PhocusWire has four core areas of focus: Startups, Distribution, Technologyand Online.
In this analysis for the PhocusWire Forecast 2018, we ask if the developments in distribution during 2017 are a barometer of what is likely to come over the course of the next 12 months.
With hotel distribution aligned more closely with the shenanigans happening on the web, we will cover that in our Online analysis. For this piece, we'll stick with airlines.
Distribution
Airline distribution was always a complex - but fairly unexciting - discipline until a few years ago.
There might have sometimes been a testy content renewal negotiation between an airline and a global distribution system, but these were usually sorted out after a bit of leaking to the media and grandstanding from both sides.
Excitement is relative, of course, yet when American Airlines started talking about its direct-connect program in 2010, things got interesting.
The airline’s project to give intermediaries the opportunity to bypass GDSs was the blueprint for some of the thinking behind IATA’s NDC standard.
It finally happened
Seven years on, and 2017 saw two carrier groups come out with their flags waving in support of the so-called new distribution model in aviation.
Air France-KLM and British Airways may have been late to the party (Lufthansa introduced its own GDS ticket tax in 2015), but their move signaled that very little is going to stay the same in airline distribution.
Lufthansa was no longer the anomaly – others were now happy to follow suit.
Distribution, inevitably, will gradually be wrapped around a far more important commodity than a (increasingly mobile) ticket that goes into the hands of a passenger.
Whether three large airline groups cheering on the new model is enough to inspire wholesale change around the sector is uncertain, but next year it is far more likely we’ll see others jump on the bandwagon.
The reality for many is that airlines appear to have wrestled control of the distribution landscape and are now ready to run with it, with everyone else seen simply as users of technology to buy tickets rather than apparent gatekeepers or beneficiaries to a commercial model.
This is maybe a too simplistic idea as we head into 2018, with the GDSs perhaps rightly claiming that NDC is simply a “standard” and is therefore something that needs the so-called buy-in from every element, rather than controlled by a single entity (such as airlines).
Another likely outcome will be other carrier groups introducing surcharges and then, through travel management companies (such as the ones between BA and Carlson Wagonlit or American Express Global Business Travel), coming to creative commercial and technical arrangements that work for all parties.
Bigger picture
With the groundwork laid over the past few years (especially during 2017), perhaps the grander vision for the evolution of airline distribution will start to come into play.
Many commentators and executives from across all parties have said for years that the (r)evolution will arrive in numerous ways – just few agree on the exact timing.
The actual technology itself is likely to see major changes, many fairly soon, especially if airlines, intermediaries and GDSs throw their hats into the ring with the ledger token-based blockchain model, essentially overhauling the entire process of payments and distribution.
Another element is simply how airlines will choose to manage their own inventory, not least with many considering themselves more than “just an airline” (the awful Amazonization word invariably springs forth in this regard).
This isn’t solely a GDS-travel agency discussion but a wider examination (and many are doing so already) around retailing and marketplaces for goods and services, as well as connections, ancillaries and partner tickets.
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Distribution, inevitably, will gradually be wrapped around a far more important commodity than a (increasingly mobile) ticket that goes into the hands of a passenger.
It is the customer data that is the more important currency, and an area that underpins almost everything a modern carrier is thinking about in its strategy for 2018.
How can an airline build a better relationship with a passenger, so that it can serve the right offer at the right price through whatever distribution channel it chooses to get the most effectiveness for its efforts?
By gathering and examining and using the data it collects from the passenger at every potential moment an airline can.
This is at the heart of the distribution debate, and why in 2018 we will see countless more initiatives (many of them subtle, some less so) that use distribution as the cornerstone for the strategy: selling a ticket and lots of stuff as simply and efficiently as possible.
It is, frankly, a far more interesting time to be in (and also writing about) distribution than it was ten years ago.