ANALYSIS: IATA awaits DOT approval of controversial NDC

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The IATA expects to unveil the results of pilot trials of a new standard in airfare distribution it is leading by end-October, as the association makes some headway in winning over opponents of the initiative.

Two pilots kicked off in April, while another two to three pilots are in the planning stage with the hope of starting in a few weeks, says Eric Leopold, IATA's director of financial and distribution services transformation, at a media briefing on 9 July.

IATA hopes to unveil the results of the pilots at its World Passenger Symposium in Dublin that begins on 29 October. In the meantime, it is still awaiting approval from the US Department of Transportation (DOT) to implement the new distribution standard it is championing, called the New Distribution Capability (NDC).

The NDC calls for the development of a new data transmission standard based on Extensible Markup Language (XML), the Internet language used in e-commerce.

IATA filed a resolution, called resolution 787, on the NDC to the DOT on 11 March. Since then, the document has attracted more than 400 public comments from different sectors of the industry, including responses from US travel agents and global distribution systems (GDS) providers urging the authority to not approve the IATA's resolution.

It is understandable that the NDC, which will modernise the way airfares are being distributed by travel agents today, could upset travel agents and GDSs. Travel agents today utilise pre-Internet distribution standards on GDSs to sell airfares, and the NDC would kick off an overhaul of these standards. IATA says existing technology offered by the GDSs do not allow airlines to sell ancillary extras adequately.

IATA estimates that airlines spend about $7 billion on GDS fees, an expense that carriers hope to reduce. GDS providers then give a portion of their earnings to travel agents for utilising their systems.

Ticket sales generated by US-based travel agents totalled $84.5 billion in 2012, up 2.93% from 2011, according to the Airlines Reporting Corporation (ARC). ARC is a technology company owned by several US airlines that processes payments between airlines and travel agents. In the first six months of 2013, US travel agents have sold $46.1 billion in airfares, down slightly from the $46.4 billion in sales logged during the first half of 2013.

Under existing pre-Internet standards used by travel agents, fares are displayed on a green screen filled with letters and numbers only understood by travel agents. The existing legacy standards make it impossible for ancillary extras to be displayed, says the IATA.

The association, in backing up the NDC, has repeatedly pointed out that the existing standards do not allow passengers shopping for airfares through travel agents to see if the airfares on offer include other amenities like extra legroom or wi-fi on board. In comparison, such extras are easily viewable if the passenger is shopping for airfares directly from an airline's website.

IATA says that the NDC will help bridge the gap between the shopping experience on an airline's website and with a travel agent, online or otherwise. It also expects the NDC to open up the distribution marketplace, now dominated by three GDSs, to more providers. Leopold says more than 20 IT companies, ranging from small firms to big corporations, are taking part in the pilots. GDSs are "in a position" to develop systems using the new standards as well, he says.

GDSs and travel agents have opposed the NDC, saying that the new technology would result in privacy concerns as customers would be required to provide personal details by logging into a registered profile to view tailored offers. IATA denies this, saying that customers would be able to view airfares anonymously just like how they would shop on an airline's website.

The association has also been accused by travel associations and GDS providers of not involving them sufficiently in discussions on the NDC - a claim that IATA has sought to address in recent months.

IATA issued further documentation in support of the NDC at its annual general meeting (AGM) in Cape Town in early June, and submitted a response addressing its opponents' concerns to the DOT on 21 June. The association has also unleased a public relations campaign, from rolling out a YouTube video promoting the initiative to showcasing a demonstrator of how the NDC would look like when applied to an online travel website.

It appears that IATA's approach might be working to cool some of the anger meeting the NDC. GDS providers, after IATA released new documentation in Cape Town, issued statements that were markedly more conciliatory in tone.

Amadeus, for one, said it was "pleased" to see the IATA address its concerns over the NDC. "We welcome this change in approach and position, and we are therefore cautiously optimistic with regard to making this effort a true, collaborative industry effort."

Not all sectors of the travel industry are convinced yet though. Open Allies for Airfare Transparency, a coalition of almost 400 travel agents and distributors, renewed calls for IATA to withdraw its resolution from the DOT and to modify it with the documentation issued at the AGM. Calling IATA's pending application "not ripe for consideration", Open Allies says that if IATA chooses to file a modified application, the DOT should issue an order to allow interested parties a fresh comment period of 45 days.

In its response on 21 June, the IATA disputes this, saying: "The AGM resolution did not depart from the meaning of Resolution 787 in any way."