NDC and Next-generation interlining: How They Can Boost the Airlines’ Recovery

The ongoing health crisis has affected the air travel industry more negatively than anyone could ever imagine. The travel restrictions have made it hard for the airlines to gather significant revenue for the last year. However, with the global vaccine rollout, the airlines are also hoping to recover, just like the entire travel industry. Customer satisfaction has always remained at the top of the priority list of the airlines. 

In current circumstances, its importance has amplified. Even before the pandemic, back in 2012, New Distribution Capability, or popularly known as NDC, was introduced by the International Air Transportation Association (ATA) to enable the airlines to provide rich content to their customers. Lufthansa, American Airlines, British Airways, and Iberia initially implemented NDC communicating protocol to improve airline operations.  

New Distribution Capability (NDC) is created to allow air service providers to give their clients superior services. It helps the market to adopt a new data transmission system based on the XML standard. Furthermore, NDC facilitates better and effective communication between the airlines and the travel agents. This better communication makes it easier for the airlines to develop personalized services for their clients, leading to more profits. As the domestic airlines in several regions have started to recover, the entire travel ecosystem hopes to see the end of the pandemic tunnel through NDC and interlining.

Here is how NDC and next-generation interlining can boost the airlines in the post-pandemic world:

Access to the customer data:

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A personalized shopping experience is one of the most effective ways for airlines to generate better revenue, especially in the current scenario. However, to give customized shopping experiences to their clients, the air service providers need access to their clients’ data which seems unlikely via the channels provided by the Global Distribution Systems (GDSs). New Distribution Capability (NDC) provides an alternative distribution system to work this issue out. NDC gives the service providers access to their client’s data. With the help of this data, airlines can provide their customers with a more engaging and personalized shopping experience.

Dynamic pricing:

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In retail services, control over pricing can help airline businesses generate considerable revenue. A strategy like dynamic pricing can boost sales by lowering the price. Reducing the cost does not necessarily mean low revenue generation; instead, it can help meet the revenue goals through increased sales. But, to adopt such strategies, the companies require their customer’s data to be available through NDC. Dynamic pricing can help the airlines adjust the pricing according to the shopping pattern of a potential client. This way, they can stay ahead of their competitors. This autonomy overpricing will also help the airlines to create higher demands for their services.

Better offers and discounts:

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A question like “what are the low-cost carriers?” will lose its relevance in coming times as the airline service providers are taking up a more hybrid model or next-generation interlining to generate more and more ancillary revenue. Both the legacy carriers and low-cost carriers depend on the revenue coming from the ancillary services like extra baggage fees, extra legroom, preferred seats, and frequent flyer programs. For many service providers, ancillary revenue is the primary source of profit. 

However, the distribution of customer data via GDSs does not allow the airliners to include ancillary services in their offers. This automatically means a loss to the already affected aviation industry. NDC’s distribution channel gives all the required data to the airlines to offer customized ancillary services. They can also provide attractive discounts to generate more sales if they know their customer’s shopping patterns.

Product marketing:

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The traditional GDS channels let the aviation service providers showcase only the ticket prices and flight schedules. The customers can only compare the pricing using search engines and online travel agencies (OTAs). However, they are not able to reach the additional facilities offered by the airline services. The NDC distribution allows the airline service providers to differentiate their products and helps them market their products efficiently. With the help of NDC, the third-party service providers deliver a better customer experience while also supporting the airline industry.     

Avoiding GDS commission fees:

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The existing GDSs make the airlines less profitable, significantly when their revenue tightens with every passing day. The airlines have to pay a commission fee to the GDSs for handling the flight booking. This is leaving a considerable margin on their margin. For instance, in 2015, Lufthansa claimed that they had to pay a commission of€18 per passenger to GDSs. 

NDC bypasses this GDSs commission fee and delivers to the OTAs rich content. When every penny counts, switching to NDC can save the airlines a lot of money without compromising with the content.

Reliance on legacy processes:

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The next-generation interline allows legacy carriers, low-cost carriers, and surface carriers to interline together, resolving several issues related to no-so-friendly legacy processes. The legacy processes like MITA and IATCI make low-cost carriers less customer-friendly leading to lesser revenue. However, with interlining, they can provide a seamless travel experience to the customers. NDC allows the airline service providers to showcase all these interning itineraries

Expanding route network:

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The travel limitations and quarantine restrictions have hurt the network carriers the most, cutting short the long-haul routes. However, the scenario is not equally devastating for the low-cost carriers and their short-haul routes. The short-hauls are among the first to recover from the damage caused by the pandemic. Therefore, the interlining of network carriers and low-cost carriers can expose them to more opportunities and expand new travel routes. 

This partnership can generate more traffic and help the airline industry recover faster. They can even attract more customers through cross-selling ancillaries using NDC standards.

Some of the limitations of NDC and next-generation interlining

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While New Distribution capabilities can be beneficial for the airlines to recover from the current crisis, it has its limitations. Even though the aviation industry is ready to adopt the NDC standard, its practical implementation varies from airline to airline. There is no standardized API, and every airline has created its personalized API. This means that the third-party channels would need to integrate with each airline separately, which is not feasible. Therefore, a standardized NDC channel is required to improve its functionality.

On the other hand, whereas NDC and third-generation interlining promise benefits for airline service providers, the profitability for the OTAs is not so promising. The OTAs have been working with the GDSs for decades now. Therefore, it is hard for them to switch to a new communication protocol and abandon their comfort zone without any guaranteed benefits. At the same time, as NDC supports the airlines to bypass GDSs entirely, the GDSs are adopting the NDC standard. This paradox is even crazier than the time travel paradoxes.   

Conclusion:

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The Covid-19 pandemic has given a sizable blow to the aviation industry. However, the airlines expect to see some growth in revenue collection as the countries and regions are getting flexible with the Covid-19 travel protocols. New Distribution Capability (NDC) and next-generation tie-ups have opened a new horizon for low-cost carriers and network carriers. Such partnerships can promote recovery for the airline industry through an expanded network, tailored offers, and cross-selling of ancillary services. 

The customers can also rip benefits out of the virtual interlining as it prioritizes customer satisfaction above anything else. Finding cost-effective flight booking and hotel booking prices has become crucial because of the economic slowdown.

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