As airlines embrace new distribution capability, GDS role crystalizes

It wasn’t so very long ago that the existence of global distribution systems (GDSs) appeared to be threatened. Eager to maximize visibility for unbundled products – like extra legroom seats and inflight Wi-Fi – airlines were warming to ‘Direct Connect’ distribution models, which allowed them to bypass GDSs by connecting customers directly to their host reservations systems. In turn, some carriers envisaged a day when GDS fees would become a thing of the past.

But in the last couple of years, as GDSs gradually improved the exposure of airlines’ ancillary products to third party travel agents and offered other creative merchandising tools, they have somewhat re-cemented relationships with carriers. Though some frustrations remain, primarily regarding airlines’ commercial agreements with GDSs, airlines “recognize there is a large market out there, whether corporate travelers, individual travelers or travelers who exist outside the home market, who are using online or offline travel agencies” and that they “need to make at least some part of their optional product mix available in order to ensure the customer has the journey they want and capture the associated revenue”, says Atmosphere Research Group analyst Henry Harteveldt.

FarelogixThat’s why it should not come as the biggest surprise that GDSs are positioning themselves to accept the very technology that helped airlines bypass them in the first place. Farelogix’s schema for facilitating Direct Connect served as the foundation for the International Air Transport Association (IATA’s) New Distribution Capability (NDC), which offers a framework for XML-based data transmission standards.

The schema is a lot prettier now versus when it was first launched by Farelogix seven years ago. “It’s really shiny now, and because IATA talked to a lot of airlines, they’ve added good stuff to it, regarding shopping,” notes Farelogix president and CEO Jim Davidson, who was once a vocal detractor of GDSs, but today concedes they are here to stay.

Now that the DOT has given a green-light to NDC, airlines will have to build out a new API. “They can hire us, do it themselves, or hire someone else – it won’t be for free, so in a sense you’re introducing a new connectivity into the GDS while you’re maintaining the existing connectivity to the GDS. So from a technology standpoint, you are maintaining two systems until you can unhook the old one, so it is an investment,” explains Davidson.

Enter NDC-Xpress, a technology solution that enables airlines to implement NDC with what Farelogix assures will be “unprecedented speed to market”. An NDC-Xpress implementation consists of three steps: (1) Farelogix establishes a normalized connection to the airline host system (PSS); (2) the airline configures its pricing and merchandising engines to define product/service offers and corresponding business rules; and (3) the airline distributes its differentiated content to travel sellers via its new NDC XML API.

“Lets say, for example, that British Airways wants to develop a NDC API and hires us to do it. BA will say, ‘now I want to give my API to Amadeus’. As part of our package for NDC-Xpress, we provide pricing to build out the API for them but also the support services so if they want to connect into a GDS, they can. So there is more of a technical relationship between the airline and us, and then the airline designates where they’d like this connector to go. For most of the airlines, this will go to the GDSs,” says Davidson.

Going forward, says Harteveldt, it will be “very important for GDSs and airlines alike,” to develop more of these NDC-compliant schemas. “So, for example United and Amadeus announced they are using NDC 1.0 to sell Economy Plus seats through the Amadeus GDS. I’m hoping that we will start to see more announcements like this.”

Davidson predicts that, in a year from now, half a dozen airlines’ NDC XML APIs will be fully integrated with GDSs. “When you spend seven years trying to go around the 800-pound gorilla, you learn an awful lot about that gorilla, and then you realize you have an opportunity to provide to the gorilla…we think it opens up the fire hose for us,” he says. Farelogix boasts that sixteen airlines have “already integrated with XML connectivity” and that Farelogix has “connections to nine PSS providers”.

On the passenger experience front, when NDC was first proposed, there was a lot of concern about whether or not it would enable airlines to be discriminatory about pricing, that someone who always bought business-type fares might not see less expensive fares or offers. “The good thing about that change in tune from IATA last year is it really wisely said, ‘this is not about killing off the GDSs’. That was critical to gaining support from the corporate travel community who still rely on the GDS channel for their flight researching and booking.” Crucially, “everything has to be discoverable”, notes Harteveldt.

1 Comment

  1. Hi Mary,

    Nice article. I’m a bit confuse that either this NDC is the replacement of old way of pushing availability and fares into GDS by airline like Hitchhiker or any other system?

    What I’ve understand from this article is that now for example British Airway will ask Amadeus to get the availability and fares by using this new API for particular routes (based on region or any other) but same time can expose the selective fares through their site using same API. Please correct me if my understanding is wrong.

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