NDC 4/5 : be aware of your legal context

By Hélène Millet | Technology

Jul 03

NDC: 5 questions an airline should ask – 4/5

After 3 years of hard work and tough discussions, the IATA NDC (New Distribution Capability) program is now proposing actual tools for implementation. As early participant to the NDC workshops, Conztanz proposes you a serie of questions that an airline should ask (internally or to its providers) before moving forward.

It is time for an airline to consider how to take advantage of this initiative. Where to start?


CHAPTER THREE: BE AWARE OF YOUR LEGAL CONTEXT


You know what, how and with who you want to launch your NDC project.

It is so close from reality that it seems that nobody can stop it.

Obviously, that’s the perfect time to take a break , step back and see your lawyers to have a real grasp of any legal issue your project could generate… and solve it at its best.

It is also time to measure any risks you might have when moving forward … and minimize them.

CHECK THE CONTRACTS WITH YOUR TECHNICAL PARTNERS

“With NDC, the airline is the offer creator”.

This simple sentence drastically changes stakeholders’ respective roles, at least for third party distribution.

Take for instance special fares: they used to be punctual or limited, now they are likely to become the rule, as “dynamic” pricing is a reachable goal. “Full content”, which was the general request airlines got from the GDS when negotiating the bookings fees level, is not relevant anymore. At the same time, GDS become aggregators ie do not create offers anymore.

This simple sentence also implies that the airline will need to activate its offer creation capability much more often. And the PSS (Passenger Service System) will be involved either directly (if it contains a retailing platform) or indirectly (if not). In both cases, its role will change.

If the PSS is outsourced by an IT provider (as most of them are), the NDC implementation might create new (high) volume of transactions and/or requests between the airline and its PSS provider. In this case, the associated cost will have to be acknowledged by both parties. If on the contrary, a retailing platform takes control of part of the PSS activity, volumes may have to be downgraded.

In practice: NDC implementation starts a change of economic model. This move will entail evolution of existing contracts with IT providers:

  • GDS (and in a more general part, all stakeholders interested in having the “best offer” for their customers: Google, metasearchs…)
  • PSS providers

Bilateral agreements will also have to be concluded with new entrants: retailing platforms or new aggregators.

Starting point: check with the distribution department for GDS contracts: validity and definition of full content (if any) are two essential information. Check as well the PSS contract, its limitations and cost of transactions.

RETHINK YOUR DISTRIBUTION PARTNERS AGREEMENTS

Distribution partners (online/offline, traditional travel agents (TA) for leisure or very sophisticated TMCs) sell a high volume of a traditional airline tickets: more that 50% and sometimes much more.

Most airlines have suppressed the direct commission that they were paying to TA (set as a percentage of their sales) in many countries. Nevertheless, regular exchanges and agreements exist: training on new products, feedback on procedures, potential indirect commissions… Those are different depending on your airline’s position in a given country. In the airline’s home market (if any), the relationship is usually very close.

The new complexity of airline products (ancillaries, in particular) already generates changes at TAs. Relationship between an NDC-capable airline and an NDC-capable TA will be even more different: variability and complexity of the offer increases. The good thing is that the painful exchanges on ADM are not relevant anymore.

In practice: the whole economic model (including the legacy GDS-airlines-TA game) will probably need to be rethought with NDC, at least some parts. One needs to deeply study the current agreements to be able to renegotiate them, (small) step by (small) step.

Starting point: ancillaries sales by travel agents and some direct connect deals are first glimpses of what the future could be: most probably multiform. To start with that subject, best is to be aware of your commercial partners position on those innovative subjects. And to be clear on where your interests are.

EVOLVE YOUR CODESHARE PARTNERS AGREEMENTS

Today the way you work with your codeshare/interline partners is well established.

For close partners, you have negotiated a code share agreement that allows you both to sell seats as if they were yours, with your own fares and products (equivalent on your partner’s planes). Share of revenue is set as indicated in the contract. No need to contact each other during the sales process.

Tomorrow, you intend to build dynamic NDC offers that go beyond your network. You will need to dynamically work with your codeshare partners. You may want to limit the number of partners you want to work with at NDC level. Once you have secured the list: do they have NDC capabilities or do they intend to have it and when? If not can legacy and NDC exchanges be combined?

In practice: codeshare processes are deeply modified with NDC, introducing the ORA (Offer Responsible Airline) and POA (Participating Offer Airline). You might want to start with your own flights only. If not, close partners for main routes need to be in the loop ASAP.

Starting point: check the list of current partners and prioritize the O&Ds and the partners you want to have with you in this NDC project. Set first exchanges with them.

PROTECT YOUR CUSTOMER DATA

With the development of connected objects, customer data privacy is becoming inevitable. As a consequence, privacy protection laws are getting more precise. They might differ from one country to another. If personalization is an NDC feature you would like to explore, you will need to store and use customer information. Hence you will need to know customer data rules to be applied in your situation.

A few tips:

  • secure customer acceptance proof: this needs to be looked after through box tickling, for instance (online) and clearly mentioned in any contract your airline may have (offline)
  • sensitive data request a specific focus: payment information, infant/child information
  • marketing campaigns using customer data are usually forbidden
  • history of transactions storage is very interesting to be kept, but require special attention as far as privacy is concerned in those “forgetfulness rights” times
  • it is better to ensure that the customer has access to his data and can modify are (so called VRM loop)
  • insure data security (using cryptic transactions, double technical servers, etc.)

In practice: in all cases, usage of customer data should create a win-win situation: the customer gives you information so that you can serve him better. Clear communication is mandatory.

Starting point: check what is your current situation: do you have a customer database, a CRM? Are you compliant with rules? How do you intend to change it?

Remark : Our ConztanzOne profiling module gathers customer data information to be used for personalization, especially on NDC’s context: building our product made us investigate data protection specifics insights. Do not hesitate to check our ConztanzONE presentation page or contact us for exchange on the subject, or of course if you are interested in a demo

REVIEW OTHER LEGAL CONSTRAINTS

In some countries, there may be additional constraints:

  • Distribution monopoly risk: if your direct sales (= you website in particular) covers a high percentage of your sales
  • Distributor transparency: in your home market, for instance; you might have commit to a certain transparency with distributors, etc.

All those bilateral rules can change: you will have to deal with the change management : exchange and communicate!!


We now have have reviewed the key subjects: CONTENT, PARTNERS, TECHNICS and LEGAL constraints. 

The last step will be to define/organize your project  and make sure the launch decision is taken. It will be our focus in our final article.

Stay tuned!


Meanwhile, we welcome any comment/live experience on this one. Do not hesitate to ask questions (see address below).

Related Articles

NDC Questions for Airlines – One : the Offer

NDC Questions for Airlines – Two : Impact on internal processes

NDC Questions for Airlines – Three: Will you CIO follow?

About the Author:

26-001Hélène Millet joined Conztanz in November 2013, soon after the company was founded, as part of the initial team (so called “Pioneers”).

At that time, she had gained 20 years’ experience in the airline business in the AFKL Group, mainly in RM, Sales and Distribution departments.

She has participated to NDC DDX, since the start in June 2012, first as AFKL’s representative and then as Conztanz’.

Please do not hesitate to contact us if any question or comment.