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The airline industry is facing a challenge when it comes to its products. While a large portion of airlines’ spending is on their product, the way they currently sell does not allow for product differentiation among competitors.
An emerging trend called New Distribution Capability (NDC), made possible by an API, Extensible Markup Language (XML), serves as a solution to that challenge. NDC’s API facilitates product differentiation amongst airlines and seamlessly distributes airline data to online travel agents (OTAs) for a better customer experience, ultimately improving airline profits.
A GDS (Global Distribution System) is a computerized network that enables the transactions between travel service providers like airlines and OTAs such as Expedia. A GDS allows customers to review information, compare prices and schedules, and make purchases from various vendors in real time.
GDSs use the message protocol, TELETYPE, and Electronic Data Interchange for Administration, Commerce and Transport (EDIFACT). Type A messages (EDIFACT) are used for interactive real-time communication, and Type B messages (TELETYPE) are for international and booking messages.
Airlines are beginning to recognize that while GDS was once widely popular, it merely provides a static display by only showing prices and flight times with limited product information for comparison. Airlines are beginning to explore other messaging formats such as NDC, as GDSs are becoming an unpopular way for airlines to market and sell their products.
NDC is an emerging trend in the airline industry. It is a new message format with optimized technical communication standards and protocols for distributing airline fares and services.
NDC encourages airlines to take more ownership of distribution of their data, as it employs the Open AXIS XML (Extensible Markup Language) model. Software proprietors can implement this NDC model within airlines’ reservation systems to allow airlines to establish parameters for transmitting data between OTAs in the air-travel distribution value chain.
NDC is preferred over GDS mainly because its XML model ensures that NDC is an open, vast, and transparent Internet-based data exchange standard that aligns with the airline industry’s needs.
Airlines want software providers to connect them to NDC for various reasons. Firstly, the NDC data exchange format enables airlines to create and distribute suitable offers to customers regardless of the distribution channel. Additionally, NDC eliminates GDS fees, as GDS providers charge a fee to airlines and OTAs for each booking made on their platforms.
Airlines also want software providers to connect them to NDC because NDC provides unrivaled rich content to highlight the passenger experience, personalized offers, and optimized pricing structures.
Rich content is an NDC component comprised of information and media such as photos, videos, and graphics. Most importantly, rich content provided by using NDC’s API motivates customers to pay extra for premium experiences and services, increasing airline profits.
Traditional GDS providers are only equipped to share prices and schedules. Airlines that utilize NDC’s API can push rich content used to showcase an airline’s desired passenger experience. Software providers that utilize NDC can integrate rich content into flight management systems.
NDC is a set of XML messages that allow airlines to communicate with OTAs. Application programing interfaces (APIs) are the “engine under the hood” that facilitates this communication. An API is a mechanism that exchanges data and/or shares functionality between business partners. Additionally, an API is the messenger that takes requests, tells the system what the user wants it to do, and returns the response to the user.
For example, OTAs and other travel services interact with airlines’ APIs to get information from the airline’s system to choose seats, baggage options, meal preferences, and other amenities. Then, the API takes the airline’s response to the request and delivers it right back to the OTA.
Software providers can implement APIs via API gateways. An API gateway is the programming that takes all API requests from a client, determines which services are needed, and combines them into a succinct and seamless experience for the user.
Because NDC is increasing in popularity among airlines, software providers have begun to provide them with APIs for shopping, flight searching, and booking. Good API integration will allow airlines to provide well-connected systems that will ultimately enable airlines to offer a better experience for their guests.
Experienced software providers can use airlines’ business functions and data via internal APIs and integrate with NDC offerings. This enables airlines’ existing passenger management systems to fulfill their business functions in accordance with NDC without having to develop entirely new software, which is good for profits.
While NDC APIs have helped airlines optimize their promotion and sales strategies, there are still downsides to this emerging airline industry trend.
The main drawback is that while NDC is defined as a set of standards, there are no actual “standards” to base it on. If each airline were to use its own standards, there would be countless connecting channels, rendering it impossible for software providers to integrate the technology with existing passenger management software.
The second drawback of NDC is that many travel agents and aggregators are reluctant to abandon the comfort and familiarity of their current GDS system. They may be hesitant to switch to NDC, as the switch may result in additional expenses for these companies and require them to make changes to their business model.
Software providers are aware that NDC APIs have potential pitfalls and are equipped to circumvent new obstacles they may bring to the airline industry. At the moment, NDC serves as a premium addition to OTAs and is not an absolute necessity.
Because an API is the backbone of NDC’s communication model, NDC’s API provides many benefits to airlines and OTAs.
Software providers are needed to implement NDC APIs to allow OTAs access to an airline’s entire product portfolio, including ancillaries, promotional fares, and other rich content. Airlines benefit from API integration because it allows them to distribute their entire portfolio and present their products in an attractive manner via rich content and expand the amount of information available on each product.
Ultimately, API integration gives customers an all-encompassing and comprehensive shopping experience. An improved shopping experience for customers that enables them to have flexible booking options can only positively impact profits.
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