What is changing in the industry with NDC & ONE Order?

NDC & ONE Order and the future of Revenue Integrity - Part 2

Our previous blog on??"NDC & ONE Order and the future of Revenue Integrity"?called?"Understanding Airline Distribution and Revenue Integrity"?explored the history of airline distribution and revenue integrity, briefly touching on the history of Lufthansa Systems Revenue Integrity itself.

In this post, we will define what NDC & ONE Order are and what is changing with them. Not to forget to give you some examples of the current airlines' process and show you all documents currently needed inside a booking for a passenger to fly.

What is changing with the New Distribution Capability (NDC)?

The New Distribution Capability (NDC) is a travel industry?standard?for distributing and retailing flight content. It is being developed by IATA (International Air Transportation Association), which recognized an opportunity to develop a new data exchange standard based on XML, allowing a better shopping, booking, and post-booking experience.?

NDC is not a system, not a database, nor a piece of software - it is a standard way for data exchange that can be used by any IT provider and it is already broadly used around the world.?It will improve communications and transform the way air products are retailed to leisure and business travelers and for some airlines, this is already a reality.

With this change:

1. The message format will be standardized;
2. The distribution of seats and services will be no longer limited to the oligopoly of the major global distribution systems (e.g. Amadeus, Sabre, Galileo/Travelport);
3. The costs of distributing the seats are?expected to be significantly lower;
4. The airline will not be limited to offering only seats and services related to the ticket itself, but will be able to offer more services/content (e.g. hotels, tickets to shows, etc.) and the offer is intended to be more personalized.

What is changing with ONE Order?

To understand how ONE Order will change processes and bookings, it is needed to understand how those processes currently work.

A booking is composed of many different documents, all of them are needed for a passenger to book, pay, board the aircraft and finally fly.

Many of them are leftovers from legacy processes and are still needed just to complete a function that currently is outdated. For example, around 1990-2000 the standard procedure to travel was:

1. make a booking reservation?- by calling the airline or a travel agent
2. ticket?issuance?- when you decide to pay for your booking, they issue you?a ticket which was a paper ticket until 2008.
3. reconfirm your flights?- some days before your travel, you would need to call the airline or your travel agency to reconfirm your itinerary.
4. boarding pass?- at the airport, an agent will detach your flight's coupon and exchange it for a boarding pass.

Another example of these legacy processes is the ticket numbers usage. Each coupon is used for a single flight of passenger's itinerary.?

If an itinerary has more than four flights, it needs a conjunction ticket - so you will get two ticket numbers, something like 123-1234567890-891.Meaning you are using two tickets from the airline stock - ticket number 123-1234567890 and ticket number 123-1234567891. Have you ever thought about why?

It is because the original paper tickets only had four coupons for flying. Besides these four coupons, there was a coupon for the airline accounting matters and the last one, which was the passenger's receipt.

When electronic tickets replaced paper tickets and became mandatory in 2008, this was carried over to the new electronic processes without having a "real" need for it.

Here are more examples of documents you will find in a booking:

• Passenger Name Record (PNR): which is the booking code. The content may vary but it contains mainly all the information about the itinerary as well as the passenger's personal information, like name, contacts, etc.
• ETKT or E-Ticket:?replaced the paper ticket and in 2008 became mandatory.
• EMD (Electronic Miscellaneous Document):?It is a non-flight record. It can be used to pay the ancillaries, services and fees. It replaced some usage of MCO (Miscellaneous Charge Orders).
• Boarding Pass:?this is the document the passenger needs to board the aircraft. Its paper version is also becoming outdated with?online check-ins and smart phone applications providing an electronic boarding pass.

ONE Order will simplify the fulfillment, servicing, delivery and accounting processes related to airline products and services.

The idea of ONE Order is?a unique Order containing everything the traveler needs. This single Order will merge all the documents and information (PNR number, passenger personal data, passenger contact information, itinerary details, payment status, ticket information and ancillary information).?

The?single ONE record number?will facilitate?among others the exchange of information between the parties (for example airline partners, or even airline and hotel provider). This will happen even independently where, how and with which provider the passenger bought his services/seats.?

The reconciliation between tickets and reservations will??no longer be needed facilitating the financial and accounting processes.

An important aspect is that ONE Order cannot exist without the NDC. A functioning NDC exchange messages in XML format is needed to be able to start with the Order process.

ONE Order has two different components, the offer and the order management system, very similar to an e-commerce store operation currently in internet:

Offer Management System

Offer Management refers to airline capabilities for?how they distribute?their?full product offerings?and merchandise additional services like baggage, seat selection, or ancillaries using rich content.

"Offer Management refers to the capability of airlines to create and return priced Offers in response to shopping requests from travel agents. Offer Management is included in the NDC shopping request from a third party, such as a travel agent, and triggers an Offer creation from an airline,?depending on the items contained by the request. The Offer is then proposed to a third party.

The Offer Management platform enables airlines to distribute their full product Offers and to merchandise any additional services using rich content, in an anonymized or personalized fashion. This may include dynamic pricing. Additional services can be those of any third party holding an agreement with an airline.

As it is creating the offer in its own IT environment, the airline is in a position to introduce new pricing mechanisms. Dynamic pricing is very likely to be widely implemented over the next years, as it addresses current pricing limitations. Instead of allocating a limited number of price points per bucket (e.g. 26 alpha codes), airlines will create many more price points. This is called an ‘indefinite price curve’.???Source:?IATA"

Order Management System

Order Management refers to airline capabilities related to?managing Orders?throughout the entire process?from booking to fulfillment.

"Order Management is the ability for the airline to create, store and manage its Orders. It can be as simple as ensuring that the Passenger Number References (PNR), E-tickets (ET) and Electronic Miscellaneous Documents (EMD) are referenced with a single identifier, i.e. an Order ID. In a more sophisticated system, Order Management could be similar to the retail world where every aspect of the Order, from product purchase to delivery, is managed.?

An Order is a uniquely identified record of the agreement between two parties to receive products and services under specified terms and conditions. The NDC Order supports the sale of a flexible range of airline products and services that are not necessarily related to a flight (e.g. subscription services).

Note: Order Management features could be extended to cover the entire lifecycle, beyond fulfillment, to delivery and accounting which typically occurs offline. This logical extension is one of the aspects of the purpose of the ONE Order Program.??Source:?IATA"

Airlines are supposed to move order-related operations to a dedicated?Order Management System (OMS)?which?will substitute the PSS (Passenger Services Systems) and give centralized access to order management within a single system.

To summarize:

• NDC?is a standard message for data exchange for distributing and retailing the flight content
• ONE Order?is a unique Order containing and merging everything needed for traveling. It is composed by two parts:

1. Offer Management Systems- how airlines distributes
2. Order Management Systems (OMS) - how airline creates, manage and store its bookings. It will replace the PSSs.

Without NDC, ONE Order cannot exist!?

The?decisive difference?between NDC and ONE Order is: NDC is about how to distribute and ONE Oder is about managing from offering, booking until fulfillment.

You may still be wondering why airlines say “book via NDC channels”, if NDC is just a standard message.?What it means is that the data exchange with the airline is done via NDC messages, giving the travel agencies, for example, access to more content bypassing the GDS (Global Distribution Systems) distribution channels.?The bookings in the inventory look exactly as the same as before.

Next blog we will take into consideration how these changes will impact Revenue Integrity processes directly.?Stay tuned for the next part!