Sunday, June 26, 2022

Digitalization to drive NDC success

IATA today represents 83 per cent of global air traffic – an industry that is very slowly recovering from the brunt of a global pandemic. According to a report, in mid-April 2021 close to 9,500 aircraft were still parked, that is about 34 per cent of the global fleet. While this is down from the 14,000-peak a year ago, it is still a staggering figure.

With the success of vaccination roll outs, travelers are keen to take that long trip again but are we really ready? Arabiatravelnews spoke to Yanik Hoyles, IATA’s Director Distribution who is still being cautious. “If we look at traffic figures from May 2021, international travel was still down around 85 per cent compared to 2019, so we have an industry that is still deeply in crisis; and we’re not at the post-pandemic stage by any means.

“But that is not because people don’t want to travel or are afraid to travel. It is because governments continue to rely on blanket solutions like border closures or quarantines that are no longer appropriate at this stage. The need of the hour is to use data to drive border opening strategies that would help revive tourism jobs and businesses without risking importing COVID-19.”

The ‘IATA Travel Pass’, a digital health pass was launched for this very purpose. The pass, will help manage and verify the flow of testing or vaccine information securely among governments, airlines, laboratories, and travelers. This digital processing is the need of the hour says Hoyles.

“If governments are going to require proof of a negative COVID-19 test or a COVID vaccine for travel in the near-term, it is imperative that they accept this documentation digitally, rather than requiring travelers to line up at airports counters to present it on paper forms. Such an approach is a recipe for chaos as passengers are forced to complete in person processing rather than using digital alternatives that have been widely available for 15-20 years.”

While the industry battled with the pandemic and revenues and profitability took a downward spiral, the airlines efforts towards Retailing, a new industry disruption enabled by IATA’s New Distribution Capability (NDC), which was announced pre-pandemic, was being embraced by various carriers and is fast gaining momentum as it is here to help the industry bounce back stronger.

“In a digitally connected world, airline customers’ expectations for personalized offers, real-time information and seamless transactions are ever-growing. Airline retailing could move airline distribution to the future through de-commoditization, selling new products in new ways, and being closer to the customers. The post-COVID-19 world will be different. It will be a while before travel volumes are back to the 2019 levels and so in the meantime, value creation through airline retailing will be even more critical to profitability,” added Hoyles.

Besides enabling richer customer engagement and dynamic offer creation, airline retailing has a value creation potential of up to US$7 per passenger, industry average or, equivalent to approximately 4 per cent of industry revenue, it suggested in a IATA-McKinsey report in 2019.

The Retail roll-out was an astounding success as  the NDC Leaderboard Airlines achieved their goal of having 20 per cent of their indirect sales powered by an NDC API (either as a direct connect or via an aggregator connecting to the NDC API) by December 2020.

“These 23 airlines have contributed to breaking down the barriers to adoption, both technical and commercial. Naturally they will carry on with their journey and IATA will continue to support them,” said Hoyles.

Hoyles agrees that the catastrophic downturn in air travel caused by the COVID-19 pandemic has definitely boosted the industry’s drive toward airline retailing, of which NDC is a critical component.
This was further confirmed in the past 18 months as :
-many airlines, technology providers and sellers have maintained retailing as part of their core strategic priorities’,

– new commercial models have emerged between some airlines and the GDSs, 

– GDS announcements suggest that they will finally be technically ready by late 2021 / early 2022 while several new (aggregator) entrants are offering services and direct connects much more commonly,

– as many as 222 IATA certifications were presented, which represents an increase of 20 per cent over the last 12 months. 

Hoyles added that more is to come as the NDC Certification program continues to evolve. The Passenger Standard Conference governance at a meeting on March 8, 2021, agreed for the need of a 21.3 release, a new standard around which the industry can once again converge. It is expected to be available from September 2021 and will represent significant improvements in areas of technical implementation and functionality. This will allow existing implementers to choose to upgrade to this version knowing that future releases can be implemented in a simpler and more cost-effective way.

The IATA governance is now structured to deliver up to four new releases each year, should this be required to keep up with evolving requirements of the industry.

The new certification model which will be called the Airline Retailing Maturity Index looks to the broader scope of airline retailing with an increased focus on value chain partnerships and value creation.

The AMR index reviews and validates three pillars that give a view of technical readiness, partnership scalability and the potential value to be captured.

These include:
– Capabilities Verification, built on past certification principles and expanded to encompass the broader scope and stronger verification within the IATA Enhanced and Simplified Distribution (EASD) standards.

– Partnerships Deployment that aims to review a company’s strength of deployment based on partnerships, volumes, and network reach and,

– Value Capture Compass, that is designed to help airlines accelerate progress and track potential value captured along the retail transformation journey. This tool allows airlines to accelerate their progress by identifying and prioritizing the most critical gaps to advance their retailing capabilities.

“The post-COVID-19 world will be different. It will take a while for travel volumes to get back to 2019 levels and in the meantime, value creation through airline retailing will be even more critical to profitability,” added Hoyles.

But what does this mean for the GDS aggregators? Hoyles is resolute that the GDS will continue to remain as important partners for both airlines and travel agents. “Aggregators have the technical capability to connect to multiple airlines and offer this aggregated content to their travel agent partners. And thanks to NDC and API connectivity, they will have the technical capability to offer them new types of products and services the airlines may make available.”

It has also been an extremely challenging time for the players across the value chain and travel agents in particular. “One thing that stands out is that to survive and to maximize resistance to future shocks, all the players need to make sure they maximize the use of technology and that they continue to anticipate and meet the needs of the end customer,’ said Hoyles. 

“Digitalization is critical for this industry to modernize its capabilities and to simplify what is a very old and complex infrastructure. The NDC will drive a better customer experience, reduce costs and make the industry more resilient to any future shocks or disruptions” he added further.

The standards and programs in scope for Airline Retailing today include New Distribution Capability, ONE Order, Dynamic Offers, Settlement with Orders and The Future of Interline – Payment, all key components that contributes to cost savings and/or revenue increase.

“The main areas of value creation will  be the following: development of new offers, enhanced Revenue Management, optimized distribution mix, better targeting and engagement with customers and optimized payment and fulfillment.”

“It is a very dynamic and exciting period for airline distribution. Today airlines have in place five-ten-year business plans based upon the airline retailing value creation drivers.”

So what does all this mean for the traveler today? Digital connectivity has also changed the way consumers, who are are connected 24/7, choose to shop and travel. In a post-pandemic world, travelers will value their choices and personalization will be key to give them a safe and wholesome-trip experience.  Hoyles adds, “Thanks to the enhancement and modernization of the airlines’ distribution capabilities, consumers will see more products offering greater value, they will benefit from more transparency and in some cases they may also benefit from tailored, personal offers.”

Playing it safe yet smart, in this unknown, uncharted territory is truly the need of the hour. “We believe fully vaccinated people should be able to travel freely and those not vaccinated, should have access to travel through testing or proof of prior infection. And we should manage both with smart, effective digital certification rather than paper testing or vaccine certificates because operationally it is just not sustainable,” said Hoyles.

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