Ever wondered why two corporate colleagues can be seated next to each other on the same business trip but pay vastly different amounts for their flight tickets?
It’s a question that every single traveller has asked themselves at some point but unfortunately the answer is more complex than you might think.
In order to bring clarity and efficiency to the industry, the International Air Transport Association (IATA) developed the new XML-based communications standard to help airlines bring rich content.
It was also created for ancillaries to work directly with Online Travel Agencies (OTAs), corporate travel management companies (TMCs), and other flight resellers through a set of travel APIs (Application Programming Interfaces).
New Distribution Capabilities is an improved system used by travellers to see which options are available when making flight bookings.
It helps airlines and websites to communicate better and to allow airlines to change prices based on factors such as availability. It also hopes to channel that information to the consumer in real time.
According to FCM general manager, Bonnie Smith, understanding airfares begins with airline economics.
“Airlines are faced with a mix of fixed costs (like aircraft financing) and variable costs (like fuel). Combine this with the industry’s narrow profit margins, and you’ll soon understand why pricing is a complex web,” said Smith.
She added that pricing is immediately linked to supply and demand and that airlines use advanced tools to forecast demand. “To make a profit, airlines need to sell the right seat at the right price and the right time,” Smith explained.
“It’s about selling a seat on a flight for the highest price someone is willing to pay, considering that the product (the seat) is perishable; once the plane takes off, any unsold seat represents lost revenue.”
Meanwhile, the general manager also highlighted that predicting human behaviour at this level, especially in an environment as volatile as air travel, requires a blend of data analytics and intuition.
“For example, for business travellers, time is money. Services like priority boarding or extra legroom seats might be more valuable than for leisure travellers. Airlines have recognised this, cleverly offering a menu of ancillaries to enhance the travel experience and boost their profit,” said Smith.
She also noted that timing is imperative as tickets booked months in advance might be priced lower to incentivise early purchases and that they can rise as the departure date approaches.
This enables airlines to capitalise on last-minute travellers who might be less price-sensitive. However, very close to the departure time, if there are many unsold seats, prices might drop again to fill the plane quickly, Smith explained.
“NDC is set to bring a lot more clarity to airline pricing and offerings, making it easier to understand. This modern distribution channel wants to eliminate many of the unclear practices of the past and offer a more direct, transparent, and tailored approach to airline booking.
“For Travel Management Companies and business travellers, this can mean better value, clearer choices, and a more enjoyable travel experience,” she said.
Here is how NDC will help bring clarity to airfares and allow for a more streamlined booking experience:
Clear, itemised pricing
According to Smith, traditional airline distribution systems offer bundled services, making it hard to discern each amenity’s individual cost. But with NDC, travellers get a transparent fare breakdown.
“For instance, instead of seeing a flat fee, a business traveller could see a breakdown like: base fare (R4 000), Seat selection (R200), Wi-Fi (R300), Priority boarding (R300), etc.
“Ancillary services (like baggage fees, meals, or lounge access) are clearly listed and priced,” she said. This level of transparency helps businesses understand and manage travel expenses better.”
New levels of personalisation
Smith said that NDC can also access a traveller’s preferences and past behaviour to curate personalised offers.
Examples of this can be seen in preferred seating, if a traveller always opts for aisle seats near the front for quick boarding and de-planing, as NDC can prioritise showing these options.
Another example is in regards to layover options as NDC can tailor search results accordingly for those who prefer shorter layovers or even longer ones to squeeze in a quick meeting.
Smith said that as the world of air travel becomes increasingly complex, the demand for transparency and clarity in pricing grows stronger and that “NDC is the industry’s answer to this call.”
But she cautioned that NDC is still developing, and some nuances must be considered and mitigated where possible.
“While the industry is focused on NDC as the future of air content distribution, it is still maturing. NDC is constantly changing, and it’s important to consider if it’s the right fit for your corporate travel programme,” said Smith.
She also highlighted that not all airlines have finished building their NDC capabilities and that an obstacle might be that it may not be possible to easily cancel an NDC booking.
“As NDC continues to evolve, each travel manager needs to make an informed decision with consideration of the airlines, content and capabilities which are most important to their programme.
“A TMC like FCM can help corporates navigate this decision and ensure they get the most out of NDC content when it’s suitable for their business,” she said.