Travel start-ups take heed – the International Air Transport Association (IATA) has partnered with a leading travel-focused investment firm to create an ‘NDC Innovation Fund’, which aims to accelerate use of the association’s New Distribution Capability (NDC) standard by investing in the best and brightest new entrants in the space.
The partnership between IATA and Travel Capitalist Ventures is a first of its kind for the association, IATA VP external relations Doug Lavin tells RGN. A member of the NDC Innovation Fund’s Investment Committee, Lavin says, “We’ve never worked with a venture capital or private equity firm before. But we saw a need to stimulate innovation in the airline distribution space. We realized we didn’t have the internal capabilities from an investment side so we went out to recruit the best group in that regard, and Travel Capitalist Ventures was high on our list; it has good experience, and is focused on the travel space, which is rare.”
NDC, which offers a framework for XML-based data transmission standards, is expected to modernize the way airline products are presented through both online and brick-and-mortar travel agents. Improving visibility of ancillary products will ultimately improve the passenger experience.
Because of this, IATA is eager to see near-term adoption of NDC. It says travel content, travel e-commerce sites, travel hubs, travel technology companies, travel apps, “software as a service” firms and all other NDC enabling companies across all travel products (air/hotel/car/cruise/activity) are of interest to the NDC Innovation Fund, which takes an equity stake in selected start-ups and in turn opens doors and provides advisors to help them test their assumptions, vet their product offerings and – when the time is right – help them with formal introductions to “marquee” clients and suppliers.
As some travel start-ups are all too aware, “if you go down the wrong path as a start-up you could spin your wheels for six to nine months”, says Abrar Ahmad, a partner with Travel Capitalist Ventures, and a member of the NDC Innovation Fund Investment Committee. “You need someone who understands the industry. Of course, there is a gap to bridge between start-ups and airlines.”
Travel Capitalist Ventures believes a sizable number of travel start-ups could benefit. “If you look at the number of travel start-ups in every region in the world – if you look at Europe, there are dozens; Middle East, there are 25 of all sizes, so I would say at least half of them from a technology point of view have some application to NDC, and can benefit from the standard.” The company’s investments range from $500,000 to $1 million in B2B and B2C companies using the NDC standard.
To be clear, says IATA’s Lavin, Travel Capitalist Ventures is “putting the capital in”, and IATA is “putting in the business expertise and the connections to airlines”, but IATA is not putting anything into the fund itself.
“As part of our governance of the NDC Innovation Fund, we have put together an advisory board where we have asked the world’s leading airlines to join us, to give us advice and counsel,” says Lavin, adding, “A lot of world’s leading airlines, both in the US and internationally, will be advising the fund going forward. The value we’re bringing is the connections to airlines and what we’re focused on here is, as airlines and agents are adopting NDC, and as more content is flowing between airlines and agents on the ancillaries, we believe that we need new distribution technology, and we think travel start-ups and others have the capabilities of developing that technology. What they don’t have is the understanding of the industry, which is daunting because the distribution market is based on pre-Internet-based standards and we’re now opening it up with XML-based standards, which gives them greater opportunities.”
The NDC Innovation Fund is currently soliciting proposals from interested travel start-ups. IATA says that while the hunt is truly global, the fund has a preference for companies “in or close to Montreal, Geneva, Los Angeles, San Francisco, Dubai, Johannesburg, Delhi/Bombay, Singapore or Hong Kong”.
Certain industry stakeholders haven’t always been keen on IATA’s NDC standard, including Global Distribution Systems (GDSs). But attendees of the association’s recent World Passenger Symposium in San Diego report that Amadeus, Travelport and Sabre are now discussing NDC as a core service. “The big change at the World Passenger Symposium was all three GDSs got up and said, ‘if our airlines are asking for it, we will support it’. That was a new message that wasn’t heard before San Diego,” says Ahmad.
In terms of the bigger picture and what the future holds, says Lavin, “Certainly airline distribution is changing and would have changed whether NDC came along or not because of the capabilities of the Internet. There are a lot of roles for players in the chain now; how it shifts out in future – whether GDSs or some other kind of aggregator [dominate] – remains to be seen. All IATA is doing is creating the data transmission standard to allow this content to go more efficiently.”
IATA notes that two airlines in China are already using NDC; and United and Amadeus recently announced they’d use NDC 1.0. Farelogix, whose ‘Direct Connect’ schema formed the basis of NDC, is working to bring NDC to a number of different airlines, and IATA is aware that more than a dozen pilot programs are already underway. IATA expects to see an acceleration of NDC implementation in 2015 and mass implementation in 2016.
See IATA explain NDC in the video below.