Airlines across the world are going through the biggest crisis they have ever had. Survey after survey finds that only about half the potential passengers are comfortable with the prospect of flying even 60 days after worldwide travel has resumed.
Given this scenario, airlines are in a rush to find any means to stop the massive bleeding of resources they are facing. Consequently, many of them have come to realize they need to cut back on their largest expense—distribution costs.
But didn’t the International Air Transport Association (IATA) bring out the New Distribution Capability (NDC) for the express purpose of cutting distribution costs?
Why hasn’t that had an impact and shielded the airline sector from the ravages of the coronavirus pandemic?
Notably, the airlines could get around the costly GDS platforms by taking control of their content distribution; either directly or through an intermediary IT provider, airlines could deliver rich content and ancillaries (lounge access, pre-check bags, seat upgrades, on-board drinks & food, and baggage allowances, etc.) to their passengers at a minimal cost.
The major NDC limitation
NDC is promising in a multitude of ways, but there is a glaring issue that has been a pain point for airlines for many decades now—the cost of distribution has not changed by much. Why?
Even though NDC was brought in to replace the monopoly of the GDS, it has not succeeded in doing that because GDS has come to dominate most of the distribution through NDC.
That is, the same three large GDS players have gained a near-monopoly in the NDC platform, leaving airlines with distribution costs as high as $14 – $25 per ticket.
All is not lost with NDC
Despite all of this, NDC provides a better way for airlines, GDS, and online travel agencies to connect, paving the way for streamlined distribution of tickets and ancillaries.
However, with the current way that NDC is implemented, airlines can’t keep improving their customer experience and get around the monopoly of the three big players in the NDC space. This is where an IT partner comes in.
Across the world, airlines have been launching multiple distribution channels, each in collaboration with an IT partner who helps the airline provide travel agents in their region with rich content.
Because of having hundreds of medium-sized players that airlines can work with in a region-specific manner, ticket distribution costs per unit can go down to as low as 2 to 4 USD. Competition among the various IT partners of the airline will further go a long way in bolstering customer experience.
Conclusion
Airlines are already beginning to implement this strategy to massively cut down on distribution costs. Already, Infiniti’s NDC level 4 capabilities have helped Emirates achieve the benefits of direct distribution at minimal cost. Given our full offer and order management capabilities, Infiniti can be a valuable partner for your airline as well. If you are interested in knowing more about how we can help you, don’t hesitate to reach us at [email protected].
