AVIAPRO CONSULTING BLOG
A Glimpse into the Future of Airline Retailing with NDC
1 April 2024
In this dynamic and exciting time for the airline industry, AviaPro Consulting helps guide aviation stakeholders towards a more customer-centric approach to airline retailing. Insights from industry leaders such as McKinsey, IATA, and a wide variety of airlines, has revealed a path towards embracing New Distribution Capability (NDC), reshaping the future for airlines, airports, and the wider civil aviation sector.
The Necessity of NDC Integration
The evolution of modern airline retailing hinges on the adoption of NDC. This groundbreaking standard revolutionizes how airlines distribute content, empowering them to tailor offers to individual customer needs, implement dynamic pricing models, and embrace a wider range of payment methods. NDC marks a significant departure from outdated legacy processes that have hindered the industry in the past, leveraging technology to personalize the user experience.
However, transitioning to a modern retailing framework, free from legacy artifacts like Electronic Tickets (ETs), Passenger Name Records (PNRs), and Electronic Miscellaneous Documents (EMDs), can be quite the challenge. It requires a comprehensive overhaul of IT infrastructure and processes to allow airlines the freedom to retail their offerings without constraints. This shift extends beyond technological adoption; it demands the restructuring of airlines as retailers genuinely capable of providing personalized, customer-driven experiences.
How can Airlines Create an Advantage?
Airlines face the dual challenge of maintaining operational standards while spearheading transformative changes. To help them respond to these challenges, AviaPro Consulting and its partners have devised a strategic, phased, and economically sustainable roadmap, ensuring airlines experience immediate revenue enhancement from the outset of their transformational journey. This approach encompasses several key strategies aimed at revenue optimization throughout the transition.
According to a study released by IATA in March of 2024, transitioning to new IT platforms, particularly Offer and Order Management modules, is projected to yield significant savings for airlines compared to operating a traditional Passenger Service System (PSS). On average, PSS operating costs of approximately $1.2 per passenger boarded (PB) could be reduced to $0.8 PB. This reduction is attributed to streamlined processes, and increased competition and innovation among new IT providers entering the market.
An earlier McKinsey analysis from 2019 also revealed that retail transformation could generate approximately $7 per passenger per year in value, combining revenue increases and cost savings. This average serves as a solid foundation for evaluating the business impact, though it’s important to keep in mind that results can vary by region. Additionally, NDC contributes an average annual value creation of $5.3 per passenger boarded (PB), with $2.2 from new offers, $1.9 from dynamic offering advantages, and $1.2 from reduced Global Distribution System (GDS) costs. ONE Order, on the other hand, contributes an average annual value of $1.7 per PB, equally split between increased revenue and lowered IT expenses.
The Perils of Stagnation
Airlines that lag in adopting modern retailing strategies risk falling behind in an increasingly competitive marketplace. They’ll be unable to deliver the personalized, agile, and efficient services demanded by today’s consumers. Embracing modern retailing practices underpinned by NDC and its successors is a path to significant opportunities for those willing to invest in their future.
Charting the Course Ahead
As the airline industry evolves, the adoption of modern retail practices becomes inevitable. The journey towards a dynamic, customer-oriented retail ecosystem offers a chance to redefine the essence of air travel.
AviaPro Consulting guides its clients through this transition, ensuring they are well-positioned to meet the needs of the modern traveler and anticipate tomorrow's increasingly competitive environment. By adopting a forward-looking approach and leveraging some of the insights and strategies outlined above, airlines can anticipate and shape the future of air travel, delivering a seamless, enriched experience for passengers and fostering sustained industry growth.
AviaPro Consulting is proud to be your partner in this journey, offering the expertise and support needed to navigate the complexities of this transformative era.
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