“Bigger and more impactful than the elimination of commissions and at least equal to the arrival of automation itself.”
That’s how Paul Ruden, ASTA senior vice president, legal and industry affairs, described IATA’s proposed New Distribution Capability (NDC).
IATA describes NDC as a “communications protocol” but in ASTA’s view it’s a new business model – one that would have immense and far-reaching effects on how consumers buy air travel and how travel agents do business.
Opposed to NDC
ASTA has urged the Department of Transportation (DOT) to reject IATA’s application for approval of a resolution that establishes the framework for NDC.
It’s not alone.
Other industry groups, including the Business Travel Coalition and the Open Allies Coalition, have voiced their opposition. Ruden said it could takes months for the DOT to rule.
Ruden gave Travel Market Report a primer on what NDC means, how it might work and how it will affect agents.
What is NDC?
According to IATA, NDC is a “messaging standard that will enable retailing opportunities through the indirect – GDS/travel agent – channel.”
In other words, IATA expects NDC to close the gap between direct channels, the airline websites; and indirect channels, GDSs and travel agents.
IATA also says NDC will facilitate customized shopping, making it easier for consumers to purchase the growing number of airline ancillaries, such as priority boarding, onboard wi-fi and access to airport lounges.
The IATA position: NDC would benefit both consumers and agents. Consumers would have personalized fare quotes, greater access to airline products and services and increased transparency in purchases. Agents would be able to provide clients with better service and greater access to airline products.
ASTA’s view: reduced transparency
ASTA disagrees. NDC would, in fact, reduce transparency by bundling airfares along with ancillaries in packaged offers that are tailored to each consumer based on personal information that has been provided either through an airline website or through a travel agent, Ruden said.
“Suppose you get two or three of these bundled offers,” Ruden said. “According to IATA, if you don’t want them, you can unbundle the features in what they liken to an Amazon shopping experience where you subtract something and get a lesser price.
“But even if something is removed [in this scheme], it’s not entirely clear what the price would be,” he said. “We have no idea how they will have arrived at that price.”
In addition, each airline might bundle its fares and products differently, he added.
How would NDC work?
Today when consumers shop for travel they can “search anonymously through an agent” or go online themselves and search as many websites as they want, getting back a huge amount of information on all available flights and fares, said Ruden.
“Only when you decide to buy, do you identify yourself.”
Ruden said that within the NDC framework consumers would have to identify themselves – and agents would have to identify clients – before they start a search. Consumers would then receive a set of offers consisting of airfares bundled with ancillary services – at a single price and customized for each individual.
IATA’s application to the DOT states that the new standard is intended to accommodate both anonymous shopping requests and customized offers.
Ruden said consumers would be asked questions that raise serious privacy issues, among them name, age, contact details, nationality and travel history. An individual’s zip code could yield an economic profile enabling a carrier to skew prices upward for consumers they believe can afford a higher price, he added.
Under NDC, agents too would have to provide clients’ personal information, Ruden said.
How will NDC affect agents?
“Confusion and extra expense” for starters, Ruden said.
“There’s a lot of questions on how agents’ existing technologies, whether that’s GDSs or accounting or security systems, will interact under NDC – through what intermediaries will they operate and at whose cost?
“IATA says the GDSs could be intermediaries, could continue to be aggregators, but what will that look like?”
Also: PNRs, which now reside in GDSs, will reside in airline computer systems, Ruden said.
“Agents can now go back and change PNRs; they won’t be able to do that if the PNRs reside in an airline computer.”
In addition, if clients go to an airline website themselves, come back “humbled and mixed up” by what they find and reach out to an agent for help, agents will wind up spending extra time helping to parse out the many pieces of the proposed transaction.
Agents need to – and should – get paid for that time, Ruden said. “It will make agents more expensive, so has the consumer really benefited from this?” Ruden asked.
Along with airline pricing and privacy issues, NDC raises several other concerns for the travel industry, Ruden said.
“Most important is that this model was constructed by the airlines without input from the distribution system [travel agents and others],” he said.
“The airlines shouldn’t be able to get together and force this.”
Customization is the future
Ruden said ASTA isn’t opposed to “the principle of customization” if it’s brought to market through competing airlines. “Let the public and the marketplace judge it, and over time the superior models will win.”
Some form of shopping customization is, in fact, coming whether it’s IATA’s or another version, Ruden said.
He also predicted that “this truly revolutionary” change will eventually affect all travel sectors.
“Cruise lines and hotels and car rentals will be right behind the airlines.”