The move represents a significant shift for the airline industry. After years of heated debate, a few airlines may finally put into production NDC-compliant transactions as early as February 2015.
In the NDC era, the airline takes on the role of creating the pricing and offers and delivering its differentiated content via an API.
Before NDC, a middleman layer, the global distribution systems (GDSs), constructed the pricing and offers on behalf of the airlines and distributed the feed to travel agencies.
Airlines are incentivized to invest in technology to make that shift because it would allow them to scale up their merchandising efforts — their most rapidly growing source of net margin — from their brand.com websites and into their largest sales channel, the travel agency network.
Farelogix, a 125-employee company based in Miami, joins other companies in aiming to profit from this era of airline IT investment.
Farelogix’s NDC-Xpress product signals a few shifts in the company’s tactics.
NDC-Xpress reveals how Farelogix has pivoted away from its original incarnation as tech provider for airlines, such as low-cost carriers, hoping to bypass the GDSs and get their tickets and merchandise out of their host systems and into travelers’ hands via any channel.
The NDC-Xpress tool is built to work as equally well to connect with GDSs as to other intermediaries and aggregators through a single, standardized XML API. The company says it has teams of people versed in the documentation to implement APIs with GDSs like Amadeus and Travelport.
Farelogix’s pivot — of accommodating, rather than bypassing GDSs — is timely.
Amadeus announced its first NDC Version 1.0-compliant connectivity to United Airlines last week, while the other two main GDSs, Sabre and Travelport, tell Tnooz they are ready to work with any airline on having NDC-compatible or NDC-style connectivity.
More subtly, Farelogix is altering its sales pitch. It’smoving away from emphasizing cost savings and toward emphasizing revenue growth — a pitch more attuned to what airline executives say they want.
In another pivot, the company is also offering its new product on a monthly subscription-as-a-service (SaaS) model, whereas previously it expected a large up-front capital investment by airlines for its other products.
Farelogix now sells a version of its merchandising platform via SaaS pricing, too, though it still sells its other solutions under the old model.
The company didn’t say if it would wholeheartedly embrace the SaaS model, which has become popular among other B2B technology providers in travel and other industries.
Low commitment offer to airlines
The NDC-Xpress product is being pitched to carriers as a way for them to dip their toes into NDC-style connectivity without deploying a major investment of IT resources.
An airline can start with a basic version called NDC Shop-Xpress if it wants to merely add NDC connectivity to its shopping process, specifically.
An airline could then later scale up, such as by adding merchandising or, more ambitiously, adopt the American Airlines approach of having an end-to-end NDC-compatible XML solution that includes comprehensive shopping, booking, order management, and fulfillment capability in a standardized XML API.
Quick to market
Farelogix promises a six-month implementation time if an airline is using one of the nine Passenger Service Systems (PSSs) that it already has done integrations with, such as HP Shares, Sabre, Amadeus’ Altea, and Navitaire.
If the airline wants connectivity via a PSS it doesn’t yet work with, such as TravelSky, integration would take a couple of months longer, says the company.
Its NDC-Xpress product does not lock an airline into using its current PSS. If an airline switched from one PSS to another, it wouldn’t have to rewrite its merchandising or pricing system.
The API to the end user would still work. Farelogix would handle the transition in how the systems communicate with the new API on the airline’s behalf.
Direct connect in a new wrapper
Updating to the XML programming language isn’t new for airlines. Several airlines, such as American, Air Canada, Emirates, and United, have XML-based direct connection integrations that are based on a version of standards that predates the NDC.
Farelogix has a share of that business, having set up XML direct connects for several airline and GDS combinations, such as between American and Travelport, American and Amadeus, Air Canada and Travelport, and West Jet and Travelport.
The company is now transforming all of its schemas to the official NDC schema of standards, starting with the shopping function. So expect further NDC-compatible products to come.
A rough, long sales cycle
Airlines remain slow to invest in NDC-style connectivity. Making the commitment requires buy-in across an organization. Farelogix used to be a single play with the distribution folks at an airline.
But NDC-style deals, which are more complicated, typically require the sign off of five or six departments, such as technology, e-commerce, revenue management, brand.com, and distribution.
Farelogix has accordingly had to train its sales and implementation staff to become much more technically savvy to accommodate NDC-style products.
Even so, the uptake of the process might be slow, as the airline industry is historically resistant to innovation. Says CEO Jim Davidson in an interview:
“NDC is not cheap, but it eventually pays off. Let’s say an airline like Alaska wants to develop an NDC-compatible API and picks us or someone else to develop it.
Then the airline goes to Travelport or another GDS and asks it to take the API, after working out the commercial details. Then the integration process starts.
In the meantime, Alaska’s inventory is still being sold in its existing way on the other GDSs and channels. It has to maintain two connections until some cutover.
That involves an expense that could be more than recovered by the growing boost in revenue from merchandising….
We expect a handful of early adopters, and then a second wave. Airlines will realize what a lot of profitable low-cost-carriers like Ryanair learned a long time ago with their GDS-bypasses. This is a significant revenue play.”
A technical caveat: The official Version 1.1 NDC schema has not yet been finalized.
But Farelogix is confident it can add any minor tweaks that will appear between now and the official announcement, which is expected sometime by the first quarter of 2015.