18th May, 2020
GDSs have been focusing on ensuring agencies are able to access NDC content in the same workflow as other content. In addition to this, they also have been working on live NDC bookings, new tools for agencies etc. In this context, the recent termination of the distribution pact between Lufthansa Group and Sabre is an interesting development.
Ai’s Ritesh Gupta spoke to two travel distribution and technology executives – Akshay Shah, Chief Commercial Officer, JR Technologies, and Ryan M. Harris, Director, JR Technologies about the same:
Ai: What do you make of the development from airline distribution perspective?
Ryan: I think that this action is the continuation of a strategic shift by the airline in terms of where they want to take their distribution mix to the future.
If we look back to September 2015, the introduction of the €16 booking fee that applied to all GDS booking had a very similar reaction by the industry, a lot of people through that it wouldn’t last and that the fee would be short-lived. Five years later, the fee is not only still there, it has expanded and is now relatively commonplace in most markets.
There is no question that the goal of the fee back in 2015 was to drive more passengers to the airline’s direct channels and to incentivize travel agents to adapt the airline’s direct portal. Lufthansa has been very active in supporting, developing, testing, and implementing projects that are NDC and ONE Order focused, which is the IATA initiative that helps to facilitate the transition away from the traditional indirect channels moving to the airline-controlled distribution model of the future. While I’m not privy to the strategic goals of Lufthansa, I have to believe that they would not have taken this action lightly and that based on what they have done in the past, they are committed to it.
Ai: How can Lufthansa Group make up for the role of Sabre?
Ryan: Lufthansa is large enough that the market demand for their product, in normal times at least, will naturally find a channel.
If a customer wants to purchase a Lufthansa ticket and a Sabre agent cannot sell it, the customer will find another way to purchase it without that agent. This is where the direct agency connection can be leveraged with the agency, as it offers the Sabre agent a pathway to keep the customer with them by offering what the customer wants to buy at a more competitive price, because now the GDS booking fee is not applied. The airline lowers its cost of sale, the customer gets the services they want at a better price, and the agency retains the customer’s business, pretty much everyone wins except the GDS. This only works because of the airline involved. A smaller carrier with less of a market presence cannot successfully drive this change.
Ai: How can the agent community connect with the airline offerings - different GDS (but still paying surcharge if not using NDC) or focusing on NDC (be it for directly via API, aggregators etc.)?
Ryan: Larger and multi-location agencies tend to have their own internal systems that can source content from multiple GDSs and other providers, including a potential API connection from an airline or an aggregator. For smaller agencies, the direct airline portal is likely the path to offer content outside of the GDS and offers the airline the quickest time to market.
Ai: Airlines have found a way to distribute exclusive offerings, for instance via the NDC API. Agents do gain access to it, but what additional cost they have to bear if they don't go via the GDS route?
Akshay: The additional costs that agencies have to deal with when working with an airline through its NDC APIs are development costs into the agency's booking platform. The development cost is considerable because each airline has its own version of NDC that they have implemented. Some airlines have one version of NDC and others have another version. Each one will have its own independent development costs. Additionally, you could have two airlines that implemented NDC from the same provider at XX.X version. One would think that you develop to one carrier and the other carrier will be identical and should take no time at all to integrate. The issue is that each airline independently developed on top of the API creating two different versions even though it is considered NDC version XX.X.
If the agency has many transactions, they will have to figure out a way to create accounting records that could interface into their back-office accounting systems. Otherwise, they will have to create and account for these transactions manually, which increases overhead.
Lastly, if the airline has an older version of NDC, a lot of servicing of the reservation will have to be done with the agent calling the airline.
Ai: Considering two options to access Lufthansa's NDC content - browser-based agency tool and NDC API - what kind of preparation needs to be done by agents?
Akshay: An agency using the browser-based agency tool will have to create several checks and processes. All transactions that happen through the booking portal are the responsibility of the agency. Therefore, the agency will require an administer for all the login credentials of every employee. When a reservation is created, they will require processes on how to handle disruption and schedule changes. Additionally, they will need workflows to account for the transaction through their accounting departments/ software. If an agency has an outsourced after hour service center, the agency will have to work with that entity to access bookings on the portal. These are the few I can think of right now. The main issue with the use of the browser-based agency tool is from the perspective of search. The agent will have to perform one search, either in a GDS or other booking platform, to get fares and itineraries for other carriers and then do a second search in the browser too.
The use of the API would mean that the agency has some sort of booking platform. Therefore, all of the processes that are currently done through the booking platform should be the same path that the NDC content follows.
(There are several ways to market with NDC. Options include a direct connect, via a GDS, a non-GDS aggregator, a meta-search engine and a message hub).
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