We know you are likely hearing a lot of buzz about New Distribution Capability, aka NDC, and probably want to learn more about it. Confused about what it is, how it works, and the benefits of NDC? We get it. The technical jargon, rapidly changing landscape, and constant news can sometimes make it challenging to grasp. So, let’s break things down in simple language. (And if you’re still baffled by a term used below, check out our NDC glossary here.)
What is NDC?
New Distribution Capability is a data interface (i.e., computer code) built for the airline industry to transform how airlines distribute and sell flight content. It was developed by the International Air Transport Association (IATA), a global trade association for the airline industry, for many different reasons. NDC gives carriers the ability to share richer content and more personalized offerings with customers than what the established data standard allows for today.
What came before NDC?
To understand why NDC originated, let’s briefly explain how airlines have traditionally sold airfares. For decades, the industry has relied on a standard called Electronic Data Interchange for Administration, Commerce, and Transport – or EDIFACT for short – to transfer booking information, such as fares and schedules, to travel sellers.
The data first gets routed to global distribution systems (GDSs), which serve as intermediaries that aggregate information from various travel providers (e.g., airlines, hotels, car rental agencies). The GDSs, which include names like Amadeus, Sabre, and Travelport, then share the compiled data with travel sellers, including online travel agencies (OTAs) and travel management companies (TMCs), so customers can have all the essential information they need to search, book, and smoothly manage their itineraries.
EDIFACT has been the backbone of the industry for 40 years, capable of processing billions of global transactions quickly and efficiently. To be clear: Travel providers throughout the entire ecosystem – from airlines to GDSs to online booking tool (OBT) providers and TMCs – still depend on EDIFACT to send and retrieve the data needed to sell and reserve airfares and seats. NDC is not replacing EDIFACT – at least not anytime soon.
Yet, EDIFACT has certain limitations. With this data standard, the number of prices that airlines can offer is limited by the 26 letters of the English alphabet that represent traditional booking classes.
So, where does NDC fit into the picture?
In today’s world of air travel where business travelers want to choose their own flight adventure, down to the refundable seat with extra legroom and priority boarding, the pricing limitation of EDIFACT’s booking classes restricts airline retailing strategies and revenue potential.
In 2012, IATA began developing New Distribution Capability based on the newer, web-based XML data protocol so that carriers could create unlimited price points, exponentially expanding their merchandising capabilities and product differentiation opportunities and their ability to raise and lower prices more quickly.
With NDC, airlines plan to craft personalized offers based on travelers’ preferences. Do your business travelers want seat upgrades, in-flight meals, and Wi-Fi service to stay productive on the go? With NDC, the aim is to provide corporate travelers with a seamless booking experience for such ancillaries and additional services, similar to how leisure travelers can access these options via the airlines’ websites.
How is NDC content booked?
At time of writing, IATA says 68 airlines (out of the 300+ that it represents) are certified to use NDC to deliver at least some of their content, and they are all in various stages of technical development and maturity.
For airlines currently offering NDC content, you can make an NDC booking in one of two ways: through a direct connect (i.e., through the airline’s website or connecting directly to their airline’s own NDC API) or via an indirect channel. With an indirect NDC channel, third-party intermediaries (e.g., GDSs and content aggregator companies) connect to airlines’ NDC application programming interfaces (APIs) to access and display airline offers, fares, and ancillary services to travelers.
NDC was first developed in 2012? Why has NDC adoption been slow?
The modernization of airline distribution is an intricate endeavor with multiple layers. To understand NDC’s complexities, we might compare it to the adoption of electric vehicles. Because electric cars run on an entirely different system than traditional diesel- and gasoline-fueled vehicles, they require a fundamental shift in technology. Not only does building out the new fueling and recharging stations require an extensive overhaul, but it also demands collaborative partnerships between governments, private companies, and utility providers.
It’s a similar story for NDC: For NDC implementation to take off smoothly, there must be industry collaboration – including airlines, GDSs, travel agents, TMCs, OBTs, and other service providers – to launch the new technology.
Furthermore, there is no universal switch to deliver NDC content within all distribution channels. Each airline is building its own NDC APIs with the help of various IT providers and technology partners, creating new development work every time – not just for the airlines but also for the aggregators and service providers on the receiving end. The work entails building out servicing, data structure, business processes, and content displays to match the established airline content we receive today. One way to picture this is to compare airlines’ websites, each one looks different, with different capabilities, types of content available and information required at different stages of the booking process. There’s also comprehensive testing and development by all parties to make sure the capabilities and functionalities distributed through the existing channels have been replicated successfully.
What’s behind the airlines’ push for NDC?
While delivering enhanced content and functionality for a better customer experience is a key priority for airlines, at its core, NDC represents an opportunity for carriers to make more money and reduce costs. For instance, because the new technology supports more advanced offer and order management processes, airlines can adjust airfares in real time using dynamic pricing (e.g., instantly raise or lower prices as demand changes) and entice business travelers to upgrade their experience by presenting a wider array of ancillary services. With NDC, carriers can also reduce distribution fees charged by the GDSs.
Of course, we need a thriving airline industry that’s healthy financially – and we also want a more personalized travel experience for our corporate clients. NDC will help to deliver that eventually, but we are still in a very early stage of this technology that was initially built with the leisure traveler in mind.
What’s next?
American Express Global Business Travel is fully committed to NDC. Our tech teams have been working diligently to bring NDC-sourced content into our marketplace. As always, we are focused on making sure we have comprehensive air content available to travelers in a transparent, omnichannel shopping, booking, and servicing environment and that it meets the needs of our corporate clients.
To learn more about what we deem necessary to make NDC-sourced content ready for business travel and what we are doing to build an NDC booking environment suited for our corporate clients, click here.
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