standardisation in the implementation of the standard across the industry, which can lead to confusion and inefficiencies.
Cost: While NDC can help to reduce costs in the long run, there are upfront costs associated with implementing the standard, such as IT infrastructure upgrades and training.
The role of aggregators in NDC
Once airlines began to offer access to their reservation systems via Application Programming Interfaces (APIs), a new type of aggregator emerged based on this newer technology.
Initially, these aggregators connected to the proprietary APIs of the various airline reservation systems but the creators of the NDC standard saw a role for an aggregator that would use NDC messages to talk to multiple travel agents on one side and to multiple airlines on the other. Aggregators provide a communications and integration hub. Sellers (usually agencies) send inquiries to an aggregator. The aggregator is responsible for sending the enquiry on to participating airlines and to collate their responses into a single response back to the seller.
The aggregator may decide which airlines should receive the request by using the NDC Airline Profile, by allowing the seller to specify which airline to query or by using its own proprietary data. Once the seller has selected one or more offers the order creation happens in the same way as if the seller were talking directly to the airline.
Changes are coming
In the past airlines have signed full content agreements (FCAs) with the GDSs to ensure they receive the same content as airlines’ other distribution channels, in return for a more favourable GDS booking fee.
FCAs are still in place with many airlines worldwide and in order for an airline to open the door to other distributors, such as aggregators, this needs to be addressed.
To drive bookings through NDC and aggregator channels, airlines are adopting pricing and content differentiation through these channels in comparison to the GDS. Airlines such as Lufthansa and Air Canada are introducing surcharges for EDIFACT bookings.
American Airlines, on the other hand, has chosen to make 40% of its fares, including its most competitively priced seats, available only through NDC-enabled channels.
Commercial models also differ amongst aggregators, with some choosing to only charge the agency for access to content, whilst others choose a hybrid model of charging the agency and airline.
Increasingly aggregators are assessing the business case for each airline and market individually. However, this is a new space for airline and aggregator alike, and both are still experimenting when it comes to business models and compensation.
In terms of other business capabilities, airlines are looking for high levels of service from aggregators which ensure response times are at least on par with other airlines.
The future of airline distribution
Overall, the adoption of NDC represents a major shift in the airline distribution landscape, and there are still several challenges that need to be addressed in order to fully realise its potential benefits.
Travel agencies, especially those that specialise in corporate travel, are struggling to make full NDC content available to book for their customers.
This is being compounded by airlines passing GDS fees along to travel resellers, or making their best fares available only via NDC-enabled channels, effectively reducing GDS-centric agencies' ability to compete.
While this is fairly limited at the moment, more airlines are expected to adopt strategies for their NDC content. It will be even more important for agencies to be make this content available to remain competitive.
For more information on how Snowfall's multimodal travel platform, Junction, can support your agency with full content, faring and retailing, talk to our team.
Head of Marketing
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