What Is New Distribution Capability (NDC)?

2020, Sep 25    

The fact that you’re here indicates that you are willing to know more about NDC or New Distribution Capability. The term might seem complex to a lot of you, and it is in some cases. In this post, we’ll try to simplify it for you so that you have a better understanding of how NDC works.

But before we go right into the details, we should probably take a look at how airplane ticket distribution works, and then we can start with how NDC changes things.

What Is New Distribution Capability (NDC)?

New distribution capability or shortly known as NDC was created by IATA (International Air Transport Association) to address the concurrent problems faced by the distribution system of the airlines. The NDC is an XML oriented data transmission structure.

Basically, NDC is the latest technological framework set in place by IATA, which is very rich in features and more focused on convenience for both the distributors and the customers. While XML is not a new technology, it’s a significant upgrade over the EDIFACT protocol that was in place previously.

History of Ticket Distribution in Airlines

There was a time when everything was done manually by the airlines. But we’re going to start with the computerised era. It started in the late 1960s where the airlines used something called the Central Reservation System (CRS) which assisted the agents in taking care of things like ticket booking. The CRS proved to be an amazing tool where travel agents were allowed to book reservations directly into the system.

The problem, however, was that each airline had its own CRS. It was a nightmare for travel agents to deal with all different interfaces at the same time. Eventually, the need for a single CRS was realised. And this went on for about 20 years.

In the 1990s, some major CRS names like Amadeus, Travelport (previously known as Galileo), and Sabre started independent operation. Hence, the 40 years long chain was broken. This is arguably the beginning of the Global Distribution System (GDS). Within a few years, these names were the major players in the distribution industry.

And then, the internet was invented. It opened a new door of possibilities for the airline industry and the online travel agencies were born. The beginning of these agencies was a little rough as they didn’t want to integrate with the GDSs but provide the customers will all the functionalities. As a result, the GDS aggregators decided to go through with transforming GDS into something new.

The Reason Behind NDC

The invention of NDC was triggered by two different but intertwined incidents. The airlines wanted to offer more content to the customers along with ancillary services. This would allow them to get an edge over their competitors and create a more wholesome travelling experience for the customers. The EDIFACT framework at that time was not capable enough to do these things for the airlines.

At the same time, the airlines were actively trying to get rid of the GDS system. GDS was very efficient and helpful for the travel agents. But the system was far more complex than the operators would like it to be. Everything required multiple steps to complete, which was not so efficient.

Let’s say an airline wants to update a fare. They have to go through a third-party system to do it because GDS didn’t allow them to do it internally. NDC is the creation to solve these two issues. Combining customer satisfaction with a convenient operation was the primary goal of NDC.

The Advantages of NDC

From what we’ve learned so far, it’s obvious that NDC is better than GDS. But what are the actual benefits that airlines, online travel agents, and customers can get? Let’s get on with the benefits.

• It Adds a Personal Touch
  Who doesn’t like a personal touch on their purchase? Even for airline tickets. That’s where NDC comes into play. NDC offers all the data regarding a customer directly to the airlines so that they can craft a package for that customer. These are personalised packages derived from the data that has been stored by the NDC protocol.
  
  The reason it was impossible in the GDS structure is the lack of data transmission. GDS was not a standalone process and it required multiple third-party services that were integrated with the airline companies. As a result, the carriers didn’t have a complete picture of what the customers prefer. GDS was not suitable to sell such rich content as well. All of these problems were mitigated by the introduction of NDC.
  
  Let’s look at an example. Suppose you are an economy traveller who likes to sit by the window and have your bags checked in during a direct flight. The NDC structure allows the airline companies to have access to this information from your previous flights and offer you a custom package where all your requirements are already met. You don’t have to take any extra steps to make those happen for you. It automatically builds credibility.

• More Features and More Services
  As NDC is an XML-based system, there is no practical limit on the ancillary services that an airline can offer. It was one of the primary challenges during the GDS days that has been addressed by NDC.
  
  You could only look at ticket prices and flight schedules in GDS, but NDC features far more options than that. NDC supports a wide array of extra information and details that will help you make the decision faster. The XML structure can be far more visually intriguing which is necessary for decision making. NDC allows the airlines to bring all these details directly to the online travel agencies by completely ignoring the need for a GDS.

• Update Prices on the Go
  Updating the price of the tickets was a hassle in GDSs. During the GDS days, the airlines mostly used ATPCO, a third-party provider that integrated the airline details with the GDS. As the prices were handled by a third party, the airline companies didn’t have the freedom to update prices immediately or offer dynamic prices for that matter.
  
  The concept of dynamic pricing is very closely related to the custom packages we previously mentioned in an example. It means the ticket price along with all the ancillary services provided might vary from customer to customer. NDC addresses all these issues at once. Now, airlines can offer dynamic pricing on their tickets to reach a broader audience.

Some Challenges with NDC

Believe it or not, it’s not all roses with NDC as well. Every coin has two sides and the implementation of NDC imposes some challenges as well. Let’s explore some common ones.

• The Standard is Not Set
  The NDC protocol is not yet standardised. As a result, different airline companies are taking different approaches to NDC. While the main framework remains the same, each airline is opting for different APIs.
  
  If this practice is continued, the online travel agencies and travel management companies would have to integrate with each of the airlines to make the system work. It’s the same problem that the agents faced during the initial days of CRS.

• What’s in it for the OTAs and TMCs?
  Online travel agencies (OTA) and travel management companies (TMC) play a major role in the airlines industry. They often handle the primary touchpoints of the customers. NDC is clearly very beneficial for the airlines as they can offer more services to the customers. But what is the value proposition for the OTAs and TMCs?
  
  The GDSs are still fully functional and working as they’re supposed to. If the OTAs and TMCs decide to switch to NDC, the entire systems must be upgraded. Why would they do it if there is no additional benefit for them? It’s a question that NDC is unable to answer, at least for the time being.

What the Future Holds?

The initial impression of the NDC has been great. But it comes with some critical issues that might cause the airline industry to go back in time. But a light at the end of the tunnel is that as the airlines industry is trying to ditch GDSs, GDSs are integrating with NDCs instead.

In the near future, we might see a universal XML-based system imposed by the GDSs. It will allow the airlines to stick to one standard of NDC rather than hundreds. It will make the lives of travel agents, TMCs, and OTAs a lot easier while offering a vast array of features to the customers.

All we can do is hope for is a standardised distribution system that can address all the issues.