NEW DISTRIBUTION CAPABILITY (NDC) 613 Third, there are very high entry barriers at the wholesale/distribution level as an aggregator: technology, talent, financial resources and, most importantly, the vast existing connectivity enjoyed by legacy GDS companies (and the corresponding lock-in problems and high switching costs both upstream with airlines and downstream with agents). It is expected to be difficult to enter the field and compete effectively as a new pure aggregator in the NDCworld30. In terms of demand, this is unsatisfactory because agents want comparison shopping, i.e. an aggregated platform or a one-stop shop where they are presented with all options that fit a customer’s desire. With only direct connect, it will require an agent jumping from one API to another. It is also very costly for airlines on the one hand, and agents on the other, to establish web-like direct connectivity to cover all the routes that they serve, without going through any form of an aggregator. Pure aggregator is therefore needed to meet this “demand” of comparison shopping. It is thus of no coincidence that GDS companies, which are enjoying substantial economies of scale from their existing connectivity and technology, are now transforming into an aggregator31, whether by partnering with airlines to create NDC channels, or even incorporating NDC into their existing interface, to ensure familiarity and user-friendliness of their systems. It comes back to the very thesis of this article – NDC is changing the structure of the market and, specifically here, changing the pricing and business model of the legacy GDS companies. In fact, it also caused a rise in the number of aggregators in the industry, albeit in different positions32. Yet, it does not come anywhere close to eliminating all GDS companies. 5. CONCLUSION NDC changes the fundamentals of competition in the air services industry. Given that airlines have also taken different approaches in utilising NDC to “expand” downstream into the wholesale/distribution market, the reality seems to be that end-consumers will be offered a wider variety of choices, with richer contents and more options of ancillaries in the NDCworld. The indispensable 30 Whereas it is easier to enter the market as, for example, an NDC-certified IT Provider. 31 Amadeus, Sabre and Travelport all have received NDC level-3 certifications. 32 E.g. OpenJaw; NDC Exchange by ATPCO.
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