real-world application of ndc - farelogix.com€¦ · estimate the full return on any given ndc...

“Ask any airline who is succeeding with NDC, and you’ll hear story after story of why it’s worth it.”

Real-World Application of NDC

PRIMER

www.farelogix.com Copyright 2018

2

Contents

Introduction .....................................................

Commercial Strategy .......................................

Building a business case .........................

Vendor Relationship .........................................

Vendor Selection Tips .............................

Engaging Your Vendor ............................

Adoption Strategy ............................................

NDC Connect .........................................

NDC Tech Connect .................................

NDC GDS Connect ..................................

The Value Proposition & a Robust Offer ..........

What’s In It For Me? .................................

Sales & Marketing ..................................

Partner Support ...............................................

New Generation Retailing & The Offer .............

www.farelogix.com

[email protected]

Phone: 305-552-6094

2

3

4

4

7

7

10

11

11

12

12

13

13

13

14

15

3www.farelogix.com Copyright 2018

“NDC (New Distribution Capability) will enable the travel industry to transform the way air

products are retailed to corporations, leisure and business travelers, by addressing the

industry’s current distribution limitations: product differentiation and time-to-market; access

to full and rich air content; and finally, transparent shopping experience.” - IATA (www.iata.org)

NDC is a program that supports the bottom-up transformation of air commerce. It opens an airline’s business,

empowering the airline to seamlessly create, control, and deliver the most relevant offer across all channels,

supported by compelling experiences and rich content. In short, it enables airlines to break free from legacy

constraints to become customer-centric retailers. With NDC, customers can get their hands on great offers via

any channel, either indirect (Agency, Travel Management Companies, Online Travel Agencies, Global Distribution

Systems and Metasearch) or direct (Web, Mobile, Kiosk, Contact Centre, etc.).

At its foundation is a standard XML API that is managed by IATA. However, a successful NDC strategy is more

involved than simply adopting an API. It’s a distribution program with a broad range of imperatives that include:

strategy, offer innovation, organizational investment, performant-built technology, and the capability to support a

global community of third parties. But ask any airline that is succeeding with NDC, and you’ll hear story after story

of why it’s worth it.

We know this because Farelogix has been leading the charge in the real-world application of NDC since its

inception. Our customer base includes NDC pioneers Lufthansa Group, United Airlines, American Airlines, Emirates,

Qantas, Qatar, WestJet, and Olympic/Aegean. By working alongside these front-runners, Farelogix has learned

what it takes to make NDC work in the real word of Travel Agencies, OTAs, Corporate Booking Tools and even

GDSs. We’re delighted to share our learnings with you in this primer.

Kind regards,Amanda Campbell Director of Marketing Communications, on behalf of the Farelogix Marketing Team.

Introduction

4

The industry is moving towards a wholesale adoption of the NDC messaging standard and

we regularly meet with airline executives who are under increasing pressure to ‘do NDC’. For

those just starting out, it’s important to note that an NDC program requires a well thought

out strategy. Anyone running into NDC without such a strategy will likely run into trouble in

terms of costs, fail cycles, and untapped opportunity. We suggest beginning with a 5-year

business case that includes weighing the benefits against the costs, so your program is an

investment that realizes returns. The following are some benefits and costs to consider

including in your business case.

> More Revenue, Happy CustomersAncillaries have made a significant positive impact on revenue and customer satisfaction

for many airlines globally. However, all too often those gains are limited to the direct

channel and remain underused in indirect channel. In a simple example, if the direct

channel represents 50% of the airline business, and an airline earns 20% of revenue

from ancillary sales in its direct channel, the airline could potentially double its ancillary

revenue opportunity by merchandising ancillaries in the indirect channel. For a Tier 2 airline

generating $800 million in passenger revenue per year, that’s an additional $160 million

annually of missed opportunity!

Personalized offers, data-driven optimization, and dynamic pricing are trends that are

revolutionizing the way airlines retail offers in direct channels. Research predicts that

dynamic pricing could grow airline revenue by 6%. For a Tier 2 airline generating $800

million in passenger revenue per year, that’s an additional $48 million annually. Without

NDC, this revenue opportunity will be excluded from the lucrative indirect channel.

> Reduced distribution costsIn the early days of NDC most airlines viewed NDC as a means of by-passing the GDS thereby

saving on distribution costs. We still see some airlines pursuing this approach. However,

for the majority of airlines, the end game of NDC is revenue gain and improved customer

satisfaction, both through and around the GDS. The extent to which distribution cost savings

drive the NDC business case will vary by airline, however in our experience, revenue gain is

often the most powerful driver.

Building a business case

BENEFITS TO CONSIDER

4

COMMERCIAL STRATEGY


> Technical: General implementation costs include:

Note: Building an NDC-standard API can be more involved than you might think. Market-

specific requirements (e.g. installment plans for Brazil), ticket-stock, choice of pricing engine,

and response times of third-party providers are all nuances that must be worked through. That

can take time. By working with an experienced NDC program partner, the impact of these

factors on the delivery time and cost can often be minimized and overall NDC program

success maximized.

API Development

Integration with airline systems, including a solution that integrates with one or more PSS providers

and other airline systems (e.g. loyalty, CRM)

IT Support, Maintenance, and Running costs (e.g. upgrades, enhancements etc.)

> Organizational: You will need to have a well-structured NDC team

in place to successfully scale your NDC strategy.

Airlines with advanced NDC deployments have

invested in (and grown) teams of 30 – 60 people

dedicated to this effort. This means restructuring

and/or hiring, the design of new processes,

training, documentation, and the adaption of

internal systems (e.g. monitoring, settlement,

and accounting). All this comes with a required

investment.

The image on the left features Senior Director,

Head of Direct Distribution Solutions at Lufthansa

Group, Arber Deva presenting how Lufthansa has

re-organized for NDC.

5Copyright 2018

COSTS TO CONSIDER

Arber Deva, presenting at Aviation Festival London, 2018.

6

> Cost of Sale:There will also be other direct costs and related investment associated with running your NDC

program, for example programs for agency and tech provider adoption, as well as marketing.

> Cost of Doing Nothing:It’s also important to consider the competitive threat if you don’t act. With airlines putting

NDC-enabled distribution and new content delivery at the heart of their commerce strategy, it

won’t be long before your competitors are selling more through the profitable indirect channel.

Targeted offers and rich-media (photos and videos) that showcase the value of the offer

will all work to grow competitors’ passenger numbers and ancillary revenue. In an already

ferociously competitive environment, consider the cost of not taking action and losing market

share to an NDC adopter!

As each airline has varying cost bases and business models, it is difficult for Farelogix to

estimate the full return on any given NDC program. However, given the multi-million revenue

growth opportunity and the positive impact on customer satisfaction outlined above, we are

confident that the investment will be a fraction of the return.

6

COSTS TO CONSIDER - Continued


The decision to ‘build or buy’ is one that every IT department faces on a regular basis and

as with any large-scale IT program, there are benefits to pursuing each approach. Having

undergone an analysis, should you choose to outsource your NDC API development to a

vendor, here are some points to consider:

Vendor Selection Tips

Proven experience:

The industry is littered with NDC pilots and projects that have taken months to

complete at best or have failed after a lengthy engagement at worst. These have

rocked both careers and vendor reputations. As such, there is a strong case for

selecting a vendor with ample real-world experience to ensure your project is a

success.

Conflict of interest:

There’s an expression in English that “there’s no such thing as a free lunch”. It means

that if something doesn’t have a price or is cheap, there’s likely to be a hidden cost.

We recommend carefully selecting an NDC vendor to ensure they are independent

and will not have undue vendor dependencies or influence over your retailing and

distribution strategies in the future.

Strategic approach:

If you are unsure what you want to achieve from your NDC program, an ethical vendor

will not agree to develop and manage your API program, as it will be a project doomed

to fail and a lose-lose for both of you. Experienced companies can consult with you

over the options, but remember, only the airline team can devise a winning strategy.

Don’t be shy about talking to airlines that have already implemented a robust NDC

strategy – Qantas, American, Lufthansa, Qatar, WestJet, Emirates, Aegean, and United

are a few that come to mind.

VENDOR RELATIONSHIP

8

Partner on-boarding:

Building an API is a small milestone in an NDC journey. What happens next are mission

critical steps. Who will technically on-board and look after your distribution customers

and partners? Do you want to brand this experience? Emirates is an example of an

airline which takes customer care very seriously. Emirates brands this on-boarding

experience which is provided by Farelogix. If you need this level of support, ensure

your technology partner can provide it.

API-management:

As you evolve your commerce strategy, you will need to actively manage its API to

incorporate new features and functionality. This is particularly true if you introduce

new products such as ancillaries and branded fares. Although the level of technical

support will vary by partner, API management (technical implementation, help desk,

documentation, etc.) will be an on-going program requirement. Make sure your

vendor is thinking well beyond API development.

Vendor Selection Tips- Continued

(http://www.emirates-api.com/)


Supplementing workflows:

Although NDC has a firm market foothold, it is still at a relatively early stage of its

lifecycle. As such, there may be a need to bridge ingrained travel agency processes

(such as queues) with the digitally transformed world of NDC for a period of time. In

other words, for NDC to work in the real-world, it’s quite possible that your technology

partner will need to supplement the NDC workflows as a result. This is no small

undertaking. At Farelogix, we orchestrate workflows with the SPRK agency interface

which is included in our Open Connect solution, and is used by thousands of agents

to service NDC bookings. It’s a good idea to ensure your vendor has a strategy in

place to avoid these pitfalls if required.

Future proofing:

NDC is an evolving, industry-led project that will take years to complete. IATA releases

several API versions a year. Messaging standards are introduced and some even

deprecated. IATA and many of us in the industry are also working on the ONE Order

program that will see all data related to a trip combined into a single document

for easy servicing and advanced retailing. It’s a changing landscape that can be

difficult to navigate, so it’s important that your vendor is experienced, committed, and

resourced for the long haul.

Farelogix SPRK agency servicing platform.

Once you have selected a vendor, you should expect the implementation to run like a

typical software development project. A Project team should be assigned to work with you

throughout the entire engagement. Key members include a Project Manager, Business

Analyst, Solution Architect along with developers, quality assurance engineers, and

subject manager and documentation experts. This team will work with you to understand

and develop your NDC product, define use cases, undertake product testing, produce

documentation, and engage in user training. This team must be well versed in NDC, as they

are the engine that will build your success.

A discovery phase is critical to sizing scope, assigning resources, and developing the project

roadmap. An elongated discovery phase can be frustrating for both the customer and the

vendor and will certainly add time and cost to the project. As such, it’s imperative that you

have a clear and agreed set of requirements before embarking on this critical phase.

Engaging Your Vendor

“An elongated discovery phase can be frustrating for both the customer and the

vendor and will certainly add time and cost to the project.”

10


Profile Management: Secure agent login and

profile management.

Order Management: Ticket, exchange, change,

refund, void, special requests, check-in.

Global Capacity: Multiple currency, multi-

language, and global capability, including ARC,

IATA weblink, and BSP certification.

Rich Content: Integration of rich media

(photos and videos) for transparent and

compelling shopping experiences.

Another option in this path is to establish your own direct relationship with large

agencies who have already invested in connecting to airline content via an NDC API.

Notable examples include: HRG, Travelplanet, El Cortes Ingles, and Travix.

Once you have an NDC-standard API in place, you need to connect with as many customers

in your indirect channel as is feasible to maximize the reach and associated return. As we see

it, there are three paths to far-reaching NDC-API delivery: NDC Connect, NDC Tech Connect,

and NDC GDS Connect.

Identify your high value customers and invite them to connect directly with your NDC API. With

technical support from your technology vendor you will be able to manage the integration and

configuration quickly and efficiently.

You will also need to employ a travel agent platform/portal to enable agents to make and

service your bookings. In addition to shop and book, here is some other functionality to

consider providing:

NDC Connect


ADOPTION STRATEGY

12

Forge relationships with tech aggregators such as Travelfusion and AERticket. Ask

your NDC Provider for a list, and then invite aggregators to connect to your NDC API.

As these companies are the technology providers for multiple travel agencies, this

approach will provide widescale access to your NDC content in what we call ‘the

multiplier effect’.

It was not long ago the GDS were seen to be dragging their heels when it came to NDC.

That position has changed dramatically over recent months. At the time of writing,

Amadeus, Sabre, Travelport, and Travelsky are actively working on NDC including

enhancements to their agent desktops. That is great news in the context of your reach

as the GDS already have commercial relationships with your customers globally. By

inviting the GDS to connect to your airline’s API, you will have your offer in the hands

of more customers, faster. For airlines looking for revenue return, this is a stand-out

opportunity to consider.

Inviting partners to connect to your NDC API is the first step, but what will encourage

them to continue down the NDC path? In the next section, we will look at some ways

to forge strategic cooperation with the customers and partners who have the power to

make your project a smashing success.

ADOPTION STRATEGY - Continued

NDC Tech Connect (Tech Aggregators)

NDC GDS Connect

NDC offers on agent desktop via AERTICKET’s Cockpit IBE.


The immediate value of NDC is getting your offers to customers who are not on your website

or mobile app. Depending on your business model, this can represent a large chunk of your

commercial revenue, in some or all markets.

Keep in mind that sometimes what is beneficial to your airline might not seem beneficial

to your channel partners. Although your airline might be ready to reap the return on an NDC

investment, remember that your distribution partners may also face an investment in the

adoption of new workflows/processes and staff training. To align these stakeholders with your

goals, you need to determine and articulate “what’s in it for me” i.e. the value proposition.

Differentiation is at the heart of every well-crafted value proposition, so you may need to

motivate your indirect customers with commercial incentives, differentiated content, or both.

Some value propositions considered by airlines include:

It’s now time to communicate your value proposition and that means sales and marketing.

Roadshows, partner events, media, and email communications are all tried and true initiatives

to raise awareness and rally support. To build strategic cooperation, your sales team will most

likely need to sell your NDC program into key corporate accounts and Travel Management

Companies (TMCs).

What’s In It For Me?

Sales & Marketing

Price differentiation:

Either long-term or

promotional.

Best Fares:

Combining price and

route.

Ancillary Offers:

Bags, premium seats,

WIFI access, lounge

pass, etc.

Corporate Bundles:

Customized flights

and ancillaries.

Incentives:

For consuming

NDC content (e.g.

commission).

THE VALUE PROPOSITION & A ROBUST OFFER

At this stage in your journey, you will need to bundle your value proposition with a package

to support your partners’ technical teams. Consider including the following elements in your

technical NDC Partner Package:

Easy Registration Process: To access the

airline API, sandbox environment, etc.

Implementation Guide: Featuring use cases

and best practices for API build, message

configuration, and integration with existing

systems.

Servicing: User Interface workflow (SPRK

or airline own agency servicing platform)

training, either live or web-based.

Technical Support: Such as contact center,

online chat, logging tickets, documentation.

Realistic Time-Frame: Detail the steps to

go into production and expected time to

complete.

Incentives: Some of our customers offer

incentives for completing on time or earlier

than planned.

Your Future Roadmap

14

PARTNER SUPPORT

Farelogix Developers’ Portal


Until this point in the paper, we have focused on the real-world practicalities of starting

an NDC program. Now, we invite you think beyond the ‘to-do’ list of building an efficient

NDC pipe and consider how you are going to use this opportunity to further your retailing

strategy. This will involve bringing in stakeholders from across the organization. E-Commerce,

Revenue Management, Ancillary Merchandising, Distribution, and IT should be a part of

your journey and your investment. Remember the real value in NDC is revenue growth and

improved customer satisfaction. Here are some initiatives to consider as you move through

your NDC journey:

Use your NDC API to

feed all channels. The

incumbent solutions

of PSS providers are

channel specific,

making it virtually

impossible to align

channel strategy and

even bring retailing

capabilities to

channels.

Merchandise more.

You may have already

considered this when

developing your

business case, but if

not it’s time to hone

your merchandising

strategy. Experiment.

Whether your

product is bundled

or unbundled there

is always scope for

selling more. Think

about smart bundles

and dynamic fare

brands.

Dynamic Pricing of

fares and ancillaries.

Leverage optimized,

demand-based, or

continuous pricing of

your products to close

the gap between value

and price.

Rules-driven

Schedules. Offer the

right connections to

the right customers,

match cost, yield

and customer value;

increase yield by

promoting, underselling

flights, or limit less

favorable connections

to certain channel

partners. Connections

are the product you

didn’t know you had!

Smart Bundles.

Entice your corporate

customers with

ancillary bundles

that are attractive

and offer great value.

Consider rolling smart

bundles into your direct

channel.

NEW GENERATION RETAILING & THE OFFER

16

[email protected]

Miami (Headquarters) 760 NW 107 Ave. Suite 300

Miami, FL 33172, USA

Direct: 305-552-6094

Farelogix is a recognized leader and innovator in the travel industry. Its groundbreaking

technology is modernizing the airline commerce and distribution landscape, and is used by

several of the world’s leading airlines. The company’s flagship Airline Commerce Gateway is

a technology platform comprised of fully integrated and optimized components for airline-

controlled distribution, shopping, pricing, merchandising, and retailing across channels.

Recognized for its pioneering role in creating the distribution innovation known today as NDC,

Farelogix now provides NDC (Level 3 certified) distribution for more than 20 airlines with

connectivity to 10 major PSS systems. Farelogix is headquartered in Miami, Florida.

About Farelogix

real-world application of ndc - farelogix.com€¦ · estimate the full return on any given ndc...

Documents