IATA’S NDC “once in a generation opportunity” for airline industry

by ASSOCIATE EDITOR AND CHIEF CORRESPONDENT, TOM BALLANTYNE  

November 1st 2019

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Airlines are facing disruption driven by technology and customers, said Singapore Airlines’ (SIA) senior vice president of sales and marketing at an industry conference in Bangkok last month. Read More »

“It is not a European story. It is not an American or Asian story. It is an industry story. It is not going away. And it is why SIA considers the transformation from being an airline to being a retailer is critical,” Campbell Wilson said.

Outlining SIA’s approach to tackling the adoption of the International Air Transport Association’s (IATA) NDC, or New Distribution Capability standard, he described it, together with IATA’s One Order initiative, as a “once in a generation opportunity”.

“NDC addresses some of the industry’s current inventory distribution limitations, creating a more agile and efficient distribution system by extending the capabilities of third party channels to match those of the airline’s websites, improving offerings for customers, including greater personalization and accessibility, and with ONE Order, paving the way for digital transformation of airline legacy systems and processes for improved efficiency and customer experience,” he said.

“SIA has become a regional leader in NDC adoption. It announced its first connection, with booking site, Skyscanner, in May last year and has since linked with numerous other players.

“The Asian consumer has embraced e-commerce at an unprecedented and unparalleled pace. Asia is spawning new platforms that are not yet seen in the West, such as WeChat and Grab, and others like banks, which are establishing retail platforms that are fragmentating the old distribution order.

“The explosive growth of LCCs, which operate more than 50% of intra-Asian seats, has educated the market to prioritize price, stimulating full-service airlines to find better ways to avoid commoditization. Customer expectations are being set by their experiences with companies in other industries that dwarf us all in size, resources and ambition.”

Wilson, who was the founding chief executive of SIA LCC, Scoot, was speaking last month at the International Air Transport Association (IATA) Airline Industry Retailing Symposium, formerly the World Passenger Symposium, held this year in Bangkok.

Where is SIA now? he asked. It is “an IATA NDC Leaderboard member, NDC Level 4 Certified, close to satisfying the requirements of NDC@Scale, integrated via NDC with entities in the categories of Travel Management Companies, Online Travel Agencies, Metasearchers, new-generation aggregators, traditional GDS and services such as BSPlink, 3DSecure payment and fraud detection systems”.

“We have recently gone to market, starting with our home market of Singapore, but soon to expand, with a clear statement that from April 1, 2020 we will be rolling out content that can only be delivered via NDC,” he said.

Wilson said the interest and reception has been very encouraging. “The focus has rightly been on the opportunities modern distribution technology can bring to enable new products, to improve personalization, to democratize access to information and functionalities and to allow companies to innovate,” he said.

“We’ll be rolling out to key markets other than Singapore in fairly short order and our in-country teams already are deeply engaged in the education process.”

Wilson did express some disappointment with the Asian region’s pace of adoption of the sector’s new technology. “Sadly, there’s no hiding the fact Asia is lagging some others. With some isolated exceptions, the region’s airlines have not been fully engaged in the transformation of distribution through new technology, including NDC,” he said.

“Frankly, it is very disappointing. The industry’s adoption and promulgation of new technology benefits everyone. Or at least those who elect to embrace it.”

The relative inaction is understandable, he said. “Some have more pressing problems. It is no secret many of the region’s airlines are loss-making or just trying to keep afloat. It’s hard to embark on a difficult, multi-year project when you’re just trying to keep the lights on.”

There also was an absence of a clear driver, whether revenue or cost. “The region’s organic growth means the focus may be on maximizing revenue. With revenue comparatively easy to come by, does one really need to go to the effort of retailing?” Wilson asked.

He also pointed out local GDS costs in some Asian markets, a legacy of previous ownership, are comparatively low so savings on offer may not support the investment in NDC from a cost-savings perspective alone.

He said to “effect what is, by most airlines’ historical standards, quite radical transformation many areas needed to work in concert and unless there was strong executive sponsorship and alignment across functions, progress is all but impossible”.

Alignment was required in multiple areas, including product philosophy and strategy, IT strategy, micro-services and API and distribution strategy, not to mention pricing, merchandising and ancillary strategies, he said.

Additionally, there were concerns [about change] among different players. “Travel agencies are worried about losing the GDS incentives they’ve become accustomed to and if their existing tech partner is capable of delivering the content others are enjoying,” he said.

“GDSs do not want to lose business or margins, but realize they can’t charge the same rent in a world of democratized technology and content access. Airlines want to regain some control over how their product is distributed and to better meet the demands of their customers, but are worried their NDC strategies may cause loss of agency support.

“These are real concerns. But the disruption we face is not going away. If we’re to avoid even greater discomfort later, we must embrace some discomfort now. All parties need to work collaboratively and in a concerted manner, notwithstanding the discomfort, with the collective aim of ensuring we can meet the customer expectations of today and the future.”

As for SIA, Wilson said although some parts of Asia and the travel ecosystem may be lagging [other regions in the world], “some of us are not standing still and indeed are among the global NDC and ONE Order leaders”.