SYDNEY (Reuters) - Airlines are betting that a new system for showcasing their wares on travel agents’ screens will help sell fancier seats, tastier meals, lounge access and flight options - and give profits a lift.
Airlines typically sell about 70 percent of their tickets via third parties, such as travel agents and websites. But in recent years, with more emphasis on selling extras on top of bookings, simply presenting fares and flight times in text wasn’t enough, an industry association said.
Instead, a more engaging visual approach to marketing was needed: airlines wanted potential passengers to be able to view their planes, seats and even meals as though they were browsing a shopping site.
The resulting system, new distribution capability (NDC), is beginning to show results three years after it was introduced, airlines say.
“Airlines want the agility and flexibility to push things the way they do on their website and sell more content,” said Yanik Hoyles, director of NDC at the International Air Transport Association (IATA).
With NDC, agents and travel sites are connected directly to airlines’ visuals and information about onboard amenities such as Wi-Fi access, plane type, entertainment options.
The system also allows passengers to buy extras such as seat upgrades, extra baggage or lounge access, and even non-airline items such as hotels, car hire and restaurant reservations, all under the auspices of the carrier on which they book their trip.
“When you know that airlines are investing billions in these options and experiences... you can imagine how happy we are to be able to communicate and try to market these options to the passenger,” IATA director general Alexandre de Juniac said at the association’s annual meeting in Sydney.
The need for airlines to work harder for robust profits was highlighted in Sydney this week, where rising fuel and labor costs were in the spotlight.
Extras are now responsible for virtually all of the net profits in some instances, Peter Harbison, executive chairman of CAPA-Centre for Aviation, told Reuters.
“More than half of the world’s airline profits come from the U.S. carriers, and of that almost 100 percent is from baggage charges and booking changes,” he said.
As low-cost but highly profitable carrier Ryanair (RYA.I) puts it, selling flights is a way to get customers to spend on other items.
“Flights become like bread and milk in supermarket - get them in for that and then you sell them as much other stuff as you can,” the airline’s marketing executive Kenny Jacobs said last month.
IATA, which developed the system for its members, released the first version of NDC in 2015. After two years of testing and several further releases, the standard is ready for widespread adoption, and travel agents and travel technology companies have come around to the concept, Hoyles said.
“This is a massive change, like going from pre-internet to internet,” he said, adding that 55 airlines and 55 travel tech companies had so far been certified for the distribution standard. IATA represents about 280 airlines comprising 83 percent of global air traffic.
Some airlines are already seeing benefits. Using the NDC with Amadeus Altea, a platform that connects agents to airlines’ booking systems, Finnair (FIA1S.HE) saw bookings on Skyscanner rise an average 30 percent, and the number of site visitors who booked a trip increase 4 percentage points to 12 percent, in the first six months of 2017.
While they have been certified for NDC, they highlight there will be challenges for the airlines, such as in handling more transactions and dealing with changes to non-airline items on the itinerary, such as hotels.
“It’s important for airlines to continue partnering with the likes of Travelport and other IT providers that can help them solve these problems,” said Derek Sharp, Managing Director of Travelport’s Air Commerce business.
Reporting by Victoria Bryan; Additional reporting by Jamie Freed and Tim Hepher; Editing by Gerry Doyle