New Distribution Capability (NDC) has been divisive in the travel industry. The technology represents not just a fundamental shift in how airline content is distributed but also a process and mindset change in how travel is sold and bought, and transformational change often sparks debate.

NDC is no exception, but it is well and truly here to stay and has already set the foundation for what’s coming next.
Our friends at McKinsey describe modern retailing as a matter of “when and how” rather than “if,” with their data showing improvements could deliver $45 billion to the airline industry by 2030. Airlines recognize retailing is a vital step towards customer-centric travel, and it is time to speed it up, seeing NDC adoption rates accelerating.

On average, we see more than 20% of an airline’s indirect volumes going through NDC, with some carriers reaching as high as 80%. 

With NDC adoption on a trajectory for growth, the question turns to “what’s next for modern retailing?” NDC is a key first building block of modern airline retail transformation, so what happens when the industry matures beyond this initial step? 

We enter the customer-centric era of offers and orders. Airlines transition from legacy passenger service systems to a modern, comprehensive offer, order, settle and deliver platform (OOSD), with the entire retailing process unified from product creation to fulfilment.

The power of offers and orders

When asked how to explain the offer and order concept, I give examples of hotel bills or the Amazon retailing experience. When you stay at a hotel, you can charge items to your room from the restaurant, spa, room service, etc. At the end of the trip, you receive one invoice for your entire stay and typically one final credit card charge. In the Amazon experience, consumers shop and have multiple items in their cart, but they don’t have a separate credit card charge for each item because it’s all part of one order.

The new airline industry standard aims to modernize and simplify airline reservation, delivery and accounting systems by consolidating legacy booking and ticket records (passenger name records (PNRs), e-tickets and electronic miscellaneous documents (EMDs) into a single, unified record: the order.

Historically, airlines have generated multiple data records for each element of the passenger journey. Take a typical trip as an example. A flight booking is created in an industry standard PNR, and in many cases an e-ticket is created, and the customer receives a credit card charge for the flight. If the customer decides to purchase an extra-legroom seat or advanced seat assignment, many times an EMD is created, and the customer sees yet another charge on their credit card. 

Checking a bag at the airport? Another EMD and another credit card charge is generated, and so on. All of this leads to complexities and inefficiencies — and most of this is even before the passenger faces a disruption or lastminute change. Orders hold the potential to remove the inefficiencies inherited from legacy processes and enhance communication between airline order management, accounting and delivery.

Offers and orders simplify the travel experience by removing legacy documents from the equation and replacing multiple reference numbers with a single, seamless identifier recognized across all service providers. This approach enhances the passenger journey, especially during disruptions. Further, offers and orders enable airlines to quickly roll out innovative products and services, turning years of investment and testing into mere weeks.

For corporate buyers and travel management companies, offers and orders deliver more control and visibility, enabling improved policy compliance and tailored content. Travel agents benefit from simplified booking processes and richer content, improving efficiency and service quality. Airlines can lower costs, simplify processes and build a stronger, more profitable brand that stands out and excites their customers.

Overcoming adoption challenges

While airlines are taking the first step in their offer and order transformation journey by investing in NDC, it would be misleading to say that it’s a simple technology refresh to scale up the transformation. A study from advisory firm Atmosphere Research Group, based on interviews with airline leaders, revealed while there is widespread recognition of the need for offer, order, settle and delivery transformation, many airlines are held back by unclear business cases, perceived complexity, and the challenge of securing full C-suite buy-in.

Replacing the PSS and moving to a modern OOSD platform is complex, and if it isn’t implemented correctly, the consequences can be severe: planes will be grounded and passengers will be adversely impacted. It is understandable the industry is inherently risk averse, but the opportunities are enormous, and the long-term risk of not transforming could be even more severe. Airlines need to foster a culture of change and innovation, really embrace modern retailing from the top down, and give the passengers the experience they expect.

How to best realize the opportunities

All airlines are on a journey to modernize, taking control of their distribution and retailing capabilities to enhance profitability, customer experience, and servicing benefits. The route each carrier takes, however, is completely unique. There is no set path, as every business is different, with varied competitive landscapes and technology contracts — alongside each airline facing different variations of the above challenges.

To drive progress towards modern retailing and implementing OOSD platforms, having outside advisership to supplement in-house expertise helps airlines understand the nuances of the airline’s business model, path and strategic direction. That broader field of vision, from experienced vendors can expedite thinking, particularly around creating immediate value to support the transformation.

Airlines need to work with partners that offer them truly open and modular platforms that allow them to integrate any new technology with existing systems as required. This makes the transition as seamless and flexible as possible.

Ultimately, we stand at the threshold of travel modernization. The window of opportunity is open, and in an increasingly competitive landscape, airlines have the opportunity to invest the time to put themselves in the best position to thrive. This is a pivotal moment that is bigger than just an IT upgrade — it’s a launchpad for innovation and a new era in travel.