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Modern Airline Retailing: Moving from NDC to Dynamic Airline Offers

NDC plays a major role in the industry's transformation to modern airline retailing. Hear Chris Allison, Director Product Management for Offer and Order Management at PROS and Raquel Portillo, NDC implementation specialist at Air Europa, as they discuss how Air Europa is deploying NDC as a part of their retailing strategy and providing accurate, real-time dynamic offers across channels.

Full Transcript

Chris Allison: Welcome to this session. Today we're looking at modern airline retailing from NDC moving towards dynamic offers. I'm Chris Allison. I am Director Product Management for Offer and Order Management at PROS. And I look after the overall offer and order management platform strategy of which NDC is an important part.

Chris Allison: I'm also going to be joined in a moment by Raquel Portillo, one of the NDC implementation specialists from our launch customer for PROS, NDC. And yeah, on that, yeah, actually before we do that, I'd like to give a little background and context into NDC and the PROS approach. As you may know, NDC is a standard that's been around for about 10 years now, and is administered by IATA, XML-based, and enables communication between travel agencies, aggregators, and airlines. ...

Chris Allison: Over the... Well, last years, especially several months, we've seen a lot of upticks in terms of adoption of NDC especially from some of the leading carriers. We see American driving a lot in terms of both volumes and in terms of capabilities that they're offering to the market. Lufthansa, of course, and the Lufthansa Group have been a leader for some time, and we're one of the pioneers in terms of content differentiation when it comes to NDC.

Chris Allison: And actually, we're seeing volumes across the industry of, yeah, even over 50% of indirect volumes from some of the larger carriers being driven through NDC channels compared to legacy GDS channels. So yeah, from that perspective, the leaders are certainly doing a good job in terms of NDC adoption. But of course, there is a long tail of followers who also need to either embark on this journey or also accelerate. So, that's something that we're looking to do, and it's something Europe has already started on that journey.

Chris Allison: And I just actually want to come back to you a bit more about the why as well, because Serene already presented this earlier today. But using NDC and retailing techniques, there's a lot of value to be captured still. Obviously seven years per... Sorry, $7 per passenger is a big amount. And this is a figure that is obviously quite publicized and prominent in the industry.

Chris Allison: And again, as Serene presented, there's a lot of upside to the amount of ancillary revenue on the table. Again, that can be enabled by NDC and the commercial strategies that NDC can enable as well. And actually, this for me is one of the most compelling kind of pieces to the business case. And actually, Serene touched on this as well, but in terms of deploying NDC and then supporting that with the right technology to power NDC. There is up to a 30% reduction in distribution cost possible, but also at scale with high accuracy and book-ability.

Chris Allison: Yeah, and especially if you can look at, for example, PSS agnostic, NDC solutions to give you that vendor flexibility and solution flexibility behind the scenes as well. So yeah, that's what we're talking about in terms of the why we should go there and especially why for, again, the following airlines. Yeah, there is certainly a journey to go on. I just want to touch on this.

Chris Allison:So, I'm not going to go through the platform because again, this was presented this morning, but what I want to touch on is the fact that Air Europa and PROS have been partners for a long time across a lot of our products and a lot of the commercial optimization that they do on the Air Europa side. So, we have the likes of revenue management and real-time dynamic pricing. We're working together on Air Europe on that. Shopping and obviously now NDC distribution is part of that. Our IBE as well. And also, in the offer marketing suite yeah, Air Europa use a lot of our products to optimize traffic to their website. And as I say now, NDC is forming a big part of that.

Chris Allison: In terms of scope, we are starting, and actually this is a typical starting point but from a Phase 1 perspective we're looking at the typical shop, price, order and pay model especially relevant for the likes of meta search and OTAs. But it's a way of starting simple before adding more complexity into the use cases. And then Phase 2 looks like adding more forms of payment, and atypical forms of payment, alternative forms of payment. Maybe those not supported traditionally in the GDS or by the PSS today. Applying voluntary changes as well, such as re-booking and cancellations, and also looking at ancillaries pre and post-sale. And then, the third phase involves looking at voluntary changes, scheduled change notifications, and what have you.

Chris Allison: And actually, until then, the likes of voluntary changes and involuntary changes are supported through existing channels call center, website, but of course, yeah, we want to also deploy this in the indirect channel thanks to NDC support. And then also, what we can also look at deploying again, for Air Europa or other airlines are tools to support the operational scalability within the airline of NDC, things like automated registration, automated certification of integrations, good user friendly documentation to make sure that it's actually easy for integrators to pick up and integrate the NDC of the airline, and yet basically tools to support that operational scalability.

Chris Allison: So, the airlines don't need a big team to manage NDC within their organization. And with that, actually, that's kind of the background. Yeah, I'd like to invite Raquel up with me and we're going to have a bit more of a deep dive into the strategy. And while we do, let's take a bit of a look at more about the background of Air Europa.

Speaker 2: Welcome on board, get carried away with the Spanish company chosen each year by more than 10 million passengers to fly to over 50 destinations around the world. Enjoy the perfect mix of technology and comfort we offer on our renewed fleet of aircraft. We'd love to see you soon, very soon. Air Europa, every detail counts.

Chris Allison: I'm just getting the right slide up.

Raquel Portillo: Yep.

Chris Allison: There we go. So, yeah, so Raquel, before we dive deep into the specifics of NDC and our project, can you tell us a bit more about Air Europa, the network, the business model, and your strategy?

Raquel Portillo: Yes. Well, Air Europa is a Spanish company. We are based in Palma Majorca and we are part of the Sky Team Alliance. And we were founded 40 years ago as a charter company, but soon we changed our business model to regular flights and direct sales. And now we have, our main business is to connect Europe through our hub in Madrid to the Americas. And we have a renewed fleet of 50 aircraft, 787 Dreamliner for long haul and 737 for short and medium haul.

Chris Allison: Yeah. And that was, yeah, some examples.

Raquel Portillo: Yeah.


Chris Allison: And can you talk us through Air Europa's distribution strategy and your vision for modern airline retailing and what are you working on to support this?

Raquel Portillo: Yes. Under the distribution strategy, we focus on three main actions, one is enhance our direct channels, that can be, our website, our call center and now NDC, and focusing also on a merchant cost, doing actions to reduce or to transfer this cost to the partner. And also, analysis of the distribution cost at agency level. And we analyze the GDS cost of the travel agency, the merchant cost of the credit cards they use, and the commercial incentive agreements that we have with them to have a better vision of the travel agency itself.

Chris Allison: Yeah. Okay, great. And yeah, I just presented actually the various projects that we work on together. Obviously, the newest one is now NDC. Are there existing limitations that you're expecting this to solve? And what outcomes, and from a business perspective, are you looking to achieve?

Raquel Portillo: Yes, using a PSS-based NDC solution, you can have a very stable system behavior, that's for sure. But at the same time, we found some limitations that does not match our needs because, for example, we use, we work with corporate codes. We have the government discount in Spanish that it is really important for us that this, we found this limitation on this PSS-based NDC solution. So, working with PROS, we found that we have more flexibility and more capability to customize our solution to meet these needs.

Chris Allison: Yeah. Good. And what are your goals for deploying NDC?

Raquel Portillo: Yeah, for the first one is to reduce the GDS cost for sure. Increase our direct sales and to achieve a better product and a better control of the product itself. Have a better control also from the merchant cost and start exploring continuous pricing and the merchant ancillary and fare bundling and to be able to provide a personalized offer for the partners.

Chris Allison: Yeah. No, sounds good. And, yeah, diving even deeper, can you tell us about maybe the key milestones, and how you plan to achieve them?

Raquel Portillo: Yes. Now we are working on the implementation of our first partners, and to achieve a stable system with our configurations. And after that, we expect to keep implementing new partners with different connections, aggregator, with IT, different IT providers. And after that we are going to start with the content differentiation for each partner.

Chris Allison: Okay, interesting. And how did you go about building your business case for NDC and how did you choose your launch partners?

Raquel Portillo: Yes. We use partners that are really important for us and we have a better, really good commercial relationship with them and also that they are IT driven, that they can manage an IT integration like this. So, in this first implementation, we learn a lot about content differentiation aggregators. So, we had a better vision of the roadmap, and we need to make some changes of the first roadmap that we have. And now we are diversifying IT providers. We are adding aggregators to the roadmap, different form of payments, all of this.

Chris Allison: Okay. It's complex, right?

Raquel Portillo: Yes, it is.

Chris Allison: But actually, how did you find their readiness? And I mean, did you have any challenges maybe getting into their pipelines? Did they have any minimum capability requirements?

Raquel Portillo: Yes, it was a challenge because we don't have the possibility to provide now at this point content differentiation, that is the main feature that the travel agencies want to make this change, but that's why we choose important partners for us that are, we have a good commercial relationship with them. And also, we are using the latest NDC version, the 21.3, so to make sure that we offer to the travel agency all the features that they will need because we know that, for example, servicing is very important for them. So, we want to be able to provide that to them, so they are more confident to move to NDC.

Chris Allison: Yeah, for sure. Well, we're hearing that a lot. And how are you measuring success in the project? What are your KPIs?

Raquel Portillo: Yes, we have two partners ready to go, almost ready, to go to production. And the end of this year, we are expecting five more partners through different IT providers, different aggregators. And once we have them, we expect to increase up to 20% of the GDS volume to NDC, and with that decrease of the 1% of the merchant cost.

Chris Allison: Yeah. That all sounds good. And actually this morning Serene's keynote, was very much, or it was actually this afternoon, was very much about commercial autonomy and the importance of this, both from a PSS perspective in moving to the offer and order stack. But actually, we can apply that to the distribution case as well. So, can you tell us a bit about how the NDC is helping you reduce your reliance on the GDS?

Raquel Portillo: Yes. Well, the first thing is that GDS as NDC aggregators are not on the roadmap because our goal is to reduce the GDS cost. So, the thing we have now is to offer a variety of options to the travel agency, that can be different IT providers, different aggregators so they can choose what is better for them. And once we have a good network, we are going to start enhancing the use of NDC by content differentiation. By first and also ancillary bundling, and also discouraging the GDS use and a combination of both these two actions, I think that will reduce our reliance to the GDS.

Chris Allison: Yeah. Okay. Sounds good. And, actually switching gears a little bit, can you tell us about the implications of NDC on your internal organization and business processes?

Raquel Portillo: Yes. We are a small department in Air Europa still for NDC. So, we have a really organic approach to the tool because when we start, that is the most challenging part, the beginning because it's really overwhelming and you don't have all the information about the tool and you start learning as you won't stop learning. And with that you see that all that you have on the company is maybe not correct for the new tool. So, you will need to do a lot of changes on the procedures and the configurations. And that can be really hard for the company because we are really used to and comfortable where we are. So, every change is always a challenge.

Chris Allison: Yeah. I know, and having started two NDC projects myself, yeah, I can certainly empathize.

Raquel Portillo: Yes.

Chris Allison: But yeah, you mentioned a few areas already that NDC can help enable innovation, but how does that translate to your payment strategy?

Raquel Portillo: Well, in NDC, we are going to focus on B2B form of payments. That is our main form of payment there because... Sorry, we think this is a perfect match for this tool. Just hold on a second.

Chris Allison: Yeah, no worries. It's been the day of a lot of talking. [chuckle]

Raquel Portillo: It's too important, these things. Okay. So, yes, at the B2B form of payments for the travel agency, we expect to be able to agree with the travel agency, the B2B form of payment. Also, we are integrating with IATA to be able to offer form of payment in cash. But for sure it's going to be our preferred form of payment, the B2B, because we think our, really help us a lot to reduce the merchant cost and also to prevent the fraud because it's a direct payment between the agency and the company.

Chris Allison: Yeah, definitely. It's a good opportunity to change that up and change that strategy for sure.

Raquel Portillo: Yeah.

Chris Allison: But actually, yeah. So, what's next for NDC and how do you see the next phases of your journey in terms of using NDC as an enabler of dynamic offers?

Raquel Portillo: Yes. Well, at this point we are going to keep, focusing on the implementation of new partners. And after that we are going, when we have a big network, NDC network where we are going to start with the content differentiation, that I think is key.

Chris Allison: Yeah, I know that's, and that's going to be the exciting bit. It's complexity, but it's going to be exciting for sure. Well, yeah, actually in terms of questions, that's more, that's almost all I have. Yeah. But actually, yeah, I'd like to thank you, obviously, for the insights.

Raquel Portillo: Thanks for having me.

Chris Allison: But maybe before I wrap up, do you have any insights or advice that you can give the audience in terms of embarking on the NDC journey?

Raquel Portillo: Yes. For me, the key is to start the process, it's overwhelming because it's really different. You are used to, for example, myself, I work at the company for a long time and I'm expert in EDIFACT and GDS. And now this change is for sure challenging and you will have to learn a lot, but you have to start because the industry is changing. So, we need to change with it, and you will learn it along the path.

Chris Allison: Yeah, that's true. Interesting.

Raquel Portillo: So that's my... Just to start.

Chris Allison: Yeah. Thank you so much and thank you for those insights. And yeah, I mean, looking at like a couple of notes that I've made, maybe to wrap up what I've maybe heard from you and what I kind of take away is that it's important to start something, start the journey and then that helps to learn. Having independence of NDC from the PSS means that you can deploy vendor agnostic solutions or other, other solutions to help with your overall strategy. And actually, NDC is important to have also independence from the GDS and less reliance on the GDS. And also, NDC is an important steppingstone towards modern retailing and certainly that content differentiation and product and price differentiation.

Raquel Portillo: Yes.

Chris Allison: Does that sound about right?

Raquel Portillo: Yes.

Chris Allison: Sounds good. Yeah. And with that, I feel like we're ahead of time, but yeah, I mean, I think that's what... We haven't yet. So yeah. Thank you for your attention. And we get a little extra break. Thank you.


Raquel Portillo: Thank you.