IATA and NDC Phobia–Update On the New Distribution Capability

This analysis appeared December 17, 2013 in Cornerstone Information System’s “Insight & Opinion” section.

IATA is listening–or so I’ve read in a number of published reportsi. To whom and about what is open to question.

The industry has been repeatedly assured that the NDC isn’t what you may think, and, that the NDC or something like it is inevitable in any case.

In his piece, “Fear and Loathing in Airline Distribution (aka NDC Phobia),”ii which a surprising number of observers have liked well enough to redistribute, IATA’s Aleks Popovich remarks, “today’s airline distribution network is changing with or without NDC.”

Mr. Popovich also says “Let’s get the posturing behind us and work together to address the heart of the matter.”

Surely that’s a sentiment everyone can support, but “NDC Phobia?”

NDC Phobia Described

I don’t myself believe that the majority of NDC’s critics are subject to whatever that malady might involve. I do believe that organizations advancing business and technology proposals have an obligation to adequately explain and defend them–and not keep shifting the scenery on stage so that the audience forgets how bad the play truly is.

IATA asks its critics to accept that criticisms of the NDC can be dismissed by statements like,

These are all legitimate questions that IATA recognizes must be answered if NDC is going to become a reality. But it is the market, not IATA, which must provide those answers.”iii

If that were true, perhaps IATA should consider whether it is wise to propose changes to the essential ways in which travel distribution operates in the guise of a proposal for technology standards and cooperation.

You don’t have to accept my analysis to come to that conclusion. According to IATA description of What is NDC about:iv

  • The initial scope is the shopping process.
  • In tomorrow’s new distribution, airlines will have greater ability to interact with who is requesting and provide tailor-made product offers.v

In order for that to happen, multiple changes to the structure of travel distribution must occur. That’s assuming we agree with IATA that this business structure is superior to the many others that are available and the inevitable financial and relationship costs its implementation requires are offset by whatever benefits will accrue.

IATA appears as unwilling to make a defensible business case now as it did when last I wrote about this topic.vi

Later, in the same IATA document:vii

Key Principles New Distribution Model

  • It is critical airlines construct/own their product. Need to connect to customers through indirect channels with interactive relationship.
  • Standards must facilitate authentication of customer identity, enable personalized offers through the whole distribution supply chain.viii

Whether you agree with these objectives and believe that the marketplace is asking for them (which I do not), they clearly focus on changes to business processes and not simply to the adoption of new communication methods.

The messaging standard itself isn’t particularly relevant, not is its potential efficiency, how related or unrelated it is to other protocols the industry might like to use, or how potentially rich a data environment might be created. The business processes that are both required to sustain the NDC and the processes it will potentially enable are more central to justifying the NDC.

The frequent suggestion that people still have to build business processes that use NDC capabilities, and that this is a marketplace function, is correct as far as it goes, but it doesn’t really address the quite rational business concern:

People don’t create “standards” without the expectation that they will be used as fully as they can.

My prior NDC comments inspired several objections to what I called “privacy compromises.” Privacy, is unrelated to communication standards–or so I’ve been told.

If the NDC’s business goals (described above) are to be realized, a far greater amount of specific, identifiable traveler data is required than is necessary for booking an air ticket. This is assumed to be collected by the NDC and is also assumed to be available as part of the traveler selling process.

The intent of collecting these data is to deliver “recognition by airlines and personalized products offers.”ix How does this suggest anything other than a fundamental change to the type and amount of data surrendered by travelers?

Specifics as to how this would work and why it has sufficient value are weak. Amazon is typically cited as the visual model, although nobody I’ve listened to bothers to explain why Amazon has any relevance to selling transportation.

The traveler is, therefore, asked to surrender data based upon promises that something valuable might, someday result. The best that can be said of that arrangement is to call it a “compromise.”

It isn’t the same thing, for example, as self-identification with a passenger-type that might be entitled to a discount or other services–the process is not self-initiated and the deliverables are unknown.

Who’s Talking and Who’s Listening?

According to published reports, IATA seems to have abandoned travel agents as “key” participants in the NDC pilot.”xIATA should have engaged travel agencies of all descriptions more skillfully from the start, and the lack of meaningful agency involvement needs to be quickly and wholly resolved.

In recent weeks a collection of trade groups announced an effort to develop alternative standards.xiThat initiative isn’t going anywhere.

The serious questions are about business, not standards. These are the questions IATA says it doesn’t want to answer.

It’s difficult to conceive of a standard that would be embraced by the airline industry being developed in competition with IATA’s standard, especially this late in the day. None of the interested trade groups has the technological or business capability to make that happen.

Putting the NDC Argument Behind Us

The industry’s energy is best spent not tinkering with alternative standards but insisting that IATA confront the real business questions the NDC raises.

This exercise represents one of several business process and strategic flaws that compromise the NDC. These have real strategic, implementation, and operation costs for all parts of the distribution system that are not addresses by the NDC’s proponents. There are direct and indirect costs for travelers as well.

I can’t agree with observers who suggest that it’s time to put NDC objections in the past and face up to business realities. It’s IATA that wants to walk away from business discussions–they’re so inconvenient and it doesn’t have good answers.

 

Notes:

i    Michèle McDonald, GDS Exec Says IATA Is Listening, (Travel Market Report, November 7, 2013).

ii   Aleks Popovich, IATA Senior Vice President, Finance and Distribution, Fear and Loathing in Airline Distribution (aka NDC Phobia), (Tnooz, August 26, 2013).

iii Popovich, op. cit.

iv   New Distribution Capability – Update, (International Air Transport Association (IATA), November, 2012), page 8.

v    Emphasis added.

vi   David Wardell, IATA’s New Distribution Capability (NDC), (Insight and Opinion, July 15, 2013).

vii  IATA, op. cit, page 9.

viii Emphasis added.

ix   IATA, op. cit, page 11.

x    Jay Boehmer, Agencies Absent As IATA Names NDC Pilot Participants, (The Beat, October 30, 2013).

xi   Kate Rice, Travel Groups Propose To Work With IATA On Distribution Initiative,(Travel Weekly, October 28, 2013).

IATA’s New Distribution Capability (NDC)

This analysis appeared July 15, 2013 in Cornerstone Information System’s “Insight & Opinion” section.


In an industry as diverse as travel distribution, there is rarely a shortage of controversial ideas. Recently, critical voices have been raised against IATA’s “New Distribution Capability” (NDC) initiative, variously asserting that its development was closed to most outside input, that it is unfair to travel agents, technology providers, and other stakeholders. It is claimed that the NDC harms consumer interests, and that its implementation requires unacceptable privacy compromises and financial expenditures from distributors and consumers alike.

Curiously, I’ve yet to hear the simplest and most concise justification for opposing the NDC from anyone:

It’s a fundamentally bad idea that probably won’t work.

As these posts must necessarily be brief, I’ll only touch on a few of the NDC’s strategic and business flaws–operational and technological shortcomings must await another discussion.

What Is the NDC?

According to IATA1 the NDC is a business and technological initiative best understood as a process that allows “indirect channels” to enable the same capabilities that exist on airline websites, while preserving an airline’s control of the product. It also proposes to enable product innovation, differentiation, and personalization by directly accessing expanded information as to a traveler’s purchasing profile and history.

The NDC’s “initial scope is the shopping process.” As an example of how this might work, supporters maintain that the NDC will modernize air travel distribution and benefitconsumers by giving them an experience similar to Amazon.

Perhaps, but the NDC mistakenly confuses multiple goals in a package that delivers capabilities few people want. It’s technical features represent one way, certainly not the only or necessarily the best, to enhance shopping data. Other intended benefits are more dubious.

Amazon is a poor service delivery model–air travel distribution has little to do with selling books or consumer products.

The personalized shopping experience, whether through Amazon or an airline, is largely a chimera without real-world application. Frequent Amazon shoppers are aware of the annoying and usually irrelevant suggestions the site continually offers–transferring this unhelpful dialogue to benefit air travel strains the imagination.

One Bad Idea Begets Another

IATA is criticized for failing to adequately consult with distributors and consumers as the NDC was developed–perhaps justly so, although interpretations disagree as to how meaningful the prior industry dialogue was. It’s worth noting that however worthwhile these discussions might have been, IATA isn’t obliged to hold them in any particular way, or to do so at all.

There is also a serious question as to who might participate. There are no industry-wide trade associations with adequate technology capabilities, credibility, and resources to represent even segments of distributors or consumers. Individual companies may have meaningful input, but are not in a position to speak for anyone else, or even their own customers.

Industry discussions to develop and refine technology policy are exceedingly rare–much more so that IATA’s critics would have us believe. Those who feel excluded would do well to upgrade the forums, expertise, and messages they might use to make meaningful future contributions.

Who Benefits?

Shouldn’t airlines know more about the consumer prior to booking so they can “personalize” the product offering, as the NDC promises?

If that were so, it should be easy to describe what that “personalization” would look like–but it isn’t. Beyond the vague “more like Amazon” promise, “personalization” sounds like a more technologically advanced bundling of the many obscure fees and charges no one likes or wants.

If the result isn’t higher consumer costs, what is it?

Many airlines have had access to personal data that were supposed to enable better offerings for decades (through frequent flyer programs, for example). The fact that these enhancements have been meager causes consumers to rightly question whether the new expense and privacy compromises the NDC imposes are justified.

The New Distribution Capability proposes to solve problems most consumers don’t see as problems and deliver ill-defined benefits they haven’t asked for and probably won’t appreciate–at an undetermined cost they are unlikely to embrace. Wholly apart from the clumsy way it has been developed and presented, this is not a formula for a successful project.

IATA was ill-advised to start down this path and its airline participants are likely to see more customer grievances, direct and indirect program costs, and few of the NDC’s promised benefits.

  1. International Air Transportation Association (IATA), NDC Update, November 2012, page 8.