April 3 - IATA Resolution 787: A Fairy Tale  


I read with keen interest an article published by the International Air Transport Association’s (IATA) Mr. Aleks Popovich in TTG Asia on April 2, 2013 entitled, “Understanding NDC.” My overall reaction was that it would have been befitting if this letter had instead been published on April 1. However, I put that firm conviction aside and address below the glaring examples of the incorrect and often mystifying assertions found in this piece about IATA’s New Distribution Capability (NDC). The fractured fairy tales about NDC and reality follow.

1. Fairy Tale. “IATA’s New Distribution Capability (NDC) represents a unique opportunity to modernise air travel distribution. Currently, airlines use Internet programming language (XML) on their websites and are able to offer travel consumers an online shopping experience similar to what they can find on retail websites such as Amazon.com.”

REALITY

a. With very few exceptions, for the vast majority of airlines, there is a zero merchandizing gap between their websites and the indirect channel (except for comparison shopping among competitors’ offerings offered only in the indirect channel). In short, the picture IATA paints of airlines offering these supposed bells and whistles is in nearly all cases pure myth.

b. Airlines took the decision in 2008 to aggressively unbundle their products without industry collaboration regarding how to support such practices and hence are the ones who created the situation they now say they chafe under.

c. Had airlines provided ancillary fare data to the industry 5, 4, 3 or even 2 years ago the industry would be further along in supporting merchandizing, and airlines would be selling more services; on this there is nothing to debate. It is highly ironic that airlines have opposed hammer and tong, tooth and nail, any action by regulators that would ensure they provide to global distribution systems (GDS) the data regarding their extra services they now complain GDSs can’t handle.

d. GDSs power many airline websites. IATA should explain how the airline websites could merchandise so well if GDSs that power them can’t.

2. Fairy Tale. “GDSs use a less flexible pre-Internet message protocol. This legacy infrastructure cannot efficiently support modern retailing practices such as personalised and customised offers. An airline that offers some extra leg room or a special meal option cannot entice the customer with this added value when selling through travel consultants because the GDSs cannot currently present that information effectively and attractively.”

REALITY

a. At a hearing before the U.S. Department of Transportation (DOT) Advisory Committee for Aviation Consumer Protection on August 7, 2012 in Washington DC the GDS Sabre showed that on its own it processed over 237 million XML transactions per day. The IATA General Counsel and many other airline representatives were in attendance, and none challenged these numbers.

b. At that same public hearing, Sabre demonstrated live to DOT that it could show for consumers the actual prices of ancillary services that airlines complain GDSs and travel agencies can’t offer. And the GDS also explained that if airlines wanted their own frequent flyer numbers sent to them, as part of the shopping inquiry so they could offer their frequent travelers better deals than published prices, the GDS could already handle that.

3. Fairy Tale. “Furthermore, in most cases, the airline does not know anything about the customer until the reservation is made, making it difficult to personalise the offer, as is common in most Internet retail activities."

REALITY

a. Since when have consumers been demanding that they be profiled and tracked?

b. Most shopping on the Internet is not truly personalized, unless it's the almost meaningless “people who purchased this product also purchased….”

c. Most consumers, and especially air-travel consumers, when shopping on the Internet want a standard product for which they can readily compare prices across websites, e.g., a specific make and model of a pasta machine, or Brussels to Washington during the morning of May 1.

d. There have been a number of complaints that when on-line shoppers were being profiled and tracked by suppliers, they often found themselves penalized with higher prices. This happen last year in the case of one large U.S. carrier when its “best customers” shopped for fares on its website and they saw higher prices than when they shopped anonymously.

4. Fairy Tale. “That’s where NDC comes in. NDC is an IATA-led collaborative industry initiative to define a messaging standard that will enable retailing opportunities through the indirect channel similar to those available on airline websites.”

REALITY

a. NDC has not even been close to collaborative – trade groups from around the world that represent travel agencies, travel management companies and government, university and corporate travel managers were excluded from the strategy sessions that led to Resolution 787 and NDC; period, full stop.

b. NDC is a messaging standard only insofar as technology might be needed by airlines to enable a new business model that would undermine fare transparency to the detriment of consumers. The fact that new technology might be needed to implement a new business model does not morph the business model into a technology standard.

5. Fairy Tale. “Using an XML-based standard, NDC will enable a dynamic, vibrant marketplace that is not possible with today’s closed proprietary systems.”

REALITY

a. Today’s marketplace is transparent, vibrant and holds prices in check, as IATA’s director general acknowledged in an interview with Flight Global (http://btcnews.co/12f6YVy) as the rationale for NDC.

b. Today’s market is only closed with respect to ancillaries; they are not being disciplined and that is because the airlines have held on to the data. There is apparently great profit in price opacity and consumer confusion.

c. XML standards are already in use – or GDSs could not be handling hundreds of millions of XML messages everyday. Why does it take a binding resolution agreed to by direct competitors for the “marketplace” to move further and faster in that direction?

6. Fairy Tale. “The NDC foundation standard was approved in October 2012. The next step is to conduct trials, which could begin as early as April. NDC will bring to travel consultants the ability to offer travellers the same products and services they often can only find on an airline’s website.”

REALITY

a. As mentioned above, for the vast majority of airlines, this simply is not true. Any consumer can do the test herself by just logging onto a few airline websites.

b. The fastest, cheapest way to improve what’s on travel consultants’ screens is for airlines to submit data using ATPCO OC. In October 2010 (2-1/2 years ago!) after months of testing, airline-owned ATPCO announced that all three of the GDSs were ready to receive and display ancillaries using ATPCO OC.

7. Fairy Tale. “Customers will not have to surrender their privacy to compare fares or services and amenities. But consumers will benefit by providing additional information. In this regard, buying air travel through NDC will be no different than other shopping experiences, such as grocery and department stores providing discounted offers to “club members”. Furthermore, airlines will have to conform to privacy laws and regulations concerning the collection and use of personal data just as they do today.”

REALITY

a. Exactly what guarantees is IATA offering that consumers not coughing up personal data will be presented a full gamut of reasonable fares as opposed to punitively high “rack rate” prices.  

b. If a consumer does not join the “airline club” she will be penalized because if she wants to fly non-stop to many places there will likely be one or at most two choices and if she does not surrender her personal details, she might receive no offers at all. What’s more, if a consumer does not like the member terms and conditions at the Costco member club, she has plenty of choices – plenty!

c. When FlyByNightAirlines in Whereisstan has a consumer’s personal data, what privacy laws apply and who is going to enforce them? And since the data that Resolution 787 indicates carriers can demand of her if she wants a price quote is “including but not limited to” the really creepy stuff (like age and marital status and past shopping and travel history), will she really have to turn over additional information if she wants to see what it costs to fly from point A to point B?  Does IATA really believe consumers will be comfortable with that?

8. Fairy Tale. “It will be possible to compare fares using NDC and the intent is not to cut GDSs and travel consultants out of the system. There is a content aggregator role in NDC to enable comparison shopping. Additionally, NDC will help travel consultants add value to their clients by allowing for comparisons of product and service options that today is only available on individual websites. It will facilitate the easy sale of ancillary products.”

REALITY

a. It will be possible to compare what fares? What guarantees can IATA provide that carriers adopting NDC in a market will continue to have publicly posted prices consumers can view and compare anonymously?

b. And isn’t it the case that IATA’s own documents say that if an aggregator does not have the personal data for a consumer that an airline has required, the aggregator cannot even ship that airline a request for an offer? So, exactly what will a consumer be comparing?

c. And since the stated mission of NDC is to allow airlines to “personalize” each price based on exactly who is asking, can IATA explain how that model can coexist with the current model that offers the same prices to all shoppers regardless of who is asking? 

d. The easy sale of ancillaries has been available since ATPCO OC testing in 2010 – airlines just have refused to use the standards they drew up.

9. Fairy Tale. “NDC welcomes broad participation of the travel consultant community in the development of NDC standards and determining business requirements. IATA has and continues to engage with all participants in the travel chain including travel consultants, agent associations, airlines, GDSs and other technology providers. Furthermore, no airline will be required to participate in NDC.”

REALITY

a. Collaboration on industry direction and NDC as a new business model has been nonexistent.

b. In the preamble to Resolution 787 the statement that says, “Members and/or system providers SHALL apply the following procedures when distributing enhanced content….” That sure appears binding.

10. Fairy Tale. “Change always brings challenges. NDC will bring change. And the market will determine which aspects of that change are valuable to customers and offer business opportunities to the value chain.”

REALITY

a. How can 240 airlines, representing 84% of all global passenger traffic, reaching a binding agreeing on a new model for the pricing and sale of airline tickets, that they collectively think is in the best interests of airlines as a group, reflect the operation of the “market,” as opposed to something else at work?

b. Since the beginning of commercial air transportation, technological innovation has been a central force behind industry growth. Customers have driven the success of innovations such as loyalty programs and corporate self-booking tools. When new technologies add true value, the customer – individual traveler or professional travel manager – will embrace them. The customer cannot decide anything when virtually an entire industry of powerful airline competitors secretly agrees on a new industry model and structure.

11. Fairy Tale. “NDC will lead to a better-informed shopping environment for air travel that will deliver value to passengers and create business opportunities across all aspects of the industry. And building it on principles of transparent standards, openness to innovation, fully informed consumer choices and collaboration across the value chain will make for a better tomorrow.”

REALITY

a. A single firm is usually free under national competition laws to endeavor to change an industry’s economic and operational models. It is a horse of a different color, however, when 240 horizontal competitors strategize behind closed doors and agree upon a new business model for the pricing and sale of their products. Horizontal airline competitors (and indeed nearly the entire industry) banding together to jointly adopt such a new business model by express agreement crosses the line. NDC is an agreement that has the purpose and would have the effect of stabilizing or raising prices charged to all consumers because it would end the air fare transparency that, as the airlines themselves have confirmed, has checked their ability to raise prices. It thus likely violates U.S. and other countries’ antitrust laws.  

EDITOR’S NOTE: IATA has filed an application with DOT for approval of Resolution 787. DOT has set a deadline of May 1, 2013 to receive industry and airline customer comments. Please find at http://btcnews.co/YoB3yJ, for your consideration to sign, a letter to DOT Secretary LaHood that will be filed in the official U.S Government Docket on or before May 1.  

Comprehensive information on Resolution 787 can be found at http://btcnews.co/ZriS6V

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