New Distribution Capability (NDC) in Air Travel: Airlines, GDSs, and the Impact on the Industry
Two fundamental needs connect all airlines: revenue and passenger satisfaction. To satisfy customers, carriers seek ways to learn more about their clients and provide a set of additional services like baggage insurance or onboard food. Those services, also called ancillaries, are offered for additional fees. Given the small margins for core transportation services, the fees help to generate profits. To be able to sell ancillaries to the passengers and be more profitable, airlines struggle to deliver personalized content to their travelers. Considering that getting in touch with the end user is nearly impossible via the channels provided by global distribution systems (or GDSs), a new standard emerged to resolve the issue.
The air travel industry confronted big changes when the New Distribution Capability (or NDC) debuted in 2012. Lufthansa, British Airways, American Airlines, and Iberia were the first to adopt NDC. And the technology continues to make its way in airline distribution, as well as other means of improving airline operations.
What is NDC?
NDC stands for the New Distribution Capability, which is essentially an XML standard created by the International Air Transportation Association (IATA) to allow airline service providers to deliver rich content and ancillaries to their customers. Rich content is one of the factors how airlines can market themselves, and make the brand distinguishable. While access to customer data via NDC, enables better control of pricing strategies, like dynamic pricing.
Basically, NDC is a communication protocol, aimed at replacing the old EDIFACT protocol, that has been around since the 1980s and used by GDSs. A new protocol using XML allows for bringing rich content and ancillaries directly to online travel agencies, GDSs, and travel management companies via a set of standard APIs, used in the travel industry. Additionally, XML is much more flexible and updatable.
However, XML is a standard for messaging between airline PSS and external distribution systems and NDC platforms. Retailers that source airline content from technology providers may expect to receive travel data in JSON via REST APIs. This is a more modern type of APIs able to handle rich content transmission.
What benefits does NDC provide?
Personalized shopping experience and access to customer information. Currently, most of the customer’s personal data remains in the hands of middlemen, OTAs and GDSs. This means that airlines get just basic information about their clients, which doesn’t allow for personalizing the shopping experience, the thing that has become a standard in modern travel eCommerce. The NDC standard’s goal is to provide airlines with direct information about their customers.
Content and pricing autonomy. Another benefit of personalization is pricing autonomy. Currently, most airlines publish their tariffs via ATPCO, the tech provider and main source of pricing data. Having a third party as an intermediary between revenue management and distribution channels means that airlines miss the opportunity of dynamic pricing. Dynamic pricing is the ability to create personalized fare and travel package offers based on individual client information. The new XML standard allows airlines to build their own APIs and change prices independently, adding value to their offers and adjusting prices individually to each customer.
Rich content offers, ancillaries, and discounts. Distributing the flight data via GDS’s EDIFACT (Electronic Data Interchange for Administration, Commerce, and Transport), airlines are unable to include ancillaries in their offers. This results in financial losses for service suppliers as ancillaries are the main source of profits for carriers.
Product differentiation. The traditional GDS model only permits airlines to display prices and schedules. While tariff metasearch engines and OTAs make it easy for travelers to compare pricing, airlines can’t market their added value services and fully compete. Rich content, that includes all service details, solves this problem.
Reduced reliance on legacy systems. Most airlines use legacy passenger service systems (PSS) that contain reservation info, fares, and schedule. The main purpose of the PSS is to show which seats are available for a given flight. PSSs may have poor performance, a number of other restrictions, and most PSS providers really lag in modernization. NDC will act as a separate engine outside of legacy systems that allow for presenting data stored in PSS databases using airlines’ private interfaces.
The first set of official standards was released on September 1, 2015. A new messaging standard promised to change the way airline tickets are distributed. This will help service suppliers bring personalized content directly to OTAs, TMCs, and metasearch engines, bypassing Global Distribution Systems (GDSs). As a result, NDC was supposed to break the oligopoly of GDSs that formed over time.
The logic of flight distribution through GDSs and via NDC
Source: IATA’s NDC Get Started guide
To understand the current situation in airline distribution and get a detailed background on why NDC has emerged, we need to look back in time.
How airline distribution works: historical and modern perspectives
The distribution system in the air travel industry includes many players in the field. To link end customers with the actual airline, there are a number of intermediaries, represented by travel agencies, tariff publishers, GDSs, and so on. Most of the major players appeared decades ago or morphed from the older formations and continue to exist.
To quickly learn how distribution in airlines works, you may check our video and get back for details.
How travel systems in aviation are connected and what is NDC
Let’s have a deeper look at the airline distribution landscape from the historical perspective. This will allow for a comprehensive understanding of the current state of NDC adoption and the roles of the players involved.
The timeline of flight distribution in the air travel industry.
Flight distribution automation. In 1964, IBM and American Airlines developed the first computer reservation system Sabre, which is still around today. Sabre allowed American Airlines ticketing agents to search for flights using digital inventory, make reservations, and confirm them via computer terminals. It also decreased the error rate and gave access to customers’ PNR (Passenger Name Records). Sabre quickly became a serious advantage for American, resulting in the appearance of more Computer Reservation Systems (CRSs).
The history of flight distribution told in less than 8 minutes
Central reservation systems emergence. Until 1972, nearly all major airlines in America adopted their own customized versions of CRSs. All of them originated from PARS – a standardized system for medium-size carriers by IBM.
Bringing terminals to travel agents. During the 1970s, all CRS providers struggled to bring their systems to travel agents, installing terminals at their offices to make searching for flights and booking semi-automatic and remove the booking load from airlines. The American Society of Travel Agents and airline platform providers attempted to create a unified CRS for all travel agents. As a result, in 1976 United, American, and Eastern airlines shared access to their CRSs. Airlines offered to travel agencies long-term contracts, for which they supplied hardware, software, and training for a monthly subscription fee to get most of the bookings made via CRS. In exchange, travel agents were obliged to book more via CRSs.
Price independence. The Airline Deregulation Act of 1978 allowed airlines in the USA to set the price for fares independent of government regulations. This influenced the market and the demand for CRSs among travel agencies increased even more.
Mass CRS adoption. By 1989, over 95 percent of travel agents signed contracts with CRS providers, and 75 percent of all tickets were booked via travel agencies.
GDSs join the game
GDS emergence. After 1996, the US Transportation Department obliged airlines to share the same content from their inventories across all CRSs equally. Meanwhile, CRSs started to become independent businesses. For instance, Galileo CRS, created by European airlines to compete with Sabre, went public in 1997. Amadeus, another European CRS, did the same in 1999. Sabre became fully independent of American in 2000. That moment can be considered as the point of Global Distribution System (GDS) emergence in the world as CRS providers grew into GDSs and became an independent, fast growing power, morphing from inventory instruments to monopolists in air travel distribution we know today.
GDS consolidates travel data from various service suppliers and allows travel agents to search and book flights. So, for the travel agencies and for customers as well, it’s not necessary to connect directly to each supplier. Currently, the major GDSs are represented by Sabre (including Abacus), Amadeus, and Travelport (Apollo, Galileo, and Worldspan). This doesn’t mean that CRSs have disappeared. They became the parts of passenger service systems, or PSS, which also include airline inventory and departure control systems.
Web distribution. At the end of the 1990s and the beginning of the 21st century, the Internet was gradually changing the way flights were distributed. The Internet era forced each and every player to go online. Airlines started to build websites to offer their services and post schedules. Carriers also invested in metasearch and booking engines such as Hotwire, Orbitz, Kayak, and Skyscanner.
Meanwhile, GDSs settled Internet connection, providing travel agencies with the software to build their own websites. So, new channels of distribution came up via the web, and online travel agencies (OTAs) emerged.
Third-party players in airline distribution
The distribution system also includes third parties that perform either supplier or intermediary roles between airlines and other players:
ATPCO, or Airline Tariff Publishing Company, is engaged in fare and fare-related data collection, providing it to GDSs, their related travel agencies, OTAs, and fare search engines.
OAG, a United Kingdom-based provider of digital data and applications for the flight industry, manages the largest flight schedule database for over 4 thousand airports.
Cirium is another schedule database provider. The company offers worldwide flight schedules and other fleet services. In 2014, Cirium acquired Innovata LLC, then one of the largest schedule providers. Innovata became a part of the FlightGlobal platform, which in turn is a part of Cirium flight content support.
In the airline industry, all of these players prevent airlines from reaching customers directly, and distributing without third parties. For instance, to change prices, airlines must publish them via ATPCO first.
Recent events and NDC background
A new issue appeared during the late 2000s. GDSs failed to support airlines in sharing their rich content across OTAs, giving no options to merchandise additional services, thus cutting down revenue. According to the IdeaWorks’ ancillary revenue report of 2009, worldwide ancillary revenue reached €11 ($13.5) billion. Without any doubt, offering bundled services to the right customers became a critical task for service suppliers. But, the GDS oligopoly with its old-world EDIFACT protocol technically doesn’t allow for distributing rich content and acquiring customer personal data.
Generally, two main events impacted NDC emergence and its further adoption among airlines.
American Airlines vs Sabre lawsuit. The lawsuit was initiated by American Airlines and US Airways to persuade a jury that Sabre was in violation of the US antitrust law. The carriers sought compensation for financial losses associated with the Full Content Agreement that GDSs force airlines to sign. According to the agreement, carriers had to publish all their inventory via GDSs. The lawsuit, which lasted over 6 years, resulted in Sabre having to pay $5 million in compensation. The case attracted the attention of industry representatives. The jury found the Full Content Agreement unlawful, but the compensation didn’t even cover 1 percent of American Airline’s losses.
Lufthansa GDS surcharge and direct bookings. The German flagship airline, Lufthansa, in the summer of 2015 announced that it would surcharge every booking made via GDS €16 ($18). The initiative was called a Distribution Cost Charge, and it put a lot of pressure on travel agencies, as it was a step away from the traditional GDS distribution model. Nevertheless, Lufthansa took further action, paying travel agencies one euro for every flight booked via their NDC channel. British Airways and Iberia began penalizing bookings via GDS. The charge was £8/€9.50 (about $11) respectively.
In 2017, Lufthansa moved away from GDS and established direct channel bookings on their website. The Lufthansa Group began offering discounts for booking via their NDC channel. This move led travel agencies to invest in direct connection technical infrastructure needed to create a GDS-free middle ground. As an IT provider, Farelogix got a contract with Lufthansa to expand its NDC API, and support its adoption among travel agencies using it.
The current state of NDC adoption
Currently, representatives from nearly all airline distribution organization have embarked on the NDC initiative in one way or another. In turn, IATA recommended a lot of resources to support decision making on NDC.
NDC Registry. The official list of NDC adopters mentions over 245 companies, which include airlines, IT providers, sellers, and aggregators. Among them are 99 airlines, 44 data aggregators, 68 IT providers, and 35 sellers. All companies certified their solutions in accordance with NDC certification levels.
The certification is split into 4 levels that differ by messaging capabilities. Level 4 certification means that an organization can handle full data transmission using NDC API channels, like posting orders, receiving payments, and executing bookings. Currently over 150 companies have been granted Level 4 certification and are officially approved as NDC capable.
NDC Get Started guide. In this document, IATA provides all the necessary onboarding information for newcomers. This includes the state of NDC adoption, technical schemas for NDC implementation, and certification requirements.
NDC Schema. Parties interested in implementing NDC and searching for guidance can look up the provided IATA Schema. The Schema has overall recommendations on how to organize data transmission via XML APIs and provides messaging requirements for them.
The NDC implementation guide includes all the available information for building NDC channels, providing reference data, security information, payment operation support, etc.
The NDC Matchmaker is a web-based tool that provides search capability across NDC adopters. This was designed to enable airline market players to seek partnership on NDC. Matchmaker provides access to over 140 companies that support NDC and are open to integrating with sellers and aggregators. Here, you can also search for IT vendors to support actual development and deployment of NDC solutions.
Additionally, IATA gives a list of IT providers that have already developed a certified NDC solution in their IT provider cards.
What integration options are available via NDC?
Considering the state of NDC in 2021, there three distinct ways to use the XML channel for distributing airline content:
- Airline NDC or direct connection with carriers via their own NDC API,
- GDS NDC, and
- NDC platforms and IT providers.
Here we’ll look at each channel and analyze some of their examples and possibilities.
NDC adoption across airlines
Major airlines managed to develop their NDC solutions, which sometimes differ in implementation. Here are some examples of NDC implementation across airlines.
Lufthansa was the first one to introduce a GDS surcharge and implement direct booking connection in its distribution. Today, it holds Level 4 certification, meaning that it’s capable of full operation on the NDC channel. Lufthansa’s direct booking includes several distribution channels: travel agencies direct, aggregators, supplier mobile application, and supplier website. In 2018, Lufthansa announced a rich content partnership with ATPCO’s Routehappy platform. This became possible due to the NDC channel, which now enables transfer of advanced messages and visual content of airline fares.
British Airways developed an NDC solution and integrated it with Kayak. Now their tickets are available directly through the Kayak platform. British Airways API allows for distributing through the following channels: direct connect through OTAs, IATA’s travel agents, GDSs, and online booking tools. Like Lufthansa, British Airways has a Level 4 certification and enable rich content distribution through their Communication Hub NDC.
Air Canada allows their API to be used freely across all channels. Air Canada presents the fullest range of NDC advantages for the moment, providing rich content, personalized bookings, airline profiles, air, and non-air related ancillaries. Air Canada integrated their API with ATPCO NDC Exchange platform to create easier access to flight data.
NDC-enabled airlines are numerous. But the current state of NDC adoption shows that a large number of carriers enabled the transmission of rich content via NDC channels. Keep in mind that NDC became a unified channel of communication both for direct connections and through GDSs.
NDC adoption across GDSs
For GDS aggregators, NDC adoption became a vital question. As it’s impossible for GDSs to integrate with each separate NDC channel, they decided to force the adoption of an XML standard for the industry. The process goes even further as all parties of a traditional distribution chain start adopting NDC. In October 2018, ATPCO announced its collaboration with IT provider SITA to develop a simple API called NDC Exchange. This platform is now fully functional and already operates across several players on the market.
In 2021, all three major GDSs acquired Level 4 NDC certification. So, the functionality of their offers doesn’t differ for today, as all three also support rich content transmission for airline branding and personalization. That said, the implementation differs:
Travelport was the first of the GDSs to develop the NDC channel. Now it has upgraded its API to operate both with Offer and Order posting, including support of different types of airline content, i.e., rich content. The APIs for travel agencies are still in development. They currently support American Airlines, Qantas, Singapore Airlines, and United Airlines.
SABRE has also been certified as a Level 4 NDC capable company, signing a rich content agreement through the Routehappy platform. This integration entails sourcing rich content through SABRE offer channels. So OTAs can now access GDS content via the NDC channel. But similar to Travelport, their supply available to distributors is quite limited. It’s available only to a select group of travel agencies and it has rich content coming from only American Airlines, Qantas, Singapore Airlines, and United Airlines.
In summary, NDC didn’t resolve the point with indirect bookings, but did affect how GDS distribution works, as all the key players now enabled dedicated channels for distributing rich content.
This enables personalization of a content and advanced marketing capabilities through existing flight data sources. However, in practice, the OTA world tends to stick more with GDSs. Because direct integrations still require custom integrations with each player. So a possible solution may be through developing unified NDC-enabled platforms for sourcing flight data.
NDC platforms and IT providers connecting airlines and distributors
IT providers are the companies offering tech services for the industry, including API development and their implementation at airlines. The list of IT providers, that are certified by IATA and showcase a large number of implementations, includes:
SITA, a global tech (IT) and communications provider in the airline industry, is one of the key providers of NDC, as it partnered with ATPCO to create NDC Exchange. We’ll discuss the platform a bit further.
Farelogix is a technology company that provides SaaS (Software-as-a-Service) NDC solutions for American Airlines, Air Canada, and Delta.
OpenJaw Tech is an IATA certified strategic partner that also provides NDC solutions for the market. OpenJaw Technologies is known for supporting such airlines as British Airways and Iberia. IATA has also chosen OpenJaw Tech to be their One Order strategic partner.
For a broader list of NDC solutions for airlines, check our dedicated article.
All the IT providers should be certified by IATA to develop their tech solutions for the airlines and other third parties. The certification NDC program can be found on IATA’s website.
As a separate category, we’ll look at existing NDC platforms. These are basically data consolidators or technical providers that help airlines and distributors connect via API to source NDC content. The logic of a platform suggests providing a single API different parties would connect to, maintaining the principle of rich content and brand identity.
Routehappy has JSON APIs from which you can source ancillary and ticket data. It provides access to three APIs that ship different types of content for distributors. The data consolidated on the platform comes from over 300 airlines and other sources.
ATPCO NDC Exchange is an industry-owned platform that will help deliver air price content via NDC APIs. The platform can be thought of as a one-stop place for reaching consolidated airline content and source ancillaries for retailing. Carriers in turn can benefit from placing flights on the NDC Exchange, as it provides differentiation among OTAs. Since 2019, Routehappy has been a part of NDC Exchange with all its flight content.
FLX NDC API by Farelogix is another NDC aggregation platform, available both for direct connection with airlines and indirect distribution through third parties like larger OTAs or GDSs.
HitchHiker API sources data both from GDS and NDC enabled airlines, also providing direct connection with the carriers, including low-cost ones. HitchHiker also offers distribution of allotments and group booking via their API.
tfFlight by TravelFusion is a flight data aggregation and distribution platform, which also emphasizes its integration with low-cost carriers.
With the enabled rich content, the choice between platforms depends on your content preferences and the airlines you want to work with. Using such marketplaces, it is possible to avoid the direct integration burden with separate NDC solutions because we can plug in just one API to source content from multiple suppliers.
Did NDC affect the airline industry in the way it was supposed to be?
As recently stated by Yanik Hoyles IATA’s distribution program director, “The good news here is that what I call the tectonic plates, we’ve got massive shifts.” This points to the changes in GDS distribution and the wide adoption of NDC APIs both by airlines and distributors.
As XML standard is settled across the industry, the next step will be moving towards modern airline retailing. Which means, there are plans to replace legacy operations with e-tickets, PNRs, and EDMs by communicating via APIs. On par with NDC, this is one of the strategic points of IATA’s Airline Industry Retailing program. As Hoyles mentioned, IATA is going to suggest a new certification program for “retail maturity level” for airlines. This will ensure the proper use of the NDC standard for modern distribution, and content personalization.
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