The choice of distribution channels is not a one-time choice. As technology is improving and developing itself continuously, more alternatives for distribution channels are available, for example applications on mobile phones. For an airline it is almost impossible to adopt a single channel approach, thinking of the profit and exposure they miss out on not cooperating with global distribution systems and Online Travel Agencies (OTA).
Around the 1970’s the airlines already achieved the top e-commerce because of their high level of IT (IATA, 2016), but this might, from the customer perspective, not be the best way to find good tickets as many customers like to compare or get advice from a third party. Unfortunately, airlines using indirect distribution channels have difficulties differentiating their product, providing personalization and there is a long time-to-market (Payne, A., & Frow, P., 2004). Exactly this is why some airlines decide not to use OTA’s. On the other hand, these airlines might have a loyal customer base and/or find that the OTA is too competitive in a way of only showing the lowest fares and not price/quality comparison. Therefore, the International Air Transport Association (IATA) developed a New Distribution Capability (NDC). This intends to bring the top level of e-commerce airlines already achieved on their own website, to the travel agencies, global distribution systems or basically any intermediary.
The NDC is based on XML technology, enhancing the capability of communication and data transmission between airlines and travel agents. In this way OTA’s have the opportunity to offer the client fast and more personalized offers because they have the ability to get all this specific data through this technology. This technology can go through OTA but practically it can go by any intermediary. Another significant advantage of the NDC for airlines is that linked with offering customization or even personalization, they generate valuable market data with these interactions as well. Every time an OTA asks the airline offer management team for specific information, the airline can store this as it is representative for a market. Besides that, customers will value them more because of the transparent and richness of content they offer via the NDC.
Regarding the three strategic criteria to use when assessing current channel combinations (Wilson et all, 2008), when the NDC is used especially the costs will be affected positively, although still commissions have to be paid to OTA’s, the offers will be more effective due to the enhancement of the communication (more extensive and transparent) and might result in more consistent consumer behaviour. Moreover, the customer experience will increase as most of the content that is on the airlines own website is now also available on OTA’s and the comparisons are based on price/quality so customers will have more accurate expectations. The accessibility aspect is not so much influenced as the NDC is about the matter in which airlines and third parties communicate and exchange data. Although this technology is not necessarily new, it is an advancement on already existing technology and certainly a great opportunity for both airlines and travel agencies.
(Image source: IATA, New Distribution Capability, e-services)
IATA. (2016). New Distribution Capability, IATA e-services, Airline Distribution. Retrieved from: http://www.iata.org/whatwedo/airline-distribution/ndc/Pages/default.aspx
Kooa, B., Mantina, B. & O’Connorb, P. (2011). Online distribution of airline tickets: Should airlines adopt a single or a multi-channel approach? Tourism Management, 32 (1), 69-74
Payne, A., & Frow, P. (2004). The role of multichannel integration in customer relationship management. Industrial marketing management, 33(6), 527-538.