NDC Is a Fundamental Change in the Business Model for the Pricing and Sale of Airline Tickets and Not Just a Technical Standard-Setting Exercise as IATA Now Claims
Hoping to ease the flight path to regulatory approval at the U.S. Department of Transportation (DOT), and to allay the objections to the International Air Transport Association’s (IATA) New Distribution Capability (NDC) that have come from so many quarters, IATA is trying very hard to minimize the nature, mission and impact of this inter-carrier agreement in several ways. To do so, IATA finds it must mischaracterize or ignore the plain language found in the four corners of this agreement, Resolution 787. For example, IATA declares in its application to DOT that:
“At its core, Resolution 787 is designed to support the development of an open XML-based data exchange standard to complement the existing TELETYPE and EDIFACT data exchange standards, which are already managed by IATA for the airline industry.”
Application at p.6
In other words, IATA represents that Resolution 787 is just some innocuous standard setting exercise and should be of no concern to anyone. However, obviously aware that the plain text of the Resolution does not support such a characterization – because most of this agreement is devoted to defining the new, agreed business model for how airline tickets would be priced and sold – IATA literally runs from the language of the Resolution containing the very substance of what the carriers have agreed. It asks for approval of Resolution 787 “only insofar as it describes a means to modernize distribution communications technology with a new XML standard.” In effect, IATA is asking DOT to ignore the proverbial “man behind the curtain,” that is the business model that pervades Resolution 787 and that the new technical standards are being designed to enable.
IATA’s media strategy takes the same tack. For example, in an article published in Breaking Travel News (http://btcnews.co/115E6M3) on April 15, 2013, IATA asserted, “The first thing to make clear is that NDC is an IATA-led industry initiative to define a new messaging standard between airlines and travel agents.”
However, IATA-generated documents leave no doubt that the fundamental and paramount purpose of Resolution 787 is not to facilitate some benign messaging standards, but rather a concerted effort by some airlines to end the current business model that ensures fare transparency and to replace it with the ultimate in fare shrouding where every price quoted depends on exactly who wants to know. And the motivation of carriers driving this initiative could hardly be clearer: They hope to have a freer hand to take up prices consumers pay to travel.
With reference to relevant IATA’s documents, we note the obvious and for IATA very inconvenient fact that neither the diagram at page 2 of Resolution 787 (http://btcnews.co/119AiJx) nor the text explaining how the new model would work (also at page 2) provide any continued role for published fares and schedules that an aggregator, like a global distribution system (subsumed under the label “B2D Distribution Channel Provider” in the diagram) might access, load in advance and comparison shop in the case of carriers that had implemented NDC for particular markets. To the contrary, as shown on the face of the Resolution at page 2, aggregators (and travel agents and customers) would access fares and schedules on NDC airlines through each carrier’s “DAS API,” with the carrier then providing its offers “based on knowing who is making the request….”
In short, the paramount and pervasive purpose of resolution 787 is not to facilitate the development of better communications standards for industry participants to exchange the present transparent fare and schedule data at all. Instead, resolution 787 embodies a radical restructuring of the current business model for the sale of tickets -- with all offers to be assembled only by carriers based on exactly who wants to know the price of travel, thus eliminating the publicly posted prices that any consumer can see and compare anonymously.
Any possible plausibility for IATA’s claim here that the “core” of the agreement in Resolution 787 really is a technical agreement on XLM message exchange standards is wholly undermined by the contemporaneous explanation of the purpose of the proposed Resolution by IATA’s Passenger Distribution Group (PDG) in its request for approval of Resolution 787. That explanation by the PDG was an integral part of the request for passage of Resolution 787 at the October 18-19, 2012 IATA meetings in Abu Dhabi and was attached to the Resolution as part of the agenda materials, with both the Resolution and the PDG justification labeled as being for “Agenda Item” “P7.” While the Resolution itself is attached by IATA to its DOT application at pages 29-43 of 87, this PDG justification for the Resolution has been separated and is found near the very end of IATA’s submission, at pages 85-86.
This report of the PDG recommended the passage of Resolution with the following description of what was being accomplished:
“The PDG was established by the PSC in 2011 with terms of reference as shown in Attachment A_P7. Member representatives have been defining the vision of a new distribution capability where requests come to airlines who will respond with an offer for their product. This is considerably different to the existing model where content is ‘pushed’ to systems (e.g. schedules, fares and availability) and the offer is created without direct involvement of the carriers.
In making this proposal for a new ‘Enhanced Airline Distribution’ resolution, it will cover only the concept of the business requirement, being a foundational resolution to provide an industry framework for ‘authenticated shopping’. This new Resolution 787 as shown in Attachment B_P7 becomes a platform that will enable further resolutions and messaging standards to be developed as further business requirements are evaluated.
Without doubt and as this justification by PDG makes clear, Resolution 787 was never an agreement on “data exchange standards” at all, but rather a resolution that “cover[ed] only the concept of the business requirement,” with messaging standards to be developed later as “further business requirements are evaluated” and “further resolutions” developed. Thus, this assertion by IATA that Resolution 787 covers only standard setting has the facts backwards.
Resolution 787 is no mere “technical standard” and has not been so since its inception. The fact that this new business model for pricing and selling airline tickets – with carriers creating offers as opposed to third parties doing so – might only be implemented with new technical standards does not make the new business model itself a technical standard.
(1) BTC has drafted a letter to DOT Secretary Ray LaHood (for the docket), to be transmitted on 1 May that has so far attracted 150 signatories from 16 countries. The letter can be reviewed and signed at http://btcnews.co/YoB3yJ; all current signatories can be accessed there as well.
(2) On Friday, 26 April, the American Society of Travel Agents (ASTA) and Business Travel Coalition (BTC) will conduct a free Webinar on IATA Resolution 787. Some 200 travel industry participants from 18 countries have registered in just the first week since announcing this event. Your association staff and your members are cordially invited to participate. For more information, and to register, please visit http://btcnews.co/ZiCvlS
(3) BTC will timely prepare and disseminate other briefing papers periodically to address other inaccuracies or inconsistencies in IATA’s regulatory filings