According to Datalex research, airlines are increasingly looking towards taking back control of their ‘distribution destiny’ in order to access and optimise a greater slice of the distribution pie.
Distribution strategies are increasingly looking less at cost-saving and more towards revenue-generating across all available channels. Datalex has long since held the view that the objective of unified offers and orders should not just be for simplification purposes, but equally to optimise and uncover the value-added benefits of a bidirectional distribution system that delivers a truly digital trip experience.
Beyond a reimagined and long-overdue simplification of a ticketing process, a complete overhaul of distribution strategies is on the horizon for airlines seeking out a reduction in their PSS dependency. With this, distribution costs can be reduced to such a degree that the airline can now shift the focus on improving the customer experience and maximising revenue through complete ownership of the entire distribution process and in doing so accessing a greater slide of the ‘distribution pie.’
Many of the airline respondents echo the Datalex view that the measure of distribution success is set to be redefined, particularly once airlines see that there are more benefits from indirect channels beyond simply cost saving and paying an arbitrary fee for access to a large combined market. Airline respondents repeatedly talked to ‘channel contribution’ as the ‘new KPI,’ rather than basing success exclusively on the cost of transaction by reservation. According to IATA and BCG ‘savvy carriers are focused on customer lifetime value and recognize that the ability to retail at the level of the individual customer is essential to their long-term success.’
Airline executives surveyed who are prioritising or refocusing on the NDC channel pointed to a resurgence in the popularity of the channel because of its optimisation potential. Once cost-saving concerns are largely taken care of, airlines can now base their distribution strategy on bringing more dynamic content to these simplified distribution channels. Airlines highlighted many benefits of NDC with one senior airline executive describing NDC as ‘the most popular expatriate in the era of technology’ which enables greater differentiation, customisation, and transparency.
“NDC is more important to our airline customers than ever, and the data backs that up with 42% of all passenger bookings globally were sold via indirect channels in 2021. NDC is now seen as a key enabler of distribution and an important cost-saving exercise, while also taking advantage of pent-up demand to drive growth and generate untapped revenue in a channel that has been under-optimised for years,” Conor O’Sullivan, Chief Product Officer at Datalex.
While many of today’s legacy distribution systems compare airlines mainly on price and schedule, NDC actually enables airlines to provide a wider variety of products, greater pricing transparency, real-time evaluation of shopping requests, and customised options. In open responses to the question of planned NDC investment, airline executives revealed a definite strong intention for a stark ratio flip between NDC and GDS with some airline executives even stating an ambition to allocate in the region of 80% of their distribution into NDC, which facilitates ‘transparent data exchange and faster commercialisation.’ This renewed focus points to a greater appreciation for the optimisation potential that NDC has.
Read more about Datalex’s NDC product here: https://www.datalex.com/datalex-ndc/