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W E P O W E R T R A V E L
NDC: IATA’s New Distribution Capability or Nutty Distribution Catastrophe?
Michael Premo President & CEO
ARC
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W E P O W E R T R A V E L
Topics
• ARC Update
• Crunching the Numbers
• FareSight
• IATA NDC: Why, Oh, Why All the Hubbub?
2
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W E P O W E R T R A V E L
What’s ARC?
Airlines Reporting Corporation (ARC):
• Accredits travel agents in the U.S. & territories for 194 airlines and provides
tools for reporting and payment on ticket sales
• Provides data services to customers interested in better understanding or
expanding their commerce in the travel industry
Owned by 9 airlines
• Incorporated in 1984 as a Delaware corporation
• Predecessor Area Settlement Plan established in 1964
• Governed by board of airlines plus the Chairman and President/CEO
Headquartered in Arlington, VA; sites in Louisville, Tampa & San
Juan
• 395 employees
3
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W E P O W E R T R A V E L
The ARC Board Family
4
Confidential and Sensitive © 2013 Airlines Reporting Corporation, All Rights Reserved.
O U R S H A R E H O L D E R S
NON - S H A R E H O L D E R S
INDEPENDENT
Bonnie Reitz – Chairman
Bob Bagley – Chair, Audit
Committee
Michael Premo
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W E P O W E R T R A V E L
Crunching the Numbers
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W E P O W E R T R A V E L
ARC Locations 1965-2013
6
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Total Locations STPs
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W E P O W E R T R A V E L
ARC Total Transactions (Millions) 1965-2013
7
0
50
100
150
200
250
Mill
ion
s
Total Transactions
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W E P O W E R T R A V E L
ARC Total (Billions) 2002-2013
8
$-
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Bill
ion
s
Cash
Credit
Total
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W E P O W E R T R A V E L
Travel Agency Segmentation –
Monthly Transactions % Change
9
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Online
Mega
Other
All
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W E P O W E R T R A V E L
And now a word from our sponsor…
FareSight
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W E P O W E R T R A V E L
FareSight
• Business intelligence tool targeted at corporate travel
managers (CTMs)
• Uses ARC data to optimize CTMs’ corporate travel programs
• Assess purchasing effectiveness
• Assess policy effectiveness
• Monitor agreement threshold
• Speedy insights and baseline—not against one agency’s
customers but the whole agency market
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W E P O W E R T R A V E L
FareSight
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W E P O W E R T R A V E L
FareSight
13
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W E P O W E R T R A V E L
FareSight
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W E P O W E R T R A V E L
W E P O W E R T R A V E L
Now back to our program already in
progress…
Other ARC Initiatives
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W E P O W E R T R A V E L
Major ARC Work Activity – 2013/2014/2015
• Revised ARA implementation – July 1, 2013
• Debit Memo Working Group – launched Jan. 2013
• IATA – ARC settlement benchmarking
• Engagement on IATA New Distribution Capability
• Ensure use of ARC ticket stock when U.S. agents sell in NDC
• Replacement of core settlement systems
• Five-year project awaiting ARC Board approval
• Compete in data products
• Explore airline-agency merchandising cooperation and
potential for ARC
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W E P O W E R T R A V E L
NDC
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W E P O W E R T R A V E L
Today’s Airline Distribution Challenge
• Airlines love, love, love to sell through their web-sites
• Control the customer experience
• Display products and services exactly as they want
• Allow anonymous shopping but if logged-in, deliver customers
customized content based on the airlines business rules
• Least expensive, yes, but more and more it’s about delivering the
brand experience and differentiated products and services
• Problem: many of their best customers buy through the
airline’s sales agents—and those agents use GDSes
• Airlines believe GDSes and agents don’t, won’t or can’t deliver to
the agent or end customer the same differentiated content as
their web-site
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W E P O W E R T R A V E L
One Answer? NDC
• IATA’s New Distribution Capability (NDC) was conceived to
help overcome exactly this challenge
• It is specifically NOT an agency-bypass
• Carriers don’t need NDC to bypass agents!
• They already HAVE web-sites!
• NDC is one approach to try to provide as much of their web-site content and experience to agents
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W E P O W E R T R A V E L
Who is IATA?
• The International Air Transport Association
• The industry’s global trade association
• Sister to Airlines for America (A4A) formerly the Air Transport
Association (the U.S. airline trade association)
• IATA develops and maintains industry standards globally in
cooperation with A4A and ICAO (the International Civilian Aviation Organization)
• Safety standards
• Business standards – luggage bar codes, ticketing and messaging
standards
• Also operates the agency accreditation and settlement system
out side the U.S. (ARC handles the U.S.)
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W E P O W E R T R A V E L
What is NDC?
NDC is an IATA-led collaborative industry initiative that:
• Defines a new messaging standard between airlines and agents
• Enables greater transparency and choice for consumer in
comparison shopping
• Intends to close the gap between direct and indirect channels,
making the indirect channel as customer-centric and retail-like
as the direct channel
Source: IATA
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W E P O W E R T R A V E L
A Few Key Terms …
• IATA’s Resolution 787 (Enhanced Airline Distribution)
• Describes the main business processes required for airlines to create
their own product offer within their own systems, which will be
provided directly by and owned by the airline
• IATA XML Message Schema
• IATA standard to create a Dynamic Airline Shopping engine
Application Program Interface (DAS API) … based on Open Axis
Schema originally created by Farelogix
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W E P O W E R T R A V E L
Airline Distribution Today
23
Availability
Fare Filing
Schedule
Airline
GDS Builds content
3rd
Parties
Agent
Cu
sto
me
r
Source: IATA
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W E P O W E R T R A V E L
Airline Distribution Tomorrow?
24
Product
Price and
Availability
Engine
Airline
Agent
Dynamic
Airline
Shopping
Interface
Aggregator
Agent
Source: IATA
Cu
sto
me
r
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W E P O W E R T R A V E L
NDC Roadmap
25
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Request for Pilot
Participation
Pilots
Launch YE Pilots
Review
Final Pilots
Review
Capability
Deployment
Industry
Mass
Adoption
Ref. Imp. v1.0
XML v1 XML v2 XML v3 XML v4 XML v5
Reso787 Reso787 v2 Reso787 v3
Mockups
Learning
Risks
2013 - 2014 2015 - 2016 Source: IATA
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W E P O W E R T R A V E L
The Vision
• NDC is envisioned
to enable carriers
to present
product features, amenities and
ancillary services
and fees in more
robust fashion
• AND still enable
comparison
shopping as
shown in this NDC Demonstrator
created by IATA
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W E P O W E R T R A V E L
What’s the Controversy?
• IATA submits request for the resolution to be approved by
DOT.
• Not thinking it’s a huge deal
• Does what it does for ALL industry resolutions
• DOT says: Hmm, this looks like kind of a big deal to us.
We classify as Level 3—we want to get public comments.
• All heck breaks loose.
• GDSes, Business Travel Coalition and even GBTA weigh in
against NDC.
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W E P O W E R T R A V E L
IATA’s Industry Outreach
• IATA’s outreach especially to agents has, by its own admission, been subpar
• Trying to fix that – recent outreach to ASTA / GBTA
• Outreach is via the Data Distribution Exchange (DDX) Working
Group
• Oversight of the NDC initiative
• Task Forces to define requirements to make the NDC standard
work
• Each led by an airline representative
• Pilots still need participant especially agencies
http://www.iata.org/whatwedo/stb/ndc/Pages/pilots.aspx
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W E P O W E R T R A V E L
The Arguments Against
• It’s the end of anonymous shopping.
• By collecting personal data, carriers will offer higher prices to the
customers they think can afford it.
• IATA admits the resolution is poorly worded. Make them pull it
and resubmit. (And go through this all over again.)
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W E P O W E R T R A V E L
The Arguments Against
• It’s the end of anonymous shopping.
• By collecting personal data, carriers will offer higher prices to the
customers they think can afford it.
• IATA admits the resolution is poorly worded. Make them pull it
and resubmit. (And go through this all over again.)
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W E P O W E R T R A V E L
The Real Arguments – Mike’s Take
• Agent – “I’m worried about my GDS revenue, and besides, who
will pay me for this extra work?”
• GDS – “Airlines might not want to pay for my pricing engine.”
• Airline – “I don’t think my product gets presented as I would like it
to be.”
• Agent – “My agents want to keep using green screen.”
• GDS – “We can jazz up green screens if they want.”
• Airline – “Ugh! Forget it—send them to my website!”
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W E P O W E R T R A V E L
ARC’s View
• We support ANY initiative that expands content availability to
agencies and CTDs.
• NDC? Yes!
• Carrier & GDS bilateral agreements? Yes!
• Direct Connect? Yes!
• That said, don’t throw valuable/proven business processes out
accidentally.
• Especially ARC ticketing!
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W E P O W E R T R A V E L
Danger Zones
• IATA’s DDX Working Group has delegated the work of
developing the business processes to support the NDC
standard to Task Forces
• Shopping
• Booking & Servicing
• Payment and Ticketing
• Reporting, Settlement and Agency Accounting Interface
• ARC working here
• Airline Profile
• Interline
• Each headed by an airline representative
• Mike’s view – too many e-commerce people, too few agencies
and other agency technology partners
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W E P O W E R T R A V E L
Danger Zones – Business Travel Specific
• Online Travel Agencies likely to be early adopters
• Compete with airline web-sites, need comparable content
• You can already purchase seats on Priceline / LastMinute
• AA only, but settles via ARC unlike any other ancillaries
• Another example of content your travelers want to book outside
your preferred channel?
• Corporate booking tool providers don’t appear terribly
plugged in yet
• Many owned by GDSes – uh oh!
• Appears investment in booking tools is already constrained
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W E P O W E R T R A V E L
Specifically What to Watch Out For
• NDC scope creep
• What beyond the XML standard will change?
• Danger: many airline leads on task forces are from e-commerce
• NDC = do it like the airline website
• Does it ticket via ARC or via airline stock on the website?
• Who controls the PNR?
• Will my mid-office and self-book tools still work?
• “Don’t worry, your GDS will do it all for you.”
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W E P O W E R T R A V E L
Next Steps
• DOT expected to issue something on NDC this month
• Mike’s view: Probable outcome is approval with some
caveats/ongoing monitoring
• More impactful might actually be upcoming DOT decisions
on “Enhancing Airline Passenger Protections III”
• Decision on transparency of fees; mandate to show in all sales
channels
• Disclosure of travel agency incentives, carriers they do or do
not sell
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W E P O W E R T R A V E L
Next Steps
• ARC already approached by a major international carrier
about accepting an NDC ticket feed for agency settlement
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W E P O W E R T R A V E L
Mike’s Final Thoughts
• There are relatively few airlines interested in implementing
NDC
• Requires detailed customer knowledge
• Requires technology investments
• Airline consolidation in the U.S. may be a factor
• If I were an agency, AND the proposition from airlines was
attractive, would it be so hard to connect to 2-3 of my biggest
airlines and use GDS content for all the rest?
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W E P O W E R T R A V E L
Summary
• NDC – pretty good idea actually
• Keeps agents/TMCs relevant to travelers
• One less reason for travelers to go outside your approved
booking paths to buy
• NDC or things that look a lot like NDC are coming
• Some via GDS, some perhaps not
• Definitely the devil’s in the details
• Ask questions and talk specifics on business process
changes with everyone!
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W E P O W E R T R A V E L
More Questions? Thank you!
…and don’t forget about FareSight!
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