The modern Airline Retailing Marketplace has gained prominence post Covid19 pandemic as the world leapfrogged into digitalization and customers adopted technology. This has been followed by a massive behavioral shift to online searches and fulfilment of orders.
The aviation industry has operated on legacy systems that were built in the 1960s where information existed in silos with limited capacity to access and analyze the data. The airline booking systems were built on the logic of city of origin and destination of travel by booking class i.e. First, Business, and Economy. On the other hand, travel customers begin with Why? Then, where they want to be? What they want to do? Who has been there in the recent past? What are the reviews?
The aviation industry responded to these shifts in consumer behavior by developing the New Distribution Capability (NDC), a data communication standard based on XML and focused on 3Cs – Cost, Content and Control for the airlines. The focus is on creating value through content differentiation and customization of offers based on the customers’ preferences in fulfilling orders.
According to an IATA study done by McKinsey & Company in 2019 titled ‘Where is the Value in Airline Retailing?’, NDC would deliver for customers a personalized experience through differentiated content and seamless order fulfilment processes. The reports explains that airline operators would generate 70 percent incremental revenues from ancillary sales and 30 percent savings on distribution costs.
Most airlines in Africa are operating from a backdrop of poor liquidity, debt burdens, high jet fuel prices, constrained capacity in key global aviation hubs, labor crisis amongst other plethora of business operation challenges. And so, the question begs, is NDC the winning formula to profitability for African Airlines?
What is the future of GDS with the evolution of NDC?
The Global Distribution Systems (GDS) e.g., Amadeus, Travelport and Sabre have traditionally enabled content distribution and order fulfilment through their digital platforms that aggregate content for Airlines, Hotels, Attractions, car rental amongst other related travel services within one platform. Travel Agents have leveraged the GDS systems to enable them to offer their customers comprehensive travel itineraries that are matched to the customers travel expectations.
Travel Management Companies (TMC) who serve as travel advisors to the corporate organizations have also leveraged GDS systems to gain access to corporate customer profile accounts, and this allows the TMC to customize the travel booking within the corporate company’s travel policy efficiently.
Through GDS systems, travel agents and TMCs have been able to successfully integrate with the back end booking systems for ease of reconciliation, billing, and settlement. GDS have been very crucial to the success of the travel agents and TMCs as cashflow management is key to the success of the enterprise. These systems have enabled accuracy and speed of invoicing which is directly linked to the ability of the travel agents/TMC to collect the payments in time for remittance within the 7-14 days credit period.
However, with the conversation shifting towards NDC, one cannot help but wonder, GDS companies today must spend more money and invest further in new systems (NDC) that will reduce their revenue earnings in future! In which direction is the cheese moving?
It is evident that there is a need to focus on the organizational design for the airline and travel industry, and develop a commercial model between the GDS, airlines and passenger service systems that will enable the creation of multi-content inclusion. This will also enable the distribution of low-cost carriers to create an integrated marketplace for the exchange of information via a single omni-channel platform. To achieve this, we must continue to interrogate, what is different with the NDC standard.
Airlines are investing millions of dollars in the development of their NDC platforms. On the other hand, Travel Agents are seeking for a plug and play travel platform with the capability for multiple content inclusion. It is all about creating an “Amazon” for the travel and aviation industry that leverages multiple content channels and rich content to fulfill customer orders seamlessly within a single order.
NDC payments integration
Today’s traveller is younger, tech savvy, adventurous and with high customer expectations on their travel experiences. This customer is seeking for multiple payment channels that are supported or enabled by their mobile devices. The optimization of alternative forms of payment via the NDC is key to fulfilling the orders.
Payment solutions must integrate onto omni-channels to fulfill the customer orders seamlessly. For instance, if a customer engages with advertised content for an Airline via say Tik Tok channel, and they desire to purchase the offer being promoted, can they accomplish this within the Tik Tok platform? We all know the answer to this. Often the customer is redirected to a secondary window for the booking’s creation, and later transitioned to a third booking window for the payment’s settlement.
The key challenge for the payment’s providers, is to develop a solution that compliments the marketing with the relevant payment methods. The goal is to develop a payment solution that delivers on integration, quick and easy to use, ensures safety and security of the funds and whose transaction costs do not dent the economics of the overall transaction!
Younger customers want to pay for their travel services differently. Majority depends upon mobile channels, and they prefer to book and pay within the same booking order channel. We have also witnessed the growth and acceptance of cryptocurrencies. Is the travel and aviation industry ready to accept crypto under the NDC platforms?
The emergence of revenge travel has also been powered by the buy-now-pay-later schemes. Traditionally these have existed in the Africa market, enabled by the Travel Agents who pay it forward for the Airlines, while extending a business credit to the travelers who later repay via installments plans. As the online marketplace gains momentum, the credit risk assessment will shift, and will rely more on the customer’s credit score based on their spend behavior on mobile transactions.
The industry must also remain vigilant on the shifting landscape of cyber fraud that the travel and aviation industry is prone to. The focus must be on mitigating the risks related to fraud while delivering upon an easy trusted and secure payment platform.
Where is the win-win with NDC?
The success of Airline Retailing Marketplace lies within a simple “secret” formula. Everything begins and ends with the customer, the inclusion of ALL traveler journeys in the NDC standards is the secret to its success. Partnerships with technology companies are key to delivering upon NDC sustainably. It is time for travel services providers to collaborate with the famous five club – Facebook, Amazon Apple, Alphabet and Microsoft in evolving and inventing the future of travel.
To create a marketplace experience of the future will be like creating an “Amazon” for travel! Air Asia super App has pioneered in this space, and they have created an easy to access platform that is rich with content and easy to place and fulfil orders.
The goal of NDC is to deliver upon the long-term value of the customer, and hence the travel services organizations must remain anchored in knowledge communities to operate sustainable businesses that are customer centric, and value driven.
Agnes Mucuha is an Aviation, Travel and Hospitality Industry Expert and a Data & Technology Enthusiast.
