ANALYSIS: IATA and travel industry continue locking horns over NDC

Washington DC
This story is sourced from Pro
See more Pro news »

IATA continues to contend with opposition from the travel industry, as it awaits US Department of Transportation (DOT) approval of a resolution on the controversial new airline distribution initiative it is championing.

A public comment period on the initiative, called the New Distribution Capability (NDC), closes today. Initially set to close on 1 April, the deadline for public comments was extended after a motion filed by a coalition of distributors and travel agents demanded that IATA produce more documents to back up the NDC.

IATA had filed for DOT approval of the resolution, called Resolution 787, on 11 March. The association has said the NDC could be ready by the end of 2014 if its pilot schemes are successful. IATA had adopted the resolution at a meeting in October 2012, but is required to file all its adopted resolutions with the DOT for approval.

IATA's NDC promises to modernise existing air travel distribution, by allowing passengers shopping for airfares through travel agencies using global distribution systems (GDSs) to be better able to purchase ancillary products like an extra legroom seat.

Travellers buying an airfare on an airline's website now is able to add these extra services on top of the airfare but they cannot easily do so when purchasing an airfare from an indirect channel like a travel agency, IATA has pointed out. The NDC's new technology is touted by the association to change that.

GDSs and travel agents have been openly critical of the NDC, and have made their sentiments known in responses to the DOT, urging the US government not to approve the IATA resolution.

The coalition of almost 400 distributors and travel agents, called Open Allies for Airfare Transparency, has called on the DOT to "tread cautiously" in considering IATA's application, saying that the NDC will be anti-competitive.

"There is ample reason to believe that the purpose of resolution 787 (and the effect would be) to terminate the current system of publicly posted prices that any consumer can comparison shop anonymously and efficiently," says Open Allies in its motion filed with the DOT.

"As we understand the agreed NDC model, there would be no publicly visible benchmark for fares in each market where NDC is implemented, with each price instead to be determined by carriers based on the identity of who is asking for a fare," it adds, saying that this will lead to consumer privacy issues.

Open Allies cites language in IATA's DOT application that appears to signal a shift to a completely new airline distribution model where airlines will be the only ones to create product offers, and says this could lead to reducing the ability of travellers to comparison shop and would result in higher fares.

IATA says that resolution 787 is only the foundation standard for a new airline distribution system and will "provide an industry framework". Open Allies dismisses this claim in its motion, saying that IATA's language in its application indicates that the NDC is "a new, agreed business model for how airline tickets would be priced and sold".

In its motion, Open Allies calls on IATA to submit "all documents in their possession" relating to the NDC to the DOT. In a preliminary response, IATA says that it intends to respond to the request and other public comments in "one consolidated filing" after the comment period has run. IATA suggested pushing back the comment period to 25 April to allow more time for responses. The DOT subsequently set this date to 1 May.

Open Allies was just one of several travel associations and distributors that filed responses to the DOT, urging the department to reject IATA's resolution.

In recent months, IATA has sought to defend the NDC, which it says has been "misrepresented" by the various industry groups that have spoken out against it. The association has stepped up publicity about the NDC through its social media channels, including Twitter.

In a speech attended by various industry groups in Washington DC on 23 April, IATA director general and chief executive Tony Tyler singles out the opposition to the NDC, calling it "misinformed discussion, communication".

Tyler strongly disputed the privacy concerns brought up by GDSs and travel agents, and said that passengers will not have to provide any more information than they do today while booking travel through a GDS.

Various airline and regional airline trade associations have come out in strong support of the NDC in comments filed with the DOT. This is not surprising, given the common grouses among carriers that they spend too much on GDS fees. Tyler has said that airlines spend an average of $7 billion a year on GDS fees - an expense that carriers are weary of in an age of volatile fuel prices and other cost concerns.

IATA has said that the NDC will help introduce competition into a sector dominated by a few GDS providers that airlines say they have no choice but to pay fees to. Concerns over these GDS fees have flared up into lawsuits filed by carriers and GDSs against one another.

GDSs have repeatedly disputed that airlines pay costly fees to them, and have asserted that they already have agreements with some airlines to help them sell their ancillary products, which the NDC expects to do.

At a panel in Washington DC in October 2012 on airline ancillary fees, Travel Technology Association chairman Simon Gros said GDS fees represent only "2% of any airfare". The association represents the interests of GDSs and online travel websites.

Gros' statement was met with skepticism among airline representatives attending the panel discussion, which at times grew heated as airline trade associations, GDSs and travel agents exchanged pointed statements with one another over what the NDC would mean for them.

Going by the recent comments filed with the DOT in response to the IATA's resolution, it is certain that dissent over the association's proposed idea is set to continue. IATA's Tyler has said he is confident that once the initiative is "properly understood", it would be able to get more people on board. But judging by the responses filed in recent weeks, the association could have its work cut out for it.