Before the COVID-19 virus, NDC was approaching maturity and widespread adoption. Travel distribution transformation will accelerate as airlines begin to recover from the crisis. Why is this?
In part 1 of this analysis
we looked at the background - now we explore where things goes next.
NDC is still the right mechanic to empower airlines to become retailers across all channels, in other words, to capture more of the value in the market, while reducing distribution costs.
With NDC maturing, airlines will focus on better revenue capture and distribution costs savings and drive a return to profitability.
Post COVID-19, airlines will continue to bleed money until traffic levels recover to where the airline's revenues more than cover their newly reduced cost base.
IATA has recently predicted
2022 for domestic recovery and 2023 for international recovery.
Looking at revenue, airlines can include rich content, such as updates on situations in certain destinations, risks and protection measures being taken by the airline, as well as cleaning and hygiene procedures that are being followed.
NDC allows airlines to offer customers choices that are not always available in the global distribution systems. With an NDC platform, airlines can be more agile and offer personalised bundles.
For example, airlines can package a range of ancillaries including non-airline products into a single fare for a specific corporate customer. Similarly, bundles can be created for individual customers based on the route, purpose of travel, customer loyalty and past purchases.
However, NDC is more than simply an issue of cost savings. Airlines will need more direct customer engagement at the point of sale to help influence travelers to return to the skies.
What is important to understand is that airlines who are determined to control the Offer and make more personalised services available to their customers. Platforms that facilitate this
will have an edge as the travel industry recovers
.
A real revenue opportunity from NDC: Dynamic offers
Today’s personalisation leaders have found proven ways to drive
5% to 15% increases in revenue
.
NDC supports Dynamic Offer creation, allowing airlines to respond in real-time in response to a user request
with the most relevant combination of products
.
By ‘knowing’ the customer and having the ability to determine ‘willingness to pay’, the airline can price the Offer accordingly.
For flights, airlines can Offer the flight at any price and do not need to use legacy pre-filed price points.
Airlines can achieve between 3% and 6% additional revenue
pricing flights in this manner.
For Offers comprising flights together with other products, airline revenue management systems can be enhanced.
Total Offer Optimisation techniques across all products can realise
further additional revenue benefits of up to 10% for the airline
.
Thinking through your NDC business case
To truly succeed with NDC, airlines need to take a strategic approach to becoming retailers. However, the COVID-19 virus is enabling business transformation much faster than ever before.
Now is the time for airlines to consider putting their NDC Strategy on ‘fast-forward’ to generate revenues and reduce costs faster.
In doing so, airlines should consider the following seven steps while continuing to push fast:
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Can we get approval and understanding from the board level?
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Is there a clear strategy and budget approval?
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Do we have executive sponsorship and clear ownership?
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Do we have the right subject matter champions, and are they empowered?
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Do we have a clear channel and market strategy?
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Do we have a roadmap?
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Do we have strong programme management to pull it all together?
Summary
Although the current COVID-19 context is incredibly difficult for airlines, the crisis allows airlines to accelerate their NDC strategy.
Now is not the time to stand still or descend into panic and wait. As an industry, we need to plan in a more agile way to ensure we come of out this crisis in better shape. NDC can be part of this.
Here at OpenJaw, we believe that airlines need to do everything they can do to survive and sustain the current crisis. Rightly, there is a focus on improving operational efficiencies to eliminate cost from the business immediately and going forward.
For non-operational areas, and with reduced headcount, it will be key to leverage the strengths of key partners, particularly in the area of distribution and retailing.
For those airlines with sufficient capitalisation, we believe that it is also vital for these airlines to invest in areas to help them recover quickly when markets and demand picks up.
NDC will help airlines reduce distribution costs, grow revenues and provide them with the ability to respond as quickly as the market changes. For the foreseeable future, these will be the primary challenges facing airlines.