NDC – What, Why, How and the Journey to 2020

Transcript

Ian Heywood:Good morning, everybody. I do apologize for doing NDC. Oh, that's good. So early in in the morning, we're going to do a very quick run through. We don't have a lot of time this morning, so we're going to do a very very. Very quick run through, but I think it's as Peter said, it's always good to just keep knowing what's happening, what's going on in the world, how are things moving? Because we seem to have been talking about NDC for year. Well, we have been talking about NDC for years and years and years and years. But I think you find that things are actually starting to happen now. We're not talking about if anymore. We're now talking about what's going to happen, when's it going to happen, etc., etc. So there's now 48 airlines that are Level 3 certified, which means they've got the capability of distributing via an NDC API. You've got a whole load of technology companies out there that are Level 3 as well that are to start supporting the industry. The standards are starting to firm up. So IATA have set their base schema now at 17.2 as the base schema. So they're starting to get firmer. There's still a lot of work to do on the schemas, but they're starting to get into a shape that you can start doing things with them, that you start going to market with them. And the other good thing is, and one of the things that I've been pushing for and other companies have been pushing for as well, is that we need to work this as an industry. If we're going to move APIs and NDC forward, we need to work together as an industry. And IATA are now starting to work with the travel agents, which they've not done before. They're also doing quite a lot of work with the corporations as well. So that's good. They've also launched their IATA leaderboard, as you've heard. They launched it with 20 airlines. Qantas was the last airline to join it, so they're the 21st airline. And what the airlines have committed to do is that they will distribute, or they will transact, 20% of their third-party content or third-party bookings through an IATA NDC API by the 31st of December 2020. So that's starting to move the industry forward. Still a long way to go and still quite long timescales, but I think you'll find when I go through some other slides, you'll see why it's going to take that long. If you don't know who the 21 airlines are, there they are. And what is this all about? Well, it's basically The industry at the moment is on the far left-hand side of that graph, which is saying that, you know, 99.9% of the transactions today are done through the traditional industry standards. I'm talking about third-party transactions here, not ones that are done with the airline direct. And the airlines want to move towards the right-hand side. Some airlines are talking about going all the way and that they can see that they will only distribute their content via an API at some time in the future. And you can see that, you know, everyone's going like, wow, this IATA leadable, all it does is get you a couple of steps up off the, off of the left-hand side. So there is a long way to go still. I think what happens though is that when you start getting to 20%, it will give you the ability to move on to 50, 60, 70, etc., etc. So why are airlines, why are airlines pushing for NDC? Why are they looking for a different way to distribute their content? I think this basically comes down to these 5 main reasons. One is control. The airlines want to get the control back from those third-party bookings. They want to know who's making that booking. They want to be able to make the offer. And they want to stop some of the fare rules, some of the way that the fares are constructed in the marketplace, and they want to be able to push that out themselves. So they want to take that control back that they feel that they've lost at the moment, or they've lost some of it. I think this is the one that over time will come to the forefront, and I'll talk a little bit more about it in a minute, but the improved sales capability. That to me, and I used to work for airline sales, so for this for me is the one that's really, really important. It's the one that you can start changing the industry with. It's the way that the airlines hopefully will be able to make a lot more revenue going forward. There's this reduced reliance on a PSS, and I've got a slide in a minute again that will show you what that means. But you're looking at the airlines are all looking at building a merchandising engine that's. Sits on top of the PSS. That will enable them to, one, improve their sales capability, be a lot quicker to market, and reduce their reliance on that PSS that is perhaps a bit slow and cumbersome because it's so big and bulky. Commercial models, you're already seeing some of that happening, particularly in Europe at the moment, changing the way that commercial models are done. Some of that doesn't need APIs, it doesn't need changes. They were able to be done today, but the airlines are using it as an excuse. And then innovation. I think you will see coming forward more innovation of the way that the airlines can sell and market and distribute their products. So focusing a little bit on the sales capability, the improved sales capability. At the moment, what you're seeing around the world Is not what's going to happen in the future. You're at the very early stages, and the airlines are just populating their fares that they're distributing through their APIs, the ones that are doing it, from the existing technology. Even if they've grown them, they're still just populating it from ATPCO. When they go forward in the future, they will be constructing the fares in a completely different way. I mentioned about the merchandising platform. You can see that you've got this merchandising engine that sits on top of an airline's PSS. That's where you're going to do all the sexy things going forward. That's where you're going to be doing your dynamic pricing. That's where you're going to be doing your personalization. That's where you're going to get the offer or the request coming in from the travel agent, and they will put the offer back out. And that's And that's where you're recognized. And you can build a lot of capability into that. And that's going to take a lot of time. The airlines have got to learn how to use it. And they will be working out what works, what doesn't work, and, you know, how can we make some more money out of these things. So one of the things you'll hear me talk a lot about now, you'll hear the industry start talking a lot about, is not about fares anymore. It's about offers. So what's an offer? That's basically— it can be just a plain fare, but it's something else as well. It can be a fare and it can be an ancillary combined. It could be just a change in the way that you've got your fare conditions. But the airlines will have the ability to make those offers to different agents, to different corporates, to different individuals if they want. So you could have a situation where An airline is selling the same fare, the same fare level to 2 different agents, but they may have different fare conditions attached to it. And in the leisure market, that could be just ticketing time limits, things like that. They can all change. You've got dynamic pricing. You may have heard of SHAP fares. That's what British Airways have launched in the marketplace. It stands for Short Haul Additional Price Points. And what they do in the old days, Not that old, a few months ago. British Airways used to manage their short haul by 10 booking classes. So the old traditional ATPCO booking classes. They've now extended that to 40, which means that you've got a lot more fares in the market. The jumps up are a lot smaller. Makes them— they've done it so they're a lot more competitive to the low-cost carriers, to Ryanair and EasyJet. And the only way that they can distribute those fares, additional price points into the market, is through an API. They are being funded at the moment, not in the long term, but at the moment via ATPCO. But they can only get that in the market using the new technology. You cannot do it through ATPCO. And you've got this, I think this is a bit out of date now, 'Cause I was always talking that, you know, the airlines use their traditional 26 booking classes that everyone knows about. A lot of people were talking they're gonna go to double alpha, so that gives you 676 booking classes. Actually, the airlines are now talking about, we're not even gonna use booking price classes, we're just gonna use price points. So you get infinite number of price points out there. You can actually have a different price point for every single passenger if you so wish. I don't think everyone would do it. Differentiation— that means that the airlines will be able to differentiate their product. That means that they will be able to go to one travel agent and say, here's a price for you, and to another one, here's a different price. Gone is everyone getting access to the same fares. Maybe in the future, we don't know what the airlines are going to do. We'll perhaps come back in a year's time or 2 years' time and go, this is what is actually happening in the market. A lot of this at the moment is just the theory. It's the possibilities. The airlines have got to work out what works. They've got to work with their agency partners, how they're going to be able to support them more, etc., etc. And then everyone talks about the personalization. I don't think you're going to see the airlines working down to an individual customer, but you can think that they're going to work to groups of customers. They're going to work to different agents. They're going to work to different corporations. And they work with their frequent flyers as well, but maybe within the existing frequent flyer bands. How are they going to move along that graph? Well, is it going to be a stick, or is it going to be a carrot, or is it going to be a bit of both? If you look around the world, you're seeing different scenarios starting to play out. So in Europe, the stick is being used to Great effect, or they're it's a great big stick that they use in the airlines at the moment. So you've got British Airways, Lufthansa Group, Air France KLM that have all put surcharges in the marketplace. You've got British Airways that's using technology. I don't know if that's a stick or a or a carrot where they're doing that with their their shap fares. You're also seeing people like Lufthansa who. Who are taking content away from ATPCO. And so their lowest fare classes now you can only access by going in through an API. They're also using a carrot as well. They're saying if you come in and you book through an API, you can get additional frequent flyer points, et cetera, et cetera. So you're starting to see some different ways that the airlines are trying to encourage or force bookings to go down the API route. In Asia, the airlines have not really started using the APIs yet, but they're all talking more on the carrot side than the stick side. If the carrot's not effective, maybe their turn to start using the stick as well. We will find out in time. In America, again, you got the American Airlines announced that they're paying $2 per sector for people that or $2 per. Booking, sorry, that for people that book through an API. So that's more of a carrot approach. So you're going to see whatever comes out going forward. But we're in this early stage experimentation at the moment, different ways of operating. So you've got the economics, what I've just been talking about in Europe where they're starting to use the economics to force that through. Economics and technology, that's a bit more like British Airways. Where they've changed in their price points. They've put the surcharge in there, but they're also using that technology to be able to distribute these additional price points. Um, technology and reverse economics— I mean, that's more like the American Airlines where they're saying, yeah, we'll pay you $2, etc., etc. Um, and you're starting to hear— you heard yesterday HRG— some of the airlines are coming on board now. They're being involved in the pilots. They're starting to happen in the marketplace, and they're set involved in that experimentation as well. I think where we are is no, none of these models have been proven yet. No one's actually saying what really works, what doesn't work, and we're going to have to wait a little bit more time before we can actually see what happens. So there is a lot being spoken about at 2020. IATA with their, their leaderboard I think it's also because that's quite a nice period for the technology to start settling down. So that's where people now in the industry are saying, yes, if we're going to see this kick up and a lot more transactions going through the airlines' APIs, it's going to be around 2020. It's not going to happen this year. It's most probably not going to happen next year. Why is that? Well, Yannick Coils, who you may know, but he's the person from IATA that leads this project. He says, you know, this year, 2018, is the year for the plumbing. We need to get the technology plumbing in place. I can assure you, we've looked under the bonnet of the car, and it's going to take more than 2018. We're really talking about 2018, 2019 to get that plumbing in place. There's a lot that's got to happen before you can really start moving. forward in anger. So I think a lot of that will happen. Why is that? Well, airlines need to build their API. And if you don't have an API, if an airline hasn't got an API and they want to start playing in this game, it's going to take them about 18 months at least before they can start going forward. So there's huge timescales involved. It's not like, oh, tomorrow I want to work and distribute all my content via an API. And you start moving forward. It's going to take about 18 months talking to the people that we're talking to. You've then got to build this merchandising engine, and you've got to build the capabilities. So again, you can start with it very basic to start with, but when you want to do the things that you really want to do that's going to make a difference to your revenue earning capability, that needs a— again, that's about 18 months development at least at the moment. You've got the whole— everyone's talking about technology. We always talk a lot about the technology, but the whole industry is built around the technology and the human processes that are built around that technology, and they've all got to change. And a good example I always tend to talk about is, you know, your revenue management. Airline revenue management people and systems they use are really, really good and effective and efficient at doing their job and the revenue that the airlines can earn. And you're now going to give the ability to move away from those 26 booking classes to whether it's 626 or it's a huge amount more. You know, does the people— do they know how to manage that amount of booking classes? They've got to start working with offers, not just fares. So you've got this whole change in the human processes As well. On our side as a GDS, as the middle people, we've got to build the technology and we sit in the middle. So we've got to get those airline APIs coming into us. We then have to combine them with the existing technology. So as Travelport, we always talk about multi-source content. And that means that because an airline isn't going to stop distributing via an ATP code, So we've got to take that ATP co-content. We've also got to take their API content and then combine it together. And then we've got to get it out to our agency partners. And so we've got to build both sides of that map. And then the agents, they've got to get this technology. If they're taking our content or any of our competitors' content via an API, they're taking electronically. Then they've got to build their own front ends. They've got to adapt their own front ends to move forward, or if they're taking one of our desktops, you know, the way that the booking's done, etc., etc., is all going to change. So there's a lot of disruption coming into the industry, and wherever you sit within it, there's going to take time and effort and learn how to work in this new world. Seeing we're in Asia, I thought it'd be good to end on, you know, Qantas have said they're part of that leaderboard. They were the 21st company that's joined it. So that means they've committed that they're going to put 20%— or they're going to transact, so it isn't just put, they're actually going to transact 20% of their content through an API by the third parties by the 31st of December 2020. So what you need to be thinking about is what effect is that going to have on the industry in this part of the world, in Asia, and then to a greater extent to the, the rest of the world. Because to get 20%, it can't just be local Australian content, it's got to be wider than that, at least Asian content. Um, to be able to do that, the plumbing's got to be in place. That isn't just Qantas The plumbing for the airline has got to be for people like ourselves. We've got to get our systems in there so the agents can access this content. And then from the agency point of view, they've got to be able to access it. They've got to be able to work with it. We've got 2.5 years to go, so hopefully that's not a problem. The technology needs to be effective and robust. And again, it's unproven. We work on an uptime of 99.99%. 9%. Is the APIs, the airlines APIs, going to be as effective as that? There's gaps in the schemas at the moment. There's a lot of things that the current technology can do and the new schemas can't do those yet. So they've got to be built. That's unlikely all of those to be resolved, but there will be changes. And then you've got to say, what's going to happen to the industry in Australia? How will it change it? What are the competitors' reaction going to be? What's it mean for the travel agents and other players in the industry? Are Qantas going to use a stick? They're going to use a carrot? They're going to use both? Because you've got to drive that people using the API if you're going to hit that 20% target by the end of 2020. And, you know, is it going to give them the results on the bottom line? Because the idea of the airlines doing all of these things is is that they want to improve their bottom line. I don't have any of the answers to that. We come back in a year's time and see where we are. Thank you very much. Thank you, Ian.

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