Imperatives & Implementation of New Distribution Capability for Superior Customer Experience

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IATA’s New Distribution Capability (NDC) initiative provides an innovative approach to airlines’ products and services distribution method.

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Imperatives & Implementation of New Distribution Capability for Superior Customer Experience

  1. 1. www.niit-tech.com Imperatives and Implementation of New Distribution Capability for Superior Customer Experience Ratan Kumar NIIT Technologies White Paper
  2. 2. CONTENTS Background 3 Need for NDC 3 NDC Implementation Imperativesfor Full Service and Low Cost Airlines 4 - Unbundling the Product 4 - Interlining 4 - Flight Reservation 4 - Non Air Product Reservation and Super PNRs 5 - Electronic Miscellaneous Document (EMD) 5 - Revenue Accounting and Integrity 5 - Booking Changes 5 - NDC Airline Profile 5 - Other Considerations 5 Multitude of Implementation Approaches for Airlines 6 Critical Success Factors 6 Conclusion 6
  3. 3. TRANSPORTATION TRAVEL CARGO PACKAGING TRANSPORTATION TOUR TRAVEL GUIDE TRAVEL TRANSPORTATION CARGO CARGO LOGISTICS TRAVEL JOURNEY GUIDE TRANSPORTATION CARGO JOURNEY CARGO GUIDE LOGISTICS TRAVEL Background personalized offers and merchandizing through agencies. This calls With the advent of Next-Generation devices and technologies, today’s customers are well connected, more informed and technologically empowered. The rise of customers is forcing businesses to change the way they operate and Airlines industry is no exception. To sustain and grow in a highly volatile and competitive environment, airlines across the world need to invest time and money in creating personalized and-seamless interaction with customers across all channels. This will lead to transformation of digital landscape and an increase in customer affinity and personalized merchandizing. for airlines to devise an interface with travel agents; enabling them to identify customers and provide them with personalized offers during the shopping cycle. IATA’s New Distribution Capability (NDC) initiative provides an innovative approach to airlines’ products and services distribution method. IATA is facilitating communication between airlines and agencies. With multitude of benefits for travelers, airlines, agencies and aggregators, NDC aims to provide a dynamic airline shopping experience with additional revenue generating opportunities for airlines. A large chunk, around 60%, of air travel tickets are sold indirectly via travel agents using Global Distribution Systems (Source IATA). This traditional distribution model is finding it difficult to keep pace with ‘digitally aware’ travelers. The model offers price-based comparison irrespective of traveler’s relationship with the airline, thereby commoditizing the entire shopping process. Customers remain unknown to airlines until a transaction takes place. Thus, it is impossible for an airline to customize its offers for customers via indirect channels. Currently, IATA is working with leading airlines, Global Distribution Systems (GDS) providers and travel agencies to finalize standards and business requirements for NDC. Several pilots are also underway to verify requirement specifications and feasibility of NDC. Most of the airlines are taking a cautious approach and are waiting to see the outcome of these pilots before developing their assets to support NDC program. Industry analysts and travel industry gurus too, are debating on the power of customer intimacy and its impact on airline top lines, as promised by NDC. In today’s world, personalized interaction and merchandizing opportunities are relatively FLY SHOP PAY NDC promises a favorable impact on airline-traveler relationship. negligible and airlines are not able to leverage it until a Need for NDC STAY HIRE EAT The ability to identify a consumer in initial phase of sales process customer makes a booking via an airline’s website. When across different sales channels will allow airlines to dynamically customers make a direct purchase via websites, airlines have construct and offer personalized products. This will facilitate direct access to data including traveler history, loyalty status, customized shopping; making it easier for consumers to purchase travel preferences and other characteristics. With this information, airline ancillaries such as priority boarding, onboard Wi-Fi, access to airlines can offer personalization and merchandizing opportunities airport lounges and many more. Continuous mapping of customers’ to the customers. buying behavior with their profile will not only empower airlines with greater insights into consumer behavior for devising more consumer The way forward for airlines community is to accept the challenge centric sales and service strategy, but will also benefit the consumer and radically transform the distribution strategies to stay ahead of with access to personalized fare quotes, wide range of airline the competition and meet passenger expectations by offering products and services and increased transparency in purchases. 3
  4. 4. With growing number of sales channels such as airline website, Following is the impact of NDC on airline processes and IT systems: mobile app, social media, travel agents, Online Travel Agencies (OTA), call center bookings, desk bookings etc. it is highly important Unbundling the Product to identify the right customer. Emerging technologies promise Customer flexibility and unbundling traditional flight seat are means to identify consumer even before the actual search begins. It potential catalysts to grow ancillary revenues associated with allows airlines to project their offerings based on the perceived value every seat purchase. LCCs have been able to harness the and preference of an individual customer, in turn allowing them to potential of offering cheaper seats and flexibility for selecting evaluate multiple offerings based not just on a single parameter of services. For traditional airlines, this means changing the way they price but also customer satisfaction. function; which may ultimately impact brand/service ideologies. 28.8 14.4 12 From an IT perspective, this involves creating an ancillary service catalog, and being able to distribute it based on point of sale and NDC Implementation Imperatives for Full Service and Low Cost Airlines Reeling under rising costs, increased competition and economic decline, airlines face the imminent test to invest in distribution and customer service channels to surpass competition and contain expenses at the same time. Today, airlines have mature systems for reservation, loyalty and CRM, enabling them to provide ancillary and customer profile. Comparison capability plays a big role in the new world of NDC. An end customer can search and compare offers based on attributes and features such as baggage allowance, seat pitch, in-flight entertainment options, in-flight Wi-Fi access, free intra-terminal transport, etc. This is similar to a shopping experience that customers today get on popular e-commerce portals while shopping for products such as mobile, consumer goods etc. NDC non-air merchandising and distributing seats via GDSes, Web provides airlines the capability to distribute their services using rich services and other offline means. Context sensitive selling continues content (ancillaries and add-ons) in a standardized way. to drive customer stickiness through the e-Commerce arena. Personalization and merchandizing continue to be the way forward for airlines. Prime contenders for NDC are most of the full service carriers who have their Passenger Service System (PSS) hosted on third party systems offered by GDS companies and other product companies or have in-house legacy systems. These systems work wither in a co-hosted ecosystem model or on platforms where change is Interlining GDS systems have been playing a primary role in offering interlining services. Going forward, airlines need routing options based on their code share and interline agreements to create and manage bookings on partner’s passenger service systems (PSS) in addition to their own. Interline routing mechanism which has traditionally been maintained in GDS systems need to be implemented again for NDC interlining. The Offer Responsible Airlines (ORA) PSS will expensive and time consuming. Apart from this, GDSes manage be impacted by the change. Further, interline ticketing, fulfillment exceptionally high loads of transactions, which if moved to airlines, and would call for extensive performance load factor delivery. This may considerations need to be undertaken. Interline airline’s fares, even mean substantial increase in infrastructure investment by pricing rules and offers also need to be available with the ticketing airlines. Given this scenario, conventional and proposed distribution so that airlines can provide effective and efficient customer service. voluntary-involuntary booking management related models are likely to stay together for the next 5-7 years. This will call for maintaining IT systems and processes for supporting both the systems during this transition period. NDC opens new doors for allowing customers to make purchase decisions based on not just the price. From the traditional Low Cost Flight Reservation Going forward, NDC product related bookings/orders need to be maintained by airline PSS while code share PNR segments need to be maintained by ORA airline systems. This will result in extended synchronization processing so that bookings can be serviced and Carrier (LCC) perspective, NDC opens up a plethora of delivered properly. Complex scenarios such as involuntary opportunities in terms of interlining with other carrier and exposing a disruptions, GDS queue equivalent processing and corresponding single standard for data exchange with OTAs. This leads to greater notifications to agencies need to be addressed. adoption by the industry and thereby larger revenue opportunities for LCC. 4
  5. 5. Non Air Product Reservation and Super PNRs non-air booking components. Airlines will also need to manage the Currently, agencies create airline PNRs and manage non-air related impact of these offer conditions on bookings, account of change bookings as passive segments in the GDS PNRs. With NDC, airline fees using EMDs and notifications to agencies. will be able to provide PNRs for air segments. It may not be feasible to manage complete traveler itinerary in airline PNRs depending on NDC Airline Profile the support provided by the airline. Agencies will continue to create The complexities of presenting NDC enabled offers call for setting PNR in its aggregator systems (which were earlier GDSes), in order complex airlines profile rules while trying to curb unnecessary to consolidate all air and non-air components. However, what was requests from travel agencies. While some airlines might want to earlier a primary PNR, will now just be a copy of airline PNR. This simplify this by having broader parameters, others may like to may have an additional impact on the Super PNR management manage profile at a granular level to receive optimum requests process. Morever, aggregators will hold additional responsibility of from aggregator systems. synchronizing Super PNR with the ticketing system of the airlines. Other Considerations Electronic Miscellaneous Document (EMD) • Caching: Traditionally, GDSes have cache and fares available for Offer Responsible Airline will be responsible for issuing EMDs on travel searches. Going forward, caching may not be applicable behalf of Participating Offer Airline (POA), for the services offered as ‘offers’ will be personalized based on traveler’s profile. Hence, by them. The key considerations involved are: quality of caching needs to be judiciously implemented by the • Consistency - Standardization of ancillary services required across airlines to support interline sales, fulfillment, refunds, payment, settlement and reporting, etc. • EMDs for subscription services such a slounge access, WIFI access, etc. • Passenger purchasing ancillary services directly with any offer participating airline instead of the travel agent. Revenue Accounting and Integrity GDSes provide Billing and Settlement Plan (BSP) and revenue integrity checks at the time of booking, booking changes and fulfillment. These checks are minimally applied by the airlines PSS. Airlines PSS. • End-to-end message security: The original service message (e.g. schedule change message by an interline airline in a booking) should not be changed/altered by any entity in the distribution chain (ORA, Aggregator, Sub Aggregator, Agent, Customer). • Heterogeneous model co-existence: NDC will be implemented by selective agencies, and a subset of airlines on select routes and destinations. Therefore, the traditional model as well as the NDC model will co-exist in the travel world for some time. The implication of this will be in terms of managing two sets of IT infrastructure at the same time. However, the ROI derived from NDC sales will support the business case. Going forward, scenarios such as partial cancellations need to be managed outside the GDS. Settlement processing and reporting will in turn impact the way processes and systems perform them. Booking Changes Voluntary and in-voluntary changes, and cancellation process will be managed by the airlines PSS for all bookings involving air and 5
  6. 6. Multitude of Implementation Approaches for Airlines NDC aims to provide airlines with further merchandizing and personalization options. Airlines have been pushing for greater social media intimacy with their customers to drive sales and achieve excellent customer service. Travel solution providers have been able to create interest amongst airline marketing and sales managers. However, none of these solutions have been developed from the overall perspective of an agency distribution. The need of the hour is to find a way to not to drastically alter (and invest in) the existing systems, but still achieve the benefits promised by NDC. Airlines are hunting for ways to reduce the impact of NDC on their core distribution systems and plan to reuse the existing IT infrastructure to deliver range of NDC services. To start with, several airlines have plans to implement NDC on their domestic markets without including interline partners. At the same time, rest of the airlines plans to have flattened airline profiles for ease of maintenance. Airlines companies showing confidence in IATA’s NDC program have further endorsed the fact that personalized merchandizing is need of the hour. Though it has been in talks for quite some time now, airlines have been finding it difficult to achieve true personalization and customer intimacy across various sales channels. E-Commerce and IT managers face the imminent question of how soon and how much should they really invest in NDC. Managing a new distribution standard based on Open Axis schemas adds complexities for airlines that are battling with the already existing heterogeneous standards within their ecosystem. Airlines need to perform cost benefit analysis based on their business plans and its impact on their IT systems and processes. Airlines are likely to approach this, by carrying out limited implementation in order to evaluate market behavior and agency response before going for a full scale implementation. Critical Success Factors The key factors to a successful NDC implementation should include: • Clearly identified objectives of NDC in terms of short, medium and long term goals of the airlines Conclusion NDC offers great opportunities for airlines and travel agencies in terms of additional revenue opportunities and higher customer 28.8 satisfaction through greater choice, brand affinity and service. It’s 14.4 12 slated to be a win-win for all the parties. IATA steering committee and partner airlines are striving to find solutions that will increase NDC distribution to other airlines and agency systems, and will helps take holders’ put their best foot forward. Despite several road blocks, the program is on track and we will be able to see a few NDC implementations by the end of 2014. NDC will drastically impact the way agencies sell today. Airlines and agencies need to develop capability both in terms of IT and training, to be able to deliver the current levels of efficiencies. In this rapidly transforming business landscape implementation of a solution like NDC is imminent. NIIT Technologies has been working with some of the world’s leading travel distribution companies, having executed projects in Reservation, Ticketing, Fares, Interline, online travel portals, integration for non-air products, fare search engines, merchandizing, corporate booking portal and customer analytics and reporting, front-mid-back office systems, multi GDS connectivity, accounting and reconciliation. NIIT Technologies, IATA’s Strategic Partner, has been actively contributing to this initiative as part of the NDC working group. At NIIT Technologies, we understand the complexities NDC will introduce in the existing airline processes and IT systems. The strategy to adopt NDC will be critical for airlines and we feel that the ideal approach will be not to change existing core systems for PSS and Loyalty, but develop a merchandizing engine that provides real-time personalized offers based on customer profile. This solution should further integrate with other core systems for providing ancillary sales, revenue accounting and integrity, EMD fulfillment, etc. The merchandizing engine should provide flexibility to deliver seats and offers using NDC standards. In a short-time, this solution will allow airlines to achieve their business objectives for self-operated routes, without significant investments. An open system based solution, developed in-house for merchandizing will deliver flexibility needed in this competitive environment. It can provide agility required in this evolving environment such as customer intimacy, • Business benefit v/s investment analysis affinity selling, cross selling, etc. Early adopters of NDC can achieve • Maturity of PSS to deliver a range of functionalities from Super faster ROI and reduce the impact of implementation. Based on the PNR to offer bookings • Availability of merchandizing solution with the flexibility to integrate outcome of this first step, NDC can later be rolled-out to interline and other markets. with legacy airline’s core systems and provide adequate control to adapt to changing market needs and advancement in technology 6
  7. 7. Airline Profile This is where NIIT can help you NDC Schemas based Web services 28.8 NDC Merchandizing & Personalization Engine Customer Persona 14.4 Rules Engine Offers 12 ORA Core Systems Offer Responsible Airline (ORA) PSS Loyalty and FFP EMD Ancillary Engine Interline Partner Airline PSS From LCC perspective, LCCs can be directly made NDC complaint, NDC holds greater opportunities for Full Service Carrier (FSC), LCC and since they usually sell ancillaries on all routes, they can create a Airlines, as well as travel agencies. What needs to be seen is how light airline profile entry for all their routes. soon an airline can find a way to implement it. Industry is also looking towards agencies to accept the change and play a leading role in this historical initiative. 7
  8. 8. About the Author Ratan Kumar is a Consultant working with NIIT Technologies in the Airlines and Travel Distribution space within TTL (Travel, Transport and Logistics). He specializes in Airlines, Travel Agency Business, eCommerce, Merchandizing, Mobility, and Personalization, with over 12 years of experience in the domain. Ratan has over 14 years of experience with the IT industry and has worked for numerous area including loyalty, banking and cards, portals, airport operational systems and has wealth of technical, managerial and business skills acquired across a wide range of demanding roles in software development area. About NIIT Technologies NIIT Technologies is a leading IT solutions organization, servicing customers in North America, Europe, Asia and Australia. It offers services in Application Development and Maintenance, Enterprise Solutions including Managed Services and Business Process Outsourcing to organizations in the Financial Services, Travel & Transportation, Manufacturing/Distribution, and Government sectors. With employees over 8,000 professionals, NIIT Technologies follows global standards of software development processes. India Over the years the Company has forged extremely rewarding relationships with global majors, a NIIT Technologies Ltd. Corporate Heights (Tapasya) Plot No. 5, EFGH, Sector 126 Noida-Greater Noida Expressway Noida – 201301, U.P., India Ph: + 91 120 7119100 Fax: + 91 120 7119150 testimony to mutual commitment and its ability to retain marquee clients, drawing repeat Americas NIIT Technologies follows global standards of development, which include ISO 9001:2000 NIIT Technologies Inc., 1050 Crown Pointe Parkway 5th Floor, Atlanta, GA 30338, USA Ph: +1 770 551 9494 Toll Free: +1 888 454 NIIT Fax: +1 770 551 9229 Certification, assessment at Level 5 for SEI-CMMi version 1.2 and ISO 27001 information business from them. NIIT Technologies has been able to scale its interactions with marquee clients in the BFSI sector, the Travel Transport & Logistics and Manufacturing & Distribution, into extremely meaningful, multi-year "collaborations. security management certification. Its data center operations are assessed at the international ISO 20000 IT management standards. Europe NIIT Technologies Limited 2nd Floor, 47 Mark Lane London - EC3R 7QQ, U.K. Ph: +44 20 70020700 Fax: +44 20 70020701 Singapore NIIT Technologies Pte. Limited 31 Kaki Bukit Road 3 #05-13 Techlink Singapore 417818 Ph: +65 68488300 Fax: +65 68488322 Write to us at marketing@niit-tech.com www.niit-tech.com D_50_181213 A leading IT solutions organization | 21 locations and 16 countries | 8000 professionals | Level 5 of SEI-CMMi, ver1.2 ISO 27001 certified | Level 5 of People CMM Framework

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