New Distribution Capability Or New Industry Model?
IATA maintains NDC will enable agents to provide more value to clients, opposition concerned it will bypass the agent channel all together
05-01-2013 By: Zachary-Cy Vanasse
As has been made obvious by those opposing NDC, the biggest issue they take with Resolution 787 is the perceived secrecy that surrounded its development. This has lead industry associations, such as the American Society of Travel Agencies (ASTA), the Business Travel Coalition (BTC) and ACTA, to believe that IATA may be trying to hide something other than a change in an industry technical standard within the resolution.
Those opposing NDC believe that the airline industry has decided that the commoditization of airline services, which has been created by the current system of publicly available and transparent fares through channels such as GDSs, has been problematic to the industry's bottom line and the NDC is a way to change that.
"This [current] model is focused only on finding the lowest ticket price. This has resulted in the commoditization air travel," Tyler said while unveiling NDC in Abu Dhabi last fall.
"Airlines are trying to escape the commoditization trap through differentiation and merchandizing... The new solution is the New Distribution Capability," he added.
This isn't the only time Tyler has derided the commoditization of air travel. During a webinar hosted last Friday to inform on Resolution 787, Paul Ruden senior vice president & industry affairs, ASTA, pointed to another instance in which Tyler expressed his views that commoditization is profitability for airlines.
"As soon as someone's got a cost advantage," Tyler said in a speech last July, " instead of charging the same price and making a bit of profit, they use it to undercut their competitors and hand the value straight to passengers or cargo shippers - and you've got to ask why? I think one of the reasons is that the way we sell our product forces us to commoditize ourselves."
"It's a new business model by all appearances," said Ruden.
McCaig said that he believes the carriers behind IATA's Resolution 787 saw the implementation of XML language as a way to regain complete control of airfares, thereby allowing them to determine the price of ticket, rather than having the market dictate their value. Because NDC does not require fares and schedules to be filed with a third party, the argument has been made that fare transparency and real competition between the airlines would disappear all together under NDC.
"The NDC is - so far - made up of 11 airlines. To me, 11 competitors are controlling the pricing, controlling the data received, controlling the consumer and the fares. That's a scheme amongst competitors and I personally don't like," said McCaig.
IATA has called such allegations a "myth." On its website, the association has established an NDC blog for the purpose of communicating its side of the argument (ndc-blog.iata.org). Within the blog, Tyler looks to refute the claims that NDC, by not requiring fares and schedules to be filed with a third party, could eliminate the free market conditions under which the carriers currently operate.
"No airline is required by law or regulation to file fares - it is a commercial decision that has its origins in the pre-deregulation, pre-Internet era," said Tyler. "Furthermore, it is an indisputable fact that not all airlines participate in GDSs; and that includes some very large airlines that are household names, including SouthWest Airlines, Ryanair, easyJet and AirAsia to name a few."
Tyler argues that customers are already losing out on the ability to comparison shop through the GDSs.
"In reality, airlines will still have the ability to file fares under NDC. Regardless of whether they do so, however, the consumer will be able to comparison shop between airlines using NDC. But with one major difference: travellers will be able to compare the full value of the airline offer including additional products and services, not just the base fare, as is the case today," he said.
"The intent of NDC is to enable travel agents to provide more value to their customers by giving them the ability to see and sell the same content airlines already offer on their own websites," Popovich said during a speaking engagement for the United Federation of Travel Agent Associations (UFTAA) in Kula Lumpur.
Tyler and Popovich's defense doesn't hold up for McCaig.
He maintains that the "scheme amongst competitors" violates Canada's fair competition regulations and could be detrimental to the industry as we know it.
"To my view, this is the biggest threat to agencies since the original commissions cuts of the '90s," said McCaig.
Which is why ACTA has submitted a letter filing comments with the Competition Bureau of Canada regarding NDC.
In its letter filing comments, ACTA writes:
"Any airline will be able to determine that it will not distribute certain fares and ancillary services through certain indirect channels, as airlines currently do to favor distribution through their own websites, and could further do to favor direct connections with travel agents (without a CRS).
"The NDC model however has very far reaching implications, which can be detrimental to consumers and other stakeholders, without any evidence that this model is necessary to reach the stated objectives of distributing more content through all channels."
The BTC has also taken actions in an attempt to derail the NDC from being fully realized. At the close of business yesterday, BTC filed a letter in the U.S. federal government docket to Department of Transportation (DOT) Secretary Ray LaHood in "strong opposition" to NDC.
The letter was signed by 214 travel managers, travel management companies and industry associations including the Scottish Passenger Agents' Association, Air Passengers Association of India, Brazilian Travel Agencies Association, Association of Canadian Travel Agencies, American Society of Travel Agents, Association for Airline Passenger Rights, FlyersRights.org and Consumer Travel Alliance.
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