"Unfortunately, the GDS technology is not capable of managing or handling all this unbundling and that is part of the continuing rift between us as carriers¡ªand our needs in raising additional revenues and satisfying the needs of the marketplace¡ªversus a technology model which simply can't cope."?

That was the state of airline distribution a decade ago, as expressed by Air Canada's then VP of sales and product distribution Marc Rosenberg and reported by BTN sister publication The Beat. Air Canada was among the first North American carriers to go all-in with merchandizing, and it was Galileo, now part of Travelport, that hooked up the first direct connect through Air Canada's application programming interface in 2007. The move caused a stir in the corporate agency and travel manager community, echoed in some of what one might hear today about the International Air Transport Association's New Distribution Capability: problems with increased fragmentation, difficulty integrating with mid- and back-office solutions, workarounds, etc. But it also set off a wave of "what-if" contemplation among airline distribution executives.

American Airlines was among the most aggressive. Executives from the carrier spoke at the time of the increased importance of flexibility in its distribution partners and of prioritizing, in global distribution system partner negotiations, "the ability to deliver products and services in a way that generates the kind of customer interaction and revenue streams that we are able to get through our other channels."

United Airlines was less bullish on the concept at the time but instantly understood the importance of a coherent strategy. "We are trying to figure out what direct connect is. Is it a technical solution to an economic problem easily solved with negotiations with the GDSs? Is it a technical solution to respond to how airlines are evolving and offering ancillary services and how those are displayed to the travel agency? We have to answer that question ourselves," said then-distribution director Kathleen Bennett.

Technical Issues

The three major GDS providers¡ªAmadeus, Sabre and Travelport¡ªhave been criticized for clinging to cryptic Electronic Data Interchange for Administration, Commerce and Transport, or EDIFACT, codes and "green screen" user interfaces that have in the past limited differentiation in the indirect distribution channel and, therefore, restricted how airline product can be communicated and displayed through agency desktops and corporate online booking tools. Airlines were limited to 26 fare codes, not just by the GDS to be fair, but also in their own reservation systems?

Given the number of fare families and bundle permutations the airlines want to convey today, these codes are insufficient. Moreover, without visual cues and explanation, adding even more codes for differing product bundles would guarantee confusion for the agent when communicating to any traveler. It also would mean consternation for corporate travelers in an online booking environment that exposes multiple price points but almost no product information beyond type of plane, connecting city and duration of the flight.?

"I know what our Smartpoint [agent] desktop looked like in 2011, and it was definitely, you know, a green screen experience," said Travelport president and managing director for the Americas Simon Ferguson. "GDS providers have come a long way since then. Has it been at the speed that [the airlines] would have liked? Probably not. That's not because we are unwilling to do it; it's because doing so is not as simple as changing a retailing website for a single carrier. We've got more than 250 other airlines, and we've got to aggregate and normalize what comes into our platform so when users get into the corporate booking tool or agency desktop, they can see not just the options for one airline but those from everyone else."

To that end, all the major GDSs have brought rich content and graphical user interfaces to their agency desktops. Ferguson pointed out that Smartpoint offers the ability to book "many types of ancillaries" directly in the GDS and noted that airlines upload their own rich content to the system to ensure what is displayed in the indirect channel matches what is displayed on the carrier's own site.?

Amadeus has invested in its Selling Platform Connect and Sabre in its Red Workspace, piping in rich content and shifting to graphical user interfaces. All of these platforms, however, still have EDIFACT foundations. One reason, according to Amadeus IT Group EVP of travel content sourcing Anna Kofoed, is that agents versed in cryptic codes, as they're called, often find it easier to rely on the skills they have to initiate, advise and book travel. All providers have made their agency desktops flexible to accommodate different levels of cryptic skill and enable agents to flip back and forth from the cryptic to the graphical user interfaces as needed.

That's good because plenty of agents are still using those cryptic codes, according to SAP Concur supplier and travel management company services EVP MIke Koetting, who formerly was an executive at mega TMC Carlson Wagonlit Travel. "The new graphical user interface displays offered by the GDS agency desktops are a different flavor of icing on the cake. It's a different veneer of a mechanism to shop and complete a transaction for a travel agent. It's a veneer that, frankly, is less productive for an agent who's accustomed to having used cryptic commands for the last 30 years," said Koetting.?

Both Kofoed and Sabre NDC VP Kathy Morgan agree with Koetting that cryptic has some practical advantages for the agent over the graphical user interface, but Morgan points out the extended value. "Even if the agent is using the desktop with cryptic, we have the ability to push graphical responses to each inquiry," she said, adding that graphical information is what can now be pushed out to the traveler for a better experience with the agency.

Koetting agreed that graphical user interfaces are "a step in the right direction to be able to display a richer content with photos to differentiate the new packaging that's being made available. But it doesn't address the rest of the plumbing which is entirely reliant upon a GDS passenger name record."

The Functional Element

"You have to remember that the PNR was built by the airlines," said Morgan. "There's an important role that the PNR continues to play between the GDS and the airlines' operational systems. Things like schedule changes, baggage tracking and the processes that get a wheelchair to show up at the right gate at the right airport. A lot of those processes are still triggered today out of the PNR."

Indeed, the agency's midoffice and back-office systems are predicated on that PNR. These systems provide agencies continued access to travelers' itineraries and the ability to act on their behalf in case of itinerary changes and disruptions. They also process and store all the data that agencies feed to associated business intelligence tools and/or traveler tracking tools and security partners. Itinerary elements booked outside the designated channel generally are not incorporated back into the itinerary as a segment that can be serviced by the agency. Off-channel aggregators like Concur TripLink or Traxo can deliver the data, but most agency systems can't reach outside the PNR, given the agencies' current technology stacks, which often are provided by their GDS partners. Moreover, some industry insiders believe GDS providers incentivize agencies to stay within those bounds.?

Following the Money

Particularly as GDS providers lagged airlines in their ability to deliver merchandizing platforms, carriers began questioning the value of the indirect channel to their long-term strategies.?

"With certain airlines, there seems to be an article of faith¡ªyou know, somewhere written in stone tablets in the airline CEO's office¡ªthat indirect distribution costs significantly more than direct distribution. We do not think that's the case," said Ferguson, citing the value of the vast corporate market to which GDSs expose airline content via TMC partners. It's a market that's hard to crack from a customer-acquisition standpoint. Also the technologies and services provided by the GDS to accommodate airline interlining and corporate negotiated deals, and not just with airline content, but with hotel and car rental, as well.?

Industry-sponsored research conducted by Infrata in 2017 supports Ferguson's view, pegging average distribution costs for a round-trip fare via indirect channels at 14.21 euros and via direct channels at 12.56 euros. Clearly using a different calculus, Lufthansa in 2015 pegged its GDS distribution fee at 18 euros compared to its direct costs at 2 euros. British Airways came to similar conclusions as did Air France-KLM. "When airlines make that kind of statement, they are often ignoring the huge marketing costs they have ¡­ marketing directly to consumers," said Ferguson.

These conflicts have been particularly apparent in Europe, where low-cost carriers and some mainline carriers have opted out of full content deals with GDS partners. Without full content agreements, airlines are free to differentiate content per channel¡ªGDSs, direct connects, websites¡ªbut they get less advantageous distribution rates from GDS partners. The result for corporate clients in some of these cases is a distribution surcharged added to the cost of each ticket segment purchased through the GDS. Lufthansa's break in 2015 created the controversial 16-euro round-trip distribution cost charge, and BA followed with a $20 roundtrip surcharge in 2017, which it recently raised to $24. This wasn't the first time airlines looked to reallocate distribution costs across the value chain, but they had never before been riding the coattails of a movement like NDC.

Looking a bit deeper, these clashes around costs may be better characterized as altercations around innovation. To this day, TMCs sign lucrative contracts with GDS providers based on paybacks for realizing booking volume goals through the channel. Those incentives are a significant revenue stream for agencies, and airlines have chafed against this arrangement, viewing their distribution fees as subsidizing the agency payouts that keep restrictive technology structures in place. Redistributing these costs to agencies¡ªwhether they absorb them or explain them and pass them on to corporate customers¡ªhas been the airlines' way of forcing agencies to consider alternative booking channels.?

A source who declined to be identified summed it up: "You didn't have to be a rocket scientist to figure out that airlines, at some point, are going to want to control how they distribute their product and are going to want to break the stranglehold and sell something of their own. So it wouldn't take a genius at a TMC to say, ¡®Hey fellas, we should invest in a system that can do something other than a GDS PNR.' Yet not a single TMC has done that."

Waiting for NDC

If agencies were waiting for GDSs to make the fragmentation created by airline merchandizing to go away, they seem to be on the cusp. All of the three major GDSs have committed to NDC, which will allow airlines to connect via extensible markup language APIs to GDS providers; content aggregators like Farelogix, Travelfusion and HitchHiker; and even directly to TMCs and online booking tools to display special branded fares, bundles and merchandizing content.?

GDSs now see themselves as taking a leadership role in bringing standardization to the NDC standard, which Sabre's Morgan said lacks discipline. "There may have been a perception that GDSs, including Sabre, weren't actively engaged in NDC developments. I can say on behalf of Sabre that we've been very engaged from the beginning," she said. "We know that initiatives of this magnitude are going to take a while. There's a lot of work and it's hard. It became very clear in 2017 that it was time to lean in hard. "IATA and airlines were driving the dialogue but not recognizing how the content needs to fit into a broader ecosystem. Sabre's role has been to champion a balanced approach as a marketplace maker. We have suppliers, we have buyers and we have to figure out how to drive this new content into the marketplace in a way that it has value for both ¡­ and fully optimize NDC content."

To that end, Morgan, Kofoed and Ferguson all pointed to the idea of normalizing the content entering the GDS through NDC pipes so corporate clients can continue to comparison shop through the agency channel. Morgan continued, "We actually start with the airline saying, ¡®Here's what we need from you from an API perspective. Here are the capabilities we require.' This is how we establish that standard flow on top of the standard so we're able to integrate this into a normalized workflow that sits alongside all the other types of content."

The Omni-Channel Future & The Role of the GDS

Kofoed and Morgan addressed the issue of GDSs continuing to build on the functional element of the PNR and expand what is possible through indirect channels. "When it comes to NDC, we will aggregate the content like all the other aggregators," said Kofoed, momentarily indicating that the GDS would become just another source of content for TMCs and online booking tools. "However we will add on an element¡ªto be honest, we have not seen any players having a vision of going as far as we are prepared to go¡ªwhich is to do true integration. This is fundamental for the agency [because] not only will we aggregate the content, we will make it available in the downstream systems, which will deliver the detailed reporting, the ability to service the bookings and support duty of care."

Morgan also referred to a future that would "remove the constraints of the PNR" and function off the concept of an order. "This is part of our NDC strategy," she said, adding that the goal of the GDS is to get past all the technical issues of NDC and deliver a platform that handles the personalization and deeper relationships that corporate travel buyers and airlines are already pursuing.?

"Corporations work hard to negotiate beyond fare benefits. They want to know that their top-tier employees always have a certain set of products. Maybe they always have priority boarding, and they're always in the front of the cabin. They need to know the technology is in place to ensure those benefits flow through and are sitting on TMC shelves and in corporate booking tools. A lot of this is available through ATPCO now, but NDC is another enabler. Within NDC we communicate that this offer request is on behalf of Corporation X. Then the airline [systems] themselves recognize "Oh, we need to make sure we put all these components in the offer."

Ferguson reminded, however, that NDC was unlikely to become the standard among standards and that GDS providers more than anything are preparing to function in an omni-channel future that includes traditional fare-filing pathways through ATPCO and OAG, along with the new workflows for NDC that will increase personalization.

"Eighty-five percent of passengers travel once a year. Do you really want to be using NDC APIs for those 85 percent? Probably not. Airlines will likely leave those [travel requests] in the traditional workflows because: Why go through all of that trouble? It will be the other 20 percent, the really frequent business travelers, that need NDC personalization. That's who [the airlines] are really interested in, and we'll be ready to reach them."