NDC Future-proof distribution


put NDC and [distribution] costs together, but it’s a separate issue. A very large airline has a lot of power and can put forward [its] commercial model. [But] that is not a function of NDC, it is a function of the size of the airline. Many airlines say in private that cost is not the issue.” Pisanello adds: “Typically, people only look at the costs they are interested in. One European airline made a study of the cost of acquisition of a customer from a Google ad and it was upwards of $100 per sale. If that is the price, it is prohibitive. You are negotiating with an algorithm.”


Distribution costs By contrast, he suggests the difference in costs to airlines of direct and indirect bookings “are not meaningful” especially “when you look at the value to an airline of delivering a booking to the other side of the world”. He adds: “We believe in the value of NDC


for airlines and agencies. The agency makes a sale, we enable the sale, the airline profits from the sale. “Airlines appreciate small travel agencies


are valuable to them. They bring passengers who want more out of travel. Airlines don’t want consolidation down to two or three major agencies.” And he suggests airline direct-connect sales are not a cheap alternative, saying:


THE UK is far ahead of other markets in the value of e-commerce, with UK consumers spending more per head than in Germany, France and Italy combined (figure 26), out of proportion to the size of the UK online population (figure 25).


FIGURE 25: SIZE OF ONLINE MARKETS: 2017 Online population (million)


300 254m 220m 200


30 60


0 60m 46m 51m 38m 57m 43m47m 28m 36m 31m28m 20m Online Desktop/Laptop Smartphone 20 | Travel Weekly Europe Report 2018 Source: Ofcom


500 0


178m


Germany France UK Italy US


“Direct connect can be very effective and can be very expensive. Airlines are realising the limits of direct connect, which we also enable, through their experience with it.” So who will pay the costs of distribution


in future? Pisanello suggests multiple models will co-exist. He says: “The model is not agreed. We are still in discussion [and] whatever is agreed with some airlines will not be agreed by all airlines. “There are multiple models in place


already – airlines pay a bit and agencies pay a bit. There is no reason the model should change, but large airlines have a lot of relevance [in certain markets], for example, British Airways in the UK.” He suggests this is not a bad thing: “In a shopping mall, you want a large department store.” Pisanello also has no issue with airlines


wanting increased competition within the airline distribution sector. He says: “Competition is for everyone. We like it. It makes us sharper.” But he adds: “We have proved our


technology and travel expertise, and we think NDC is an opportunity. It creates complexity in the market and we see an opportunity to simplify and solve that. “We understand the airlines want to open the [distribution] market as much as possible. [But] we have scale and capabilities which others don’t have.”


E-COMMERCE TURNOVER At £ exchange rate of €1.22 & $1.35


FIGURE 26: ANNUAL B2C +16% +11% +11%+17%+17%+23%+13% % change YoY


1,000 1,500 2,000 2,500


£2,175 UK


France Germany


£872 £777 £260 £914 £390 £293 Turnover per head (£)


Italy US Japan China


Source: Ofcom 2017


�


million


Turnover per head (£)


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