How airline distribution works | Global Distribution Systems | New Distribution Capability (NDC)

Summary

The script delves into the evolution of flight booking systems, from the 1960s' Sabre system to modern Global Distribution Systems (GDSs) like Sabre, Amadeus, and Travelport. It discusses the challenges of GDSs, including limited customer data and ancillary service support, and the emergence of the New Distribution Capability (NDC) standard by IATA, which allows airlines to offer more personalized services and bypass traditional GDSs. The script also highlights the industry's struggle between direct distribution and reliance on comprehensive booking platforms.

Takeaways

• 🛫 Early flight reservations in the 60s required manual labor and a mainframe computer, with American Airlines and IBM pioneering automated flight distribution.
• 💻 The Sabre system, an acronym for Semi-automatic Business Research Environment, was a groundbreaking development in flight reservation technology.
• 🌐 In the 70s, the introduction of terminals in travel agents' offices marked the beginning of Global Distribution Systems (GDSs), which revolutionized how flights were booked.
• 🔗 GDSs like Sabre, Amadeus, and Travelport connect to airlines' Central Reservation Systems (CRSs) to manage seat reservations and distribution.
• 📊 Airlines rely on third-party providers like ATPCo for fare information and Innovata or OAG for flight schedules, which are then integrated into GDSs.
• 📈 GDSs have become dominant middlemen in the air travel industry, controlling a significant portion of ticket distribution and limiting airlines' direct customer interaction.
• 💼 The lack of customer data and limited ancillary service support are key issues faced by airlines due to the GDS-centric distribution model.
• 💵 Some airlines, like Lufthansa, have taken steps to counter GDS dominance by imposing fees on GDS bookings and encouraging direct bookings.
• 🆕 The New Distribution Capability (NDC) standard introduced by IATA allows airlines to create their APIs, potentially bypassing GDSs and offering more personalized services.
• 🚀 Despite the potential of NDC, adoption has been slow, with only a fraction of airlines implementing it, and GDSs are adapting by incorporating NDC support.
• 🌟 The future of travel distribution remains uncertain, with a balance needed between direct bookings and the comprehensive services offered by GDSs and OTAs.

Q & A

How did flight reservations work in the 1960s?

In the 1960s, making a flight reservation required multiple people and a mainframe computer. American Airlines and IBM pioneered automated flight distribution using the IBM 7090 computer, which was connected to 1500 remote terminals. Reservations were made through travel agents who contacted the airline by phone.

What is the full name and original purpose of Sabre?

The full name of Sabre is Semi-automatic Business Research Environment. It was originally designed to process flight reservation data and could handle up to 84,000 telephone transactions per day.

What are Global Distribution Systems (GDSs) and how did they start?

Global Distribution Systems (GDSs) are large flight aggregators that collect flights from airlines and distribute them across travel agencies using APIs. They started in the 1970s when terminals were extended to travel agents' offices to free up manpower at airlines.

How many major GDSs are there and what are their names?

There are three major GDSs: Sabre, which became an independent business in 2000; Amadeus, established in 1987 by four European airlines; and Travelport, a UK-based GDS formed through a merger of smaller providers.

What does a Central Reservation System (CRS) do for airlines?

A Central Reservation System (CRS) is a software program that manages seat reservations on the airline side once a GDS requests a seat. It is connected directly to the heart of airline sales technologies.

Why do airlines publish their prices on ATPCo?

Airlines publish their prices on ATPCo, the Airline Tariff Publishing Company, because it is the main global source of fare information that further distributes prices across GDSs, online travel agencies, and price aggregators.

What are the main problems with GDS-centered distribution for airlines?

The main problems with GDS-centered distribution include the lack of valuable customer data, limited ancillary support, and the lack of full control over their inventory and the choice of distribution channel.

How do some airlines combat GDS dominance and encourage direct bookings?

Some airlines, like Lufthansa, combat GDS dominance by encouraging people to buy tickets directly from their sites and by introducing additional fees for bookings made through GDSs.

What is the New Distribution Capability (NDC) and how does it benefit airlines?

The New Distribution Capability (NDC) is an API standard introduced by IATA that allows airlines to build their own APIs and suggest them to GDSs or bypass this layer by connecting directly to online travel agencies. It supports rich content, wide ancillary offers, and personalization for every customer.

How many airlines have adopted the NDC standard so far?

As of the script's knowledge cutoff, only 65 airlines have adopted the NDC standard in one way or another.

Why are GDSs investing in innovation and incorporating NDC support in their products?

GDSs are investing in innovation and incorporating NDC support in their products to maintain their positions in the market as airlines, hotels, and other service providers strive to distribute their products directly and as the number of travelers grows.