The International Air Transport Association (IATA) New Distribution Capability (NDC) and ONE Order initiatives are set to transform the airline industry from its traditional business model – of selling seats at relatively fixed prices – into hyper-personalized retailers of passenger travel experiences. Airlines can go beyond the traditional boundaries of air travel to incorporate complimentary travel and leisure products and services to gain a larger share of the traveler’s wallet. For many airlines, this will ensure their relevance and survival for years to come.
What are NDC and ONE Order?
The airline industry has been slow to adopt new and modernized systems, especially in the passenger reservation and ticketing platforms. This is largely due to the interconnections between airlines and the broader ecosystem (travel agents, global distribution systems, etc.) that make large transformational changes complex and lengthy to implement.
The increasing threat to airlines becoming marginalized by newer competitors, such as online travel agents, aggregation platforms, and more nimble market players, has required IATA to define new standards to modernize and digitally transform through the NDC and ONE Order programs.
Today, most airlines publish their inventory and related fares to an external inventory system that provides availability and pricing to the broader travel ecosystem. In this highly competitive and regulated airfare market, an airline cannot do much differentiation and personalization across these indirect channels.
NDC gives airlines the ability to distribute a more personalized offer (e.g., airfare bundled with hotel, car hire, and other complementary travel services) across these non-direct channels. It also improves the richness of information (e.g., seating, baggage policy, meals, etc.) and content (e.g., images of seats) that airlines can distribute to ensure the passenger has an “apples to apples” view when comparing an airline’s offer to competitors.
ONE Order’s vision is to move towards a single customer order record and modernize airline retailing, delivery, and accounting. IATA says ONE Order is a natural extension of NDC and is based on the following core principles:
- Creating a single, combined travel record: This will create at superset of data currently contained in the Passenger Name Record (PNR), Electronic Ticket (ETKT), and Electronic Miscellaneous Document (EMD).
- Reengineering travel commerce processes: Airlines will move towards adopting processes and systems centered around offer and order management, much like how retailers operate today. This will require a huge shift to transform existing Passenger Reservation Systems (PSSes) to align with newly defined travel commerce processes.
- Establishing efficient billing and real-time synchronization of relevant information between parties: All entities involved in travel and fulfillment, from customers to third-party service providers, will access the single record to get information and make necessary updates to trips. This aims to significantly simplify customer service, revenue accounting, and settlement processes.
- Moving towards customer order profitability: Improving the quality and accuracy of customer revenue information will help airlines understand profitability at an order/customer level. This can play a significant role in evaluating profitability, not just at a flight level, but across the entire the customer journey. It will also enable airlines to be more creative in how they present offers to customers.
A split in the airlines industry
In my opinion, NDC and ONE Order will create a split in the airline industry. A segment of airlines will continue to focus on running a cost-effective, profitable airline business offering highly competitive airfares to the travel ecosystem. The other segment will focus on owning a larger share of the end-to-end travel experience to capitalize on predicted growth in this market. However, taking overall responsibility for the end-to-end delivery of all (own and third-party) services will require these airlines to consider a more holistic customer service and experience management strategy than they may have today.
Learn more about how the aviation industry is “Accelerating Business Outcomes In The Experience Economy.”