This is an analysis by Philippe Der Arslanian, CEO, Answair.
This is the second of two articles looking at what needs to happen for an NDC tipping point. Here's part one - NDC tipping point? - Seeking speed
Ever since we entered the Internet Age, companies have faced a key issue: choosing their IT partners. This selection is critical – after all, the wrong IT partner can simply break a business. When it comes to NDC however, this decision takes on a whole other dimension: no longer are we just looking at complex IT solutions, but rather at comprehensive digital transformations.
It’s therefore no surprise that according to a high-level survey and conversations conducted with 15 NDC-certified airlines, the first priority in securing an ROI on NDC is picking the right IT partner (67% of respondents).
Meanwhile, at rank #2, we discover “Align NDC quick wins with long-term strategy”, which is again unsurprising. Airlines need to ensure that their relevant partners can fulfill both the basics. i.e. check a compliance matrix for day-1 deliveries - and - be strategically aligned with their long-term NDC journey.
The importance of suppliers doesn’t stop there - over 90% of respondents find it either “important” or “very important” to set up the right contractual framework. These agreements may need to be revised not only with an adjusted set of IT players, but also with the newly connected trade partners as deployment evolves.
To address this industry challenge, there are 40 IT NDC-capable providers and 15 aggregators currently listed in the IATA registry as of February 2018. These 55 players now represent a broad range of possibilities for airlines and demonstrate the significant momentum building in the NDC space. This is also exemplified by the fact that all key travel actors are on the NDC bandwagon. “The turning point is that most GDS are now on board” highlighted one carrier.
Indeed, on the GDS aggregator side, Travelport is already certified level 3 and Sabre and Amadeus level 1, with the expectation that they will reach level 3 by end of year. Meanwhile, with over 10 NDC-certified carriers in what is to become the largest domestic market worldwide, China Travelsky may become another noteworthy NDC player to watch.
Which brings about the key question: which IT provider should airlines choose?
The reality check
First off: things are more complex than they appear. We haven’t yet reached an NDC inflection point, in part because the IT players themselves are not yet fully up to speed on NDC. Things are moving very fast but as of February 2018, only 5 IT Level-3 providers offer the most stabilized and production-ready version – version 17.2. Interestingly, the same observation applies to aggregators: out of 15, only 9 are level-3 certified, of which only 2 run 17.2.
Even this analysis is only skimming over the vast discrepancies in NDC capabilities – including upstream and downstream processes. While most providers have the basics down, once the investigation moves into more advanced categories such as servicing, interlining, rebooking and complex itineraries, the number of relevant suppliers melts away. Case in point: only 30% of the 40 NDC-capable providers support some kind of rebooking / reshop NDC verbs. One airline warned “Deliver[ing] a full end-to-end solution remains very complex.”
Ironically, the above complexity seems to go against one major NDC expectation: simplicity. One carrier said “NDC is not about saving costs or increasing revenues, it is first to make it easy for the airline.” – but it doesn’t seem as if we are there yet.
This issue however, should not last long. We are still at the beginning of the curve – going forward, supplier adoption will likely see a drastic acceleration for three main reasons:
Partners who managed to get their level 3 capability have just done so in the last few months. The upgrade to this promising production-ready baseline 17.2 - also including new servicing capabilities – is now increasingly attractive to implement.
There is a tremendous incentive to quickly upgrade because many airlines now look at up-to-date functionalities as a prerequisite. Providers cannot be left out of a bid just because they don’t pre-qualify on a version level.
Finally and most importantly, NDC opens up an entirely new co-opetition game where all suppliers can both compete and cooperate at the same time and on the same ground. Ranging from specific innovative merchandising technics to end-to-end solutions, they deliver more complementary value together. Gone are the days where airlines had to select monolithic and proprietary solutions. This open field will eventually result in a much faster and simpler adoption with relevant supplier(s) for the benefit of airlines and their ecosystems.
Selecting the right IT partner
No IT partner is the perfect fit for everyone. Much depends on an airline’s business model and type, distribution mix, regional infrastructures, competitive environments, and strategy, all of which provide guidance towards which IT partner is right for a given carrier at a given time.
That being said, there are general considerations to take into account in ensuring that NDC deployment be made as simple as possible. Without further ado, here’s what to look out for in an NDC provider:
The ideal supplier needs to be able to deliver short wins while also scaling up with a long-term strategy in mind. Indeed, most airlines respondents emphasized this point – which is unsurprising given the potential of this standard to drastically grow NDC-processed bookings over the next three years.
To secure this, one must look beyond “NDC Capable” stamps, as the IATA only certifies the use of messages. To obtain this stamp, suppliers are only required to submit traces for validation, which may have been produced within a test system rather than a production environment. As of such, and because airlines need high-performing solution to handle their offer creation and order management, they should focus on providers that can reliably support high-volumes under stress tests, ensure instant response times, and handle any type of traffic surges in a cost-efficient way.
Preferred suppliers should be those that can also align with their customers’ long-term strategies e.g.
- Risk-averse: building a step-by-step, proof of concept plan with the supplier rather than a big-bang player
- Innovative: selecting a retailing game-changer with outside retailing expertise vs. an airline legacy specialist
- Best-of-breed: integrating the best set of suppliers vs. choosing a single provider end-to-end.
What is a key gain expected from NDC? 80% of respondents agreed: Control.
With this mind, choosing an IT provider that can offer dynamic personalization of offers and increase air-related ancillaries attachment rate is clearly critical to success.
Above and beyond these capabilities, there are also several additional dimensions to consider – also captured in the IATA Business Requirement Document template - which can provide more control to an airline such as:
- Dynamic offers on the end-to-end journey e.g. to treat every single seat like a single offering
- New business models to both expose (e.g. NDC API) and consume (e.g. Desktop UI)
- NDC-driven servicing including rebooking, complex itineraries, interlining and back-end functions
- Advanced Merchandising capabilities with multi-channel business-rule engine
A new IT NDC retailing architecture means nothing if it isn’t backed by a solid merchandising and personalization strategy. “Airlines first need to equip themselves with a retailing DNA” confirmed a supplier. Along with the stated requirement to “control” the offer, the business-side of airlines must take full ownership of key retailing functions. This will empower retailers with new attributes such as flexibility, time-to-value, reactivity, openness, customization, and innovation.
The right IT provider(s) will therefore ensure that the architecture complies with these business drivers, by creating a fully-dedicated and agile retailing layer. This layer should contain all relevant functions starting with Offer & Order Management, as well as pricing, rich media, merchandising, and personalization modules.
More importantly, this layer should also be exposed and its output dynamically tailored to all channels such as OTAs, TMCs, Travel Agencies, and more. In a reinforced channel ecosystem, this modular approach will also protect all airlines’ investments by allowing to switch components, without disrupting their trade partners’ operations.
Quest for simplicity
The airline industry is now well beyond the point of no return with NDC and the tipping point is clearly within reach. Today, a few airlines are testing the waters with simple use cases, while others are setting up transformation programs involving all stakeholders and fueled with big ROI objectives. Choosing the right IT partner(s) is critical in the latter case, as it will allow leading airlines to scale to their fullest, control their offers on the overall journey, and deliver on their complete retailing vision.
As with any major industry revamp, there will be problems along the way. The journey from basic HTML standards to a full enterprise-wide digitalization was no different. The pay-off, however, will be well worth the effort: a superb NDC trajectory that will be as impactful and simple as possible.
This is a viewpoint by Philippe Der Arslanian, CEO Answair. The views expressed are the views and opinions of the author and do not reflect or represent the views of his employer, tnooz, its writers or partners.