In the rapidly evolving landscape of the aviation industry, the New Distribution Capability (NDC) and the subsequent NDC One Order initiative represent a paradigm shift. These initiatives are not merely technological upgrades; they are transformative strategies that have the potential to redefine how airlines interact with their customers, manage their operations, and generate revenue. For airline executives and digital strategists alike, understanding the strategic significance of NDC One Order is crucial in navigating this complex transition and harnessing its full potential.
What is NDC One Order?
At its core, NDC is an IATA-led initiative designed to modernise the way air products are retailed to corporations, leisure, and business travellers. Unlike the traditional Global Distribution Systems (GDS), which often limit airlines to selling seats and basic ancillaries, NDC leverages XML-based data transmission standards to enable richer and more personalised offerings. The evolution to NDC One Order goes a step further by consolidating multiple records currently used to manage air travel (such as Passenger Service Records, Electronic Tickets, and Electronic Miscellaneous Documents) into a single order. This single order approach is akin to how other modern e-commerce systems operate, and it represents a significant leap towards simplification and efficiency.
The Strategic Significance of NDC One Order
- Enhanced Customer Experience Through Personalisation One of the most compelling advantages of NDC One Order lies in its ability to foster a more personalised customer experience. By using a single, consolidated order structure, airlines can better understand the customer journey from start to finish. This comprehensive view enables airlines to offer more personalised and timely offers, ranging from seat upgrades and extra baggage to tailored in-flight services. In a marketplace where customer expectations are increasingly shaped by their digital experiences with companies like Amazon and Netflix, the ability to offer a seamless and personalised travel experience is a significant differentiator.
- Operational Efficiency and Cost Reduction NDC One Order simplifies the complex web of legacy processes that airlines have relied on for decades. By replacing multiple booking records with a single, unified order, airlines can significantly reduce administrative overheads, streamline their operations, and eliminate redundancies. This not only cuts down on processing times but also reduces the potential for errors, leading to enhanced operational efficiency and cost savings. Moreover, this simplification can be particularly beneficial in reducing costs associated with interlining – the process of coordinating travel between different airlines – making it more efficient and less prone to inconsistencies.
- Greater Revenue Optimisation and Merchandising Opportunities The NDC standard opens up new avenues for ancillary revenue generation beyond the traditional seat and baggage fees. With a more flexible and dynamic inventory management system, airlines can offer a wider range of products and services tailored to individual customer needs and preferences. This approach aligns with modern retail practices, where the emphasis is on upselling and cross-selling based on customer data insights. Furthermore, by integrating with third-party service providers, airlines can offer a broader ecosystem of travel-related products, enhancing the customer proposition and driving incremental revenue.
- Improved Data Utilisation and Analytics A single order management system provides airlines with a wealth of data that can be leveraged to gain deeper insights into customer behaviours, preferences, and buying patterns. This enhanced data utilisation is critical in an age where data-driven decision-making is a key competitive advantage. Airlines can use these insights to refine their pricing strategies, develop targeted marketing campaigns, and improve demand forecasting, all of which contribute to more effective capacity management and increased profitability.
- Enhanced Collaboration Across the Value Chain The NDC One Order framework promotes better collaboration between airlines and their partners, including travel agencies, technology providers, and other third-party service vendors. This enhanced collaboration is facilitated by standardised communication protocols and more transparent data sharing, which help in reducing friction and improving coordination across the value chain. By fostering a more integrated ecosystem, airlines can enhance their service offerings and provide a more consistent and cohesive customer experience.
Why Traditional PSS and Airline Systems Fall Short
To understand the impetus behind the adoption of NDC One Order, it is essential to examine the limitations of traditional Passenger Service Systems (PSS) and legacy airline systems. These systems, many of which date back several decades, are characterised by fragmented architectures and siloed data structures. This fragmentation inherently limits their ability to support the modern retailing and personalisation capabilities that NDC One Order facilitates.
- Fragmented Data and Systems Traditional PSS are built around multiple, often disconnected, data silos, such as Passenger Name Records (PNRs), tickets, and Electronic Miscellaneous Documents (EMDs). Each of these records exists separately, necessitating complex and costly reconciliation processes whenever changes occur. The lack of integration across these systems hinders airlines’ ability to have a single, comprehensive view of the customer, which is a prerequisite for offering personalised and dynamic pricing and services. In contrast, NDC One Order unifies these disparate records into a single order, streamlining the process and allowing for a more holistic view of the customer journey.
- Inflexibility and Incompatibility with Modern E-Commerce Practices Legacy airline systems were designed in an era where the primary focus was on seat inventory management and not on customer-centric retailing. This design inherently limits their ability to dynamically offer and price a wide range of ancillary services or bundles tailored to individual customer preferences. Modern e-commerce platforms, by contrast, are built to be flexible and adaptive, supporting dynamic pricing, personalised recommendations, and seamless cross-selling and upselling. NDC One Order enables airlines to mirror these capabilities, allowing them to compete more effectively in today’s digital-first economy.
- High Costs and Limited Scalability Maintaining and upgrading legacy systems is a costly endeavour. These systems often require specialised skills and technologies that are becoming increasingly scarce and expensive. Additionally, the scalability of traditional PSS is often limited, making it challenging to quickly adapt to fluctuating market demands or to integrate with newer digital platforms and channels. NDC One Order, built on modern standards, offers greater flexibility and scalability, enabling airlines to innovate and adapt more swiftly to changing market conditions.
- Limited Capability for Real-Time Data Processing Traditional airline systems are not designed to process real-time data efficiently. This limitation is increasingly at odds with the expectations of today’s digitally-savvy travellers, who demand real-time updates and seamless interactions across multiple touchpoints. NDC One Order, with its unified data structure, enables more efficient real-time data processing and exchange, allowing airlines to provide more timely and relevant offers and communications to their customers.
- Challenges in Partner Integration and Collaboration The fragmented nature of traditional airline systems also complicates integration with third-party partners, such as hotels, car rental companies, and tour operators. Each partner may use different systems and standards, leading to significant integration challenges and inefficiencies. NDC One Order’s standardised framework facilitates more straightforward, more transparent integration across the travel ecosystem, fostering better collaboration and creating a more seamless experience for the customer.
Overcoming the Challenges of Implementation
While the benefits of NDC One Order are substantial, the transition is not without its challenges. Airlines must navigate complex change management processes, including upgrading legacy systems, training staff, and aligning with multiple stakeholders across the value chain. Additionally, the initial investment in technology and systems integration can be significant, requiring a clear and well-structured business case to justify the expenditure.
Moreover, the shift to NDC One Order necessitates a cultural change within organisations. It requires airlines to move away from their traditional, often siloed ways of working towards a more collaborative, data-driven approach. This shift must be underpinned by a robust digital strategy that aligns with the broader organisational goals and is championed by leadership at all levels.
Conclusion
NDC One Order is more than a technological upgrade; it is a strategic imperative for airlines looking to stay competitive in an increasingly digital and customer-centric marketplace. By embracing this initiative, airlines can unlock new opportunities for personalisation, operational efficiency, revenue optimisation, and data utilisation. However, realising these benefits requires a comprehensive and well-executed strategy that addresses both the technical and cultural aspects of the transformation.
Traditional PSS and legacy airline systems, while reliable for their time, lack the flexibility, efficiency, and customer-centric capabilities required in today’s market. NDC One Order offers a forward-looking alternative that can overcome these limitations, positioning airlines to better meet the demands of the modern traveller and compete more effectively in the digital age. As airlines embark on this journey, the winners will be those who not only understand the potential of NDC One Order but who also have the vision and agility to implement it effectively. In an industry marked by rapid change and evolving customer expectations, NDC One Order could very well be the key to unlocking a new era of airline distribution and customer engagement.