In March 2018, an Answair study discovered that across the airline industry, expectations were sky-high for NDC: Almost all players predicted a fast take-off.
This research, conducted in February 2018 with 14 NDC-certified airlines enthusiastically pursuing new retailing opportunities and distribution freedom, was based on a combination of surveys and interviews.
One and a half years later, we decided to do a situation check with 15 NDC-Leaderboard airlines.
We are now halfway to the end of 2020, when the NDC IATA Leaderboard members (consisting of 21 airlines) have set themselves a goal of reaching 20% of their reselling traffic through an NDC API, aka the 202020 objective.
- Are all players on track?
- Have they reached, or even exceeded their goals?
While the situation we uncovered was undeniably positive for most Leaderboard airlines, other carriers seemed to have hit a hard reality check.
Despite the ineluctable NDC promise carried aggressively by the leading airlines, others seem to be adopting a wait-and-see approach.
They are looking at Leaderboard carriers to solve major adoption challenges before committing with less growing pains. This situation is also indicative of their better appreciation of NDC challenges and opportunities that went from simple NDC trials 18 months ago, to rigorous transformation programs with renewed volume ambitions.
NDC's big progress
The 202020 objective means that over 80 million passengers per year will have their Passenger Name Records transacting through an NDC API.
While this only represents a small fraction of total air traffic worldwide, it will be a key tipping point on the road to NDC mass adoption (not to mention serving as an enabling example for other airlines to follow in a faster and more cost-effective way).
Recently, most Leaderboard airlines have hinted that this objective of reaching 20% of sales through NDC in 18 months seemed within reach.
At first glance, these results are less optimistic than last year’s. While 2018 had 59% of respondents expecting to do over 20% of their bookings through NDC, this figure has fallen to 34% in July 2019.
Overall, 87% of airlines now estimate a penetration between 10 and 30%. The 2020 target therefore still remains achievable – albeit a bit challenging.
What is certain is that a double-digit penetration in 2020 will already be both a point of no return and the start of a drastic acceleration: the NDC take-off.
Popping the hood open
When it comes to NDC in general, all growth indicators are green and good. NDC now boasts an impressive number of players: 25 aggregators, 51 IT providers, 22 sellers and 68 airlines, all currently certified as NDC or NDC capable.
What’s more, IATA keeps raising the bar higher by defining and setting up new levels, e.g., Level 4 certification (Full Offer and Order including servicing) and NDC@Scale, thus improving the standard, providing crisp guidelines and helping airlines and their business partners to increase their volume and recognize its value.
Within a couple of months, a total of 27 companies upgraded to Level 4, which is a remarkable achievement.
But wait - let’s also check where the 46 airlines and 40 providers stand, when compared to their March 2018 status. Surprisingly, this reveals a very different story.
Out of the 46 airlines investigated in March 2018, the proportion of production-ready airlines (i.e., airlines that have adopted NDC version IATA PADIS 17.2 and above) does not even reach half of today’s sample.
Over an 18-month period, this proportion has only increased by 15 percentage points, from 24% in 2018 to only 39% in 2019 – a disappointing result.
In the same period, the number of airlines on Level 3 or above (Offer and Order) has actually decreased from 36 to 34. Furthermore, were we to remove the Leaderboard airlines, the adoption level of production-ready airlines would fall to 16, yet again showing that these NDC leaders are carrying more than their fair share of weight.
The question then becomes: Is NDC only suitable for Leaderboard airlines? When will the rest of the airlines eventually follow suit?
Similarly, in March 2018, only 15% of the 40 early IT providers analyzed had obtained a production-ready NDC standard certification. This adoption figure only increased to 33%, 18 months later.
Could this delay in upgrading to a production-ready release simply be a reflection of a lack in customer demand?
NDC is supposed to facilitate and stimulate more competition and innovation in order to help the industry grow.
This “contraction” in terms of numbers of IT players bringing NDC forward could be concerning. On the other hand, this may simply be the symptom of IATA reinforcing the certification process, improving the credibility, quality and commitments of IT players towards NDC.
Regardless of the reason, however, the underlying question remains: What caused some of these enthusiastic early providers and airlines to go from eager adopters in March 2018, to not being able to keep up with the quality level that this certification requires today?
From inflated expectations to the plateau of productivity
How to reconcile this unstoppable 202020 NDC volume quest with this disappointing year-on-year adoption level improvement in the above samples?
The numbers paint a contrasting picture, with high NDC volumes being forecasted by big airlines and big IT players on one side, and a general slowness of other airlines to jump onto this bandwagon on the other.
Is there a disconnect between the locomoting Leaderboard airlines and their partners, aggressively taking on the big 2020 challenge, and the rest of the train?
Just like for any big industry faced with massive changes, the typical Gartner Hype Cycle curve can explain these conflicting views.
Undeniably, and with the exception of the Leaderboard airlines, 2018 saw inflated expectations that were quickly tempered by perceived risks related to executive commitments, unknown business drivers to ensure the right return of this technology and potential misalignments throughout the distribution chain.
All in all, it made for a hard reality check: Is NDC worth it at this stage? Or should we wait?
IATA has already anticipated the upcoming plateau of productivity with 2018 being the “Plumbing Year."
It is why, in October 2018, it introduced NDC@Scale, enriching the existing standard with four key dimensions:
- Technical setup
- Organizational setup
- Use cases
- Capabilities
As Yanik Hoyles, director for industry distribution programs for IATA, says: "NDC@Scale is not just another IATA certification level. This is a brand-new, structural means to help airlines understand how to secure growth with NDC, be it for Leaderboard airlines to reach their 2020 target or for airlines still at the beginning of their NDC journey.
"This is about making sure that all airlines and partners are ready to drive big volumes and derive significant tangible value while highlighting the business travel specifics."
* Click here to read part 2.