October 2021

Airline Retailing
An industry vision for Offers and Orders

© 2021 International Air Transport Association. All Rights Reserved.

Disclaimer

The information contained in this document is subject to

regular review in the light of changing business needs of the
industry, government requirements and regulations. The views
expressed in this guide are based on the views and opinions
of the IATA Distribution team and with feedback from across
the value chain, including airlines, IT providers and sellers.
This document is designed as a thought piece about what the
future state of airline distribution may look like. Any strategy to
transition to airline retailing will vary by airline, subject to each
airline’s individual commercial decision-making.
3 Airline Retailing – An industry vision for Offers and Orders © 2021 International Air Transport Association. All Rights Reserved.

Contents

Executive Summary 4

Introduction 6

1. Retailing end vision 7

1.1 Introduction to Airline Retailing and its value 7

1.1.1 Current distribution workflow and case for change 7
1.1.2 Limitations in the current distribution workflow 8
1.1.3 The value of airline retailing 9
1.1.4 Airline retailing: A world of Offers and Orders 9

1.2 End state retailing platform frameworks 10

1.2.1 The future of the Passenger Service System 10
1.2.2 End state: Key functionalities of the Offer and Order management 11
1.2.3 Changing some core industry processes 13
1.2.4 Customer as a reference 15

2. Individual airline transition 16

2.1 Possible business paths 16

2.1.1 Airline Retailing Strategy matrix 16
2.1.2 Analysis of potential paths 17
2.1.3 Setting up the key roles 17

2.2 Technology roadmap 18
2.2.1 Evolution of the PSS modules 18
2.2.2 Removing legacy standards (ET, EMD, etc.) 18
2.2.3 Evolution of other supporting systems 18

3. Industry transition 19

3.1 Value creation 19
3.1.1 Overall This document
value for is a supplement to the Global Update report and provides
the industry 19
a detailed
3.1.2 Transition costs overview of the forecasting framework that underpins the IATATE 19
passenger forecast service.
3.2 Transitioning a full eco system 19
3.2.1 Onboarding industry players 19
3.2.2 Change management and mindset shift 20
3.2.3 Operating dual processes 20
3.2.4 High level timeline 20
3.2.5 A move towards widespread adoption 22

Conclusion 23

Acknowledgements 24

Glossary 25
4 Airline Retailing – An industry vision for Offers and Orders © 2021 International Air Transport Association. All Rights Reserved.

Executive Summary

Adapting the airline industry to the retailing world is possibly 3. New platforms will be required to accommodate these
the most important transformational project of the next needs: They will be order-based and built to facilitate
decade. Since the adoption of the Internet at the end of the interactions between the different modules (offer
90’s, most industries quickly transformed and benefitted management, order management, operations) with the
substantially from e-commerce. While the aviation industry did highest degree of interoperability and flexibility. Airlines,
modernize, it did so only by digitizing paper-based processes IT providers and sellers will decide based upon their
rather than creating more effective processes. Therefore, it is individual needs.
still largely operating with concepts and flows that date back
many decades. 4. Transitioning to these platforms is expected to be
gradual. Ultimately the PSS – Passenger Service System –
Retailing aims to bring the customer at the centre of the is replaced by an IT infrastructure that creates offers and
ecosystem. Any aspect of the journey, from dreaming of orders, stores them, and distributes them to many other
the next trip, to exploring, planning booking, paying, and systems for processing: operations management in the
enjoying the flight and associated products and services, operational window, financial accounting to materialize
needs to incorporate customer’s needs. The customer wants the revenue in the accounting books, seller interfaces to
personalization, efficiency and seamless engagement. process the sales, etc.

Several years ago, IATA with the support of the industry, 5. At the end of the transition, airlines will operate more
embarked on a journey towards the modernization of airline efficiently: They will remove booking classes, fare filing,
distribution, by developing new standards, workflows, they will merge ET, EMD and PNR into one single record
architectures, business cases, implementation paths, etc. All (the order) and they will operate within a simplified and
these elements combined should help and assist the airlines in more agile IT environment. They may also replace code
driving their own transformation projects. sharing and manage air and non-air partners under
modernized retailer / supplier schemes. They will easily
However, this raises many questions: Why do this? How long use existing forms of payments and be much more agile
will it take? What are the main decisions to be taken and who to adopt any other efficient forms or evolve innovative
should be involved? industry settlement plans.

This white paper aims at addressing these questions. There 6.  Airlines will build their retailing strategy based on their
are seven key findings: individual value creation goals, but also their capacity to
drive the change, both from a commercial and technical
1. The value at stake is significant: In an exhaustive perspective. It will require strong alignment between
independent study performed at the end of 2019, key stakeholders (Distribution, Revenue Management,
McKinsey estimated that airlines could generate up to $7 Finance, E-commerce, IT, Sales) and a buy-in from the top
of additional value per passenger (industry average) by management.
the end of this decade. This would come from the sales
of extra ancillaries, optimising payment and aggregation 7. Ultimately the order may be based on the customer’s
costs, and changing many internal processes such as how digital identity: The customer becomes the unique
to do pricing or utilize data. It can also come from new reference.
partnerships, such as intermodal flows that are currently
favoured by many governments.

2. The future customer experience will be seamless

and more contextualized: Tailored fares and products
(on the ground and inflight), adjusted payment methods,
targeted airport connecting times, etc. All components
of the customer journey will be stored in a central order,
single source of truth within the airline ecosystem allowing
seamless access and updates for voluntary and involuntary
(disruption) scenarios. This personalization will come from
contextualising the request as travellers have different
expectations while on a business trip or a leisure trip.
5 Airline Retailing – An industry vision for Offers and Orders © 2021 International Air Transport Association. All Rights Reserved.

As a matter of fact, LCCs and new start-up airlines already

operate with similar architectures.

To support the industry driving this transformation the

IATA’s Distribution Advisory Council (DAC 1) is considering
an aspirational goal of 100% Offers and Orders by 2030,
with the possible sunset of legacy standards (based on the
industry’s requirements). This is an ambitious challenge and
it will be reviewed as we continue to understand the industry
dependencies as well as the speed at which the industry re-
starts and recovers from the COVID-19 crisis.

It will require an industry mindset shift and strong cooperation

well beyond the current scope of any classic distribution
project. Indeed, besides airlines, travel agencies, technology
providers, other players will also need to come on board:
airports, ground handlers and even governments.

DAC consists of 15 airlines from all size and regions

1
6 Airline Retailing – An industry vision for Offers and Orders © 2021 International Air Transport Association. All Rights Reserved.

Introduction

The modernisation of airline distribution started in 2012 when Settlement with Orders, and the Future of Interline. All these
IATA initiated the NDC – New Distribution Capability – program. programs are interrelated and contribute to building the
There were two significant milestones that enabled NDC to retailing storyline. It should be one journey with a start and an
pick up. First, in 2014, the US DOT – Department of Transport end. The starting point is the willingness at top management
– approved Resolution 787, the enabling standard. Then, in level to change the airline commercial model and unlock
2015, IATA released the first data exchange messaging version greater value. The aim is to better serve the customer through
of the official standard. an effective personalization across all distribution channels
and including efficient servicing. The end point is the complete
Following further revisions and enhancements to the data transformation of many processes around the customer, that
exchange standard, the standard is now stable and mature. can only be achieved by adopting modern retailing techniques
Many airlines are similarly maturing and moving forward and platforms.
with their NDC implementations despite the crisis related
to COVID-19. Indeed, more than 66 airlines have adopted This paper intends to describe this journey and is split into
the standard with several of them having already processed three parts:
millions of transactions.
1. The first part presents views on the end state of the
The distribution value chain is equally engaged. GDSs are transition, from a business and technology perspective.
rolling out NDC solutions both for travel agencies (aggregation
platforms) and for airlines (IT solutions called Offer and Order 2. The second part describes the transition use case
Management). Travel Sellers and Metasearch have either built for a generic individual airline, including possible
their own solutions, partnered with new aggregators, or are in implementation paths and the changes needed in IT
the process of adopting GDS solutions. platforms.

IATA is now pivoting its engagement strategy, from a focus on 3. The third part looks at it from an industry perspective:
NDC to a focus on enhanced retailing. Retailing is the process what is the value for all involved stakeholders, and how
of selling consumer goods or services to customers through to drive the value chain transition.
multiple channels of distribution to create benefits for airlines
and their customers. This can be through personalization by This document is designed for senior management (not
creating and offering a range of products and services (flight, necessarily experts in airline distribution) who would like to
ancillaries such as extra bags, special seats, Wi-Fi on board understand where airline distribution and retailing are heading
and other non-air services) and selling to their customer either and how they can build their own roadmap to get there. It also
via their direct channel (call-centre, web) or via intermediaries aims at describing relevant industry decisions that will need to
(metasearch, travel agents, content aggregators, new type of be made, regarding the eventual sunsetting of certain legacy
sellers, etc.). standards and business processes. Readers who want to
understand the current landscape and the need to evolve it,
Embarking on a retailing journey requires airlines to think will focus on the first part. Readers who want to understand
across the entire customer journey from shopping to booking, the drivers across the value chain are advised to focus on the
payment, delivery, and financial back-office processes. From a third part. Some graphical vision of the industry’s key business
business perspective, we look at how the customer interaction functions are there to facilitate conversations between
works and how it is impacted by the underlying systems. Distribution and IT people.
For example, can a booking easily be changed, refunded, or
partially refunded? Can a voucher be issued? Analysing a As always, we welcome feedback to enrich the analysis and
multitude of use cases enables us to identify the industry’s contribute to this major industry initiative.
needs for technology change and which accompanying
business processes could benefit from simplification and
efficiencies. This covers the way the offer is constructed
(including with third-party air or non-air partners), its
distribution and display on the intermediary shelves, payment,
and accounting / settlement.

To complement the introduction of NDC, IATA has put in place Olivier Hours
new programs, such as ONE Order, Dynamic Offer Creation, Head, Distribution Strategy
7 Airline Retailing – An industry vision for Offers and Orders © 2021 International Air Transport Association. All Rights Reserved.

1. Retailing end vision

1.1 Introduction to Airline Retailing To operate this, airlines have traditionally relied on two
and its value systems:

1. The PSS – Passenger Service System – that is the core

In this chapter we intend to define the world of Offers and IT, which is comprised of an inventory, a shopping and
Orders and how it differs from today’s legacy technology. We pricing module, a database of reservations (PNR) and
will highlight the case for change, what airline retailing entails tickets, and a final one for the delivery of the service at the
and the reason and value to transition. airport (DCS).

2. The GDS – Global Distribution System – that enables 3rd

1.1.1 Current distribution workflow and case party sellers – mainly travel agencies – to interact with the
for change airline content held in the PSS and manages the bookings
and tickets.
When customers want to purchase air travel, after the initial
inspiration phase, they traditionally go through three phases: In addition, airlines have developed websites to sell directly to
the end consumer (commonly referred to as e-commerce).
1. Shopping: The customer searches for specific airline Sellers have also developed systems, booking tools, on top of
content, using an airline website or an intermediary (travel the GDSs to be able to sell multiple airlines content to the end
agency, metasearch, etc.). Particular attention is paid to consumer.
the speed of display of offers especially online, the quality
of the offer (base fare, extra products and services), the Interacting with these core systems are satellite applications
range of dates, the richness of the offer (does it include such as revenue management, payment solutions, revenue
other air or non-air providers). The richer and the more accounting, data analytics and client relationship management
relevant the offer, the more likely it is to be accepted by (frequent flyer programs).
the customer, i.e. driving higher conversion rate; however,
today’s offers are often based on price comparison alone. This has worked well for decades and continues to serve the
industry. However, many processes and tools have limitations
2. Booking: The customer picks a specific offer and blocks and there is a clear case for change.
specific capacity, that is guaranteed for a certain period. In
general, a record materialises the booking. Customers are
generally looking here at a simplified process, one-click A key driver for the change is the
experience. customer expectation driven by
3. Payment and ticketing: The customer pays the airline technology. Customers are increasingly
directly or the intermediary in charge of the booking, shopping online, using their mobile
and in exchange for this gets a ticket, that is a proof of
payment but also a legally binding contract. Customers phones, and looking for optimised
appreciate to find their preferred methods of payment and user experiences. When shopping for
a simplified user experience.
air travel, customers expect similar
Following these phases, products will be delivered interfaces and services they are used
and serviced.
to for their online shopping experience
(e.g., Amazon, Apple, etc.). They also
expect a similar user experience
between leisure and corporate
interfaces.
8 Airline Retailing – An industry vision for Offers and Orders © 2021 International Air Transport Association. All Rights Reserved.

Airlines find it increasingly difficult to achieve many of their • Requirement to implement revenue integrity checks as
distribution ambitions. To become true retailers, they would fares quoted to the end customer are created by a 3rd
need to: party.

• Dynamically create offers based upon dimensions • Lack of alternatives to card payment in indirect
such as competitive and comparison pricing, shopping distribution when airlines are paid directly by customers.
context, customer’s needs, etc.
• Difficulty to cross-sell ancillaries between carriers as
• Easily be able to add new products and services or well as set up and manage interline agreements.
bundle them into the initial offer.

• Personalize and / or contextualise offers, which requires 1.1.2 Limitations in the current distribution
the ability to identify the customer and know their workflow
preferences and situation.

• Offer an efficient portfolio of payment solutions both for Airline content is largely distributed to travel agencies by
the base offer and the ancillaries: payment instruments, GDSs, that operate a significant number of functionalities, e.g.:
payment time (instalments, at time of booking, ticketing,
check in, etc.) for the end customer or for its distribution 1. Collect airline schedules filed with schedule aggregators,
partners. fares filed with fare distributors and availability maintained
and distributed by airlines.
• Issue a single reference for the offer (flight and
associated ancillaries services). 2. Quote fare including all extra information needed (e.g.:
government and airport taxes, surcharges, etc.).
• Service the order in any kind of change scenario and
enable an engaging and simplified customer experience 3. Create the agency PNR.
for all services and across all sales channels.
4. Check airline card payment acceptance and create the
• Track service consumption – i.e. plane boarding, service authorization request.
delivery (lounge access, Wi-Fi, etc.) real time.
5. Authenticate the seller and check its status (authorized to
• Simply account for sales and payment – as any provider sell on behalf of the airline).
of service.
6. Request the issuance of accountable documents upon
• Perform advanced analytics to better understand successful completion of the payment initialization.
customer needs.
7. Report the sales to the relevant settlement plan (e.g. BSP)
Airlines have been struggling to do this with the current for the airline to request the fund transfer and to create the
technology infrastructure, however they have been able to find internal sales record in the revenue accounting system.
workarounds. They have also leveraged historical standards.
One could claim that things work, however it is far from being In this legacy workflow operated by the GDS, airlines provide
optimal. The main challenges faced by the airlines are: availability per booking class and per flight. This means that
airlines operate in a “blind” environment where they cannot
• Inability to know who the customers are, and their needs. estimate demand in real time, beyond total volumes (full
polling only partially addresses this). Airlines also do not “know
• Difficulty to create and distribute specific products, the customer,” including the context in which the request is
as they need to have an ATPCO filed fare, ancillaries, being made and is thus unable to tailor the response based
charges, etc, followed by distribution by the different on the customer’s specific needs. Availability requests are
GDSs. generally not stored (unlike web searches), and as a result this
information gets lost.
• Price points limited to only ranges based on the 26
letters of the alphabet. The objective driving airline retailing is to bring back control
to the airlines. It is also the opportunity to better know the
• Processes still driven by the paper initial logic. customer and offer a better service.

• Complexity of fulfilment of ancillaries (EMDs mimic ET Travel agencies also expect to have access to more airline
processes) and separate servicing of the reservations products and to be able to compare them. Today, most of what
record, ticket and miscellaneous document. they see is a schedule, and even booking classes in legacy
cryptic screens (also called “green screens”).
• Inability to track in real time product consumption as the
information does not flow immediately back into the PSS. There is an appetite to move forward and many players are
looking for answers.
9 Airline Retailing – An industry vision for Offers and Orders © 2021 International Air Transport Association. All Rights Reserved.

1.1.3 The value of airline retailing Overall, these changes are pro-consumer as they provide
simplification and will enable to adapt faster to more industry
Why would an airline invest time and money to implement changes. During the COVID-19 crisis there were expectations
retailing and the associated organisational re-design it would of simplified refunds, or issuance of vouchers, discussion on
require? new payment deadlines (Pay as You Fly, etc.). All these trends
can be accommodated in the world of retailing.
The model is modern online retailing, which is common
amongst many retailers that personalize Offers, and create
Orders to store all customers records and where user 1.1.4 Airline retailing: A world of Offers and Orders
interfaces and experiences are simplified.
The critical facilitators to this journey to value creation are the
Retailing can produce value for airlines in five main ways: IATA standards that support the implementation of Offers &
Orders and drive capabilities that are critical to retailing. These
1. Development of new Offers: Airlines can develop and standards were and are designed in different programs (New
commercialize new products and services. Distribution Capability, Dynamic Offer Creation, ONE Order,
Settlement with Orders, Future of Interline) that all concur to
2. Enhanced revenue management: Airlines can modernize the same goal of retailing. They aim to ensure interoperability
their revenue management, implementing more dynamic between systems, whoever the provider is.
pricing, adding price points, creating bundles, and
optimizing the complete offer. If we go back to the customer retailing journey and its four
main phases Shopping – Booking – Payment and Ticketing,
3. Optimized distribution mix: Airlines can benefit from new here is what the introduction of modern retailing standards will
technology intermediaries and diversify their sourcing. bring:

4. Better targeting of and engagement with customers: • Creation of Dynamic Offers: Will allow airlines to move
Airlines can personalize and contextualize Offers. from static to tailored and dynamically priced offers. As
a result, the customer will have access to more relevant
5. Optimized payment and fulfillment, including Offers.
servicing: Support alternative payment instruments
focusing on main metrics (customer preference, • Enhanced Distribution: New Distribution Capability
acceptance costs, cash flow, risk of fraud, etc.). standard is a data exchange format to connect and
provide a rich airline offer to the customer regardless of
These five ways are either contributing to value creation, the distribution channel.
or cost reduction, or a mix of both. Managing data brings
further value across most of these dimensions. Data feed • Fulfilment with Orders: The ONE Order standard
improvement in revenue management systems, enables to creates a single integrated customer record to
better understand channels and customers. A real time data streamline distribution, delivery and accounting
flow enables faster decision making, that is key to pricing or processes without the need for PNRs, and separate
schedule adjustments. ticket records.

Ultimately this will contribute to a better customer experience. • Interline with Offers and Orders: Will modernize and
Customers will benefit from lower fares, greater transparency, simplify interlining and support airlines to connect with
more personalization and greater product choice. The value new partners.
chain players will modernize their capabilities and be able to
better serve their customers. • Settlement with Orders: Will simplify the money
collection process with a simple message between
Working with Orders will bring very specific value to the travel sellers and airlines to trigger the payment.
airlines:
The implementation of industry standards will bring benefits
• A simplification of their IT, as they do not need to as it shortens and simplifies overall implementation processes
reconcile different records. and stimulates competition.

• Savings thanks to removal of processes and tools (ET

server, cost of auditing, etc.).

• Real time data flows that add value for decision making
(pricing, schedule).

• Efficient servicing of all the order components.

• Facilitated intermodality, using one record for the air and

train journey.

• Facilitated partnerships for air and non-air using orders

in the same way as modern retailers.
10 Airline Retailing – An industry vision for Offers and Orders © 2021 International Air Transport Association. All Rights Reserved.

1.2 End state retailing platform This is not about re-engineering or making changes to the
frameworks PSS, but about transitioning over time to a new environment.
It connects to the outside world (the seller world) via an
API, accessible directly or via intermediaries. The offer
Understanding the current distribution architecture and how it management is the unique source of content, not only to
will alter in the end state architecture is key to recognizing the 3rd party sellers (TMCs, OTAs, or metasearch operating in a
impact of the planned changes. This will enable an informative facilitated booking approach), but also direct sales (web, call
and clear communication to internal departments and senior centre, physical sales offices).
management. It will also help identify where resources should
be allocated. This architecture is highly flexible and modular, enabling
interoperability between players. The Offer Management
system creates the offer, which includes the price the airline
1.2.1 The future of the Passenger Service System offers to the customer, ancillaries, bundles. The Order
Management fulfils the accepted offer, includes payment,
The airline retailing journey is about how to move from tracks delivery status, and is the single source of truth for the
a current legacy channel and process-centric driven customer order data.
architecture to one that is omnichannel and customer centric,
relying on centralised capabilities – i.e. Offer and Order Analytics are a key component of the architecture as a lot of
management capabilities and data. In the end-state the airline data is generated and needs to be stored to be able to offer a
will have its own retailing platform from which all its sales better service to customers.
channels will be managed (direct and indirect), via a single
source of truth. Non-air Orders (e.g. taxi, baggage, pick-up services, etc.) will
benefit from the data feed from the Order Management to
The overall architecture (see figure 1 below) foresees an trigger service delivery.
Offer Management component and an Order Management
component that may be delivered from a single provider,
or from different providers using industry standards when
needed.

Figure 1: End state vision

TMC OTA Other seller Web direct Other direct

Aggregators

API layer

Offer & Order Payment

Analytics

Network Operations
Planning Management

Offer Management Order Management

Seller identity &
Financial
Channel
Accounting
Management

Customer
Relationship Partners
Management
11 Airline Retailing – An industry vision for Offers and Orders © 2021 International Air Transport Association. All Rights Reserved.

1.2.2 End state: Key functionalities of the Offer

and Order management

The current core of an airline’s system landscape lies in its

Passenger Service System (PSS), typically consisting of
an inventory system and a reservation system as well as
sometimes a departure control system (DCS). If an airline
wants to implement an architecture based on Offers and
Orders, the question arises as to how the PSS needs to be
enhanced to work in this new retailing world.

The industry is starting to look beyond today’s PSS solutions

and limitations. Airlines are starting more and more to consider
the PSS as a set of capabilities, that can be unbundled.

The following diagram (see figure 2) details views of the

core functionalities of the Offer and Order management. It
provides a lower granularity to enable us to understand the
main workflows driving the creation of an offer and then its
distribution.

Figure 2: Key functionalities of the Offer and Order management

Offer & Order Analytics

Network
Planning
Offer Management Order Management

MASTER DATA Order

Seller Identity & Pax info, Services status, Lifecycles, Payment
Channel Notification, ...
Management Partners Product
Offer Rules
Contracts Catalog

Customer Airline
Relationship Partners Order
Schedule
Management Revenue Offer Stock Servicing &
Management
Management (Flight & Ancillaries) Change Management
(Itinerary builder)
3rd party
Partners Order
Airline
DYNAMIC PRICING & BUNDLING
Partners Offer
Offer construction, optimization & conversion
Customer, seller & channel Delivery & Financial
3 party
rd
Accounting Management Accounting
(Flight, Ancillaries, Bundles, Partners, Payment forms)
Partners Offer

3rd Party
Operations
Partners
Management
Delivery
12 Airline Retailing – An industry vision for Offers and Orders © 2021 International Air Transport Association. All Rights Reserved.

Below is a description of the key business functionalities, 3. Partners Orders: an interaction with the partner’s Order
from top to bottom and left to right. This supports an overall Management to synchronize the order.
process to create more complex offers, service them, and then
deliver and account for them. Processes need to be simple, 4. Partners Delivery: for the players who deliver a service
real time, and fully automated whenever possible. (lounge access, airport fast track, rail, etc.).

Although there is a clear split between the shopping, booking Partner Contracts
and paying flow and the operations, airlines will want to be able Partner contracts provide all background information and data
to sell products in an efficient manner until the boarding and needed to operate an efficient interlining for the sale of 3rd
even during the flight, using the same background technology. party products and services.

Offer & Order Analytics Offer Rules

Improved data will support offer and order construction. All Conditions attached to the offer are stored, i.e. specific
transactions can be stored. A much more efficient science- applications, change and refund policy, etc.
based approach can be implemented. Enhanced analytics are
therefore a key building box of the future framework. Product Catalogue
The list of products and services includes scope, specific
Network Planning T&Cs, application.
This is the scheduling of all the airline flights. It feeds the
Schedule Management module that will provide relevant Schedule Management
routings at O / D level, including specific elapse time, minimum There is a real time schedule and connection builder based
connecting times, minimum grounding times, etc. The need upon customer request and information that can be collected
to get airport slots, build a schedule of destinations, allocate to offer most relevant elapse time, connections, etc.
aircraft and capacities, remains in the end state. The need to
be much more agile and flexible exists already, to be able to Revenue Management
capture short term opportunities. The main change will be in Revenue Management optimizes product availability by
the ability to provide tailor-made solutions to end customers. leveraging analytics to predict consumer demand. There is
a need to generate a relevant bid price for a specific flight.
Seller Identity & Channel Management While current complexity resides in the forecasting at booking
The identity management enables to manage sellers. It class level as a proxy of bid price to overcome current RBD
contains a list of the different Travel Sellers, their sales status distribution paradigm, one of the challenges of future systems
(e.g. IATA BSP or ARC) and key statistics about their sales is to have a more sophisticated total demand forecast.
performance. For an airline, it is important to know the seller’s
capacity to sell ancillaries as this is important for corporate Offer Stock
traffic; for an OTA it is important to track its look to book Offer Stock is the inventory that does not need to rely on
ratio as they often generate high volumes. The Offer will be booking classes. It reflects the capacity available for sale.
adjusted depending on the customer touchpoint and seller.
This will determine how to route the shopping request (e.g.: Dynamic Pricing & Bundling
use of cache or not, etc.) and provide the right content for the To create an offer, the pricing engine needs the following
intermediary to display. Airlines also may want to have the primary elements:
technology intermediary identity (GDS, aggregator, etc.).
1. A flight connection builder (Schedule Management) that
Customer Relationship Management provides a list of connectable flights with connection
Customer relationship management is a process in which a builders from origin to destination, subject to routing
business or other organization administers its interactions and availability constraints such as direct or / and via
with customers, typically using data analysis to study large connecting point(s) with associated and real-time stock
amounts of information. Data relevant to creating new Offers information, i.e., physical capacity in the aircraft.
range from consumer credentials, to preferred options
(ancillaries, payment) and flight history. 2. A bid-price from the RMS, i.e., the outcome of the revenue
optimization.
Partners
Partners will be both airlines (e.g. for interline), and 3rd parties 3. A list of extra products that can be sold: Product
(e.g. intermodal), delivering either reservations (other airlines, Catalogue.
other transport operators, etc.) or products and services –
that may or may not require an inventory. To manage these 4. Stock that reflects the capacity available for sell.
partners, the key modules are:

1. Partners contracts: a list of all partners and the

commercial conditions.

2. Partners Offers: an interaction with the partner’s Offer

Management to get the offer for the relevant product
(flight, etc.)
13 Airline Retailing – An industry vision for Offers and Orders © 2021 International Air Transport Association. All Rights Reserved.

In terms of workflow, there are three steps supported by Financial Accounting

airlines individual business processes: Many activities are currently achieved in Revenue Accounting,
like coupon valuation, preparation for collection of moneys
1. Assemble the different elements to create the offer. (settlement), auditing, aggregation, and reporting (for
example: taxes). In the end state, many of these processes
2. Adjust that offer dynamically depending on the customer are transformed or moved upstream (Offer Management,
segmentation, the shopping context, the competition, etc., Order Management) or downstream (Financial Accounting).
thanks to algorithms such as willingness to pay analysis For example, the interline settlement terms (value, etc.) are
(i.e. leveraging data to optimize supply and demand). provided in the offer at time of shopping, this may eliminate
the proration process of the interline services. There is major
3. Fine-tune the content depending on the identity of the value in real time data, for example revenue from a flight ready
seller. to depart.

During steps 2 and 3 there is a clear focus on the seller and Although we are not showing explicitly a revenue integrity
the customer touchpoint. Understanding the customer function, some checks will disappear (for example integrity
intermediary (TMC, OTA) is important, and when possible, of the offer) while others will need to be strengthened (for
also the touchpoint (desktop, mobile, etc.). Customer-facing example risk management / fraud detection).
platforms need to get when possible tailor-made content
depending on the touchpoint. Scalability is an important focus, Operations Management
especially in view of continued increase in look-to-book ratios. This is currently called the DCS – Departure Control System. It
One of the goals is to maximize the sales conversion. is likely to evolve as processing orders will be simpler. Current
systems consist of customer management workflows (check
Order in, boarding, baggage handling) and flight related workflows
The order is stored and managed throughout its lifecycle, and (load and balance). The DCS is critical for operations and has
this includes payment, changes, etc. The status of each service very specific SLAs (concerning downtime, etc.). In the future
is also tracked. This includes any modification done either by some processes will evolve or disappear. For example, we
the customer or by the airline, in case of disruption of flight. could expect the check in process to be removed. If the airline
has received all relevant customer data (passports, etc.), it
Servicing and Change Management does not add value. Therefore, the next generation DCS will be
Servicing and Change management orchestrates the changes different.
required in the order for various voluntary or involuntary
change scenario. Events from the schedule management 3rd Party Partners Delivery
module trigger changes on the original order, may it be timing All delivery partners get orders, so that they can provide the
change or alternate flights in case of flight cancelation, flight service, and then feedback the Order Management with the
renumbering, etc. For all change scenarios, this module delivery status.
ensures the protection and notification of the passenger as
well as the coherence and reconciliation with the stock and
external partners. It reflects events impacting the life cycle of 1.2.3 Changing some core industry processes
the booked flight.
There is a need to revisit many processes that have existed
Delivery and Accounting Management for decades. The focus here is on fare filing, booking classes,
The objective is to potentially insource in the Order interlining and code sharing.
Management some of the business functions of the DCS and
the Revenue Accounting. Depending on the size and shape of Fare Filing
the Order Management, airlines and IT providers may want to The future of fare filing has been debated for several years.
have some functionalities that can facilitate interaction with It enables the efficient distribution of fares into GDSs. In
different types of DCS and Revenue Accounting. This business the retailing world, however, the airline creates the offer and
function serves to highlight some of the processes that could it does not need to relay on fare filing, which limits pricing
be done by the Order Management. freedom. The offer should be based on the ability to quote a
price dynamically and not have to rely on a published fixed
Payment amount distributed from a database to 3rd parties.
The airline needs to integrate with all acquirers and payment
providers supporting the payment instruments that it accepts. In the end state there should be no need for fare filing. There
This platform can either be internal to the airline or fully is a need for business rules, that are tied to a dynamically
delegated usually through a bridge in the hosted payment page generated price. There is also a need for an extended global
of the presentation layer that connects to a 3rd party payment database to manage, for example taxes, fees and charges,
platform / gateway. similar to how it is managed today. However, the removal
of fare filing also requires engaging regulators, as some
Airlines want to be able to differentiate payment forms from governments still require fares to be filed.
the offer creation stage, adjusting to the customer’s choice.
Until the end state is reached, it is likely that many airlines
will continue to rely on fare filing capabilities, albeit in a more
efficient way. Airlines may adjust real time the output from
the fare filing before distributing the offer to the customer.
14 Airline Retailing – An industry vision for Offers and Orders © 2021 International Air Transport Association. All Rights Reserved.

Booking Classes Retailer and a Supplier and relies on the concepts of Offers and
The physical aircraft capacity, i.e., the number of total seats to Orders. The Retailer initiates a relationship with a customer at
sell, is distributed among a number of booking classes. This is the time the customer makes a shopping request and provides
the inventory. products and services either directly or by engaging Suppliers.

The challenge is to determine whether booking classes are The aim of this framework is to support airlines in connecting
relevant in the end state. There are two main perspectives to and interacting with different suppliers and unlock the new
analyse this issue: opportunities such as accessing and selling any content from
these 3rd party suppliers (i.e. transport operators).
• Booking classes are primarily used to host specific
fares with a value; each booking class corresponds to Traditionally, interline was based on GDSs constructing the
a revenue range. Booking classes feed in real time the offer. Airlines would negotiate interline agreements with
seat availability to pricing engines (GDS, IBEs – Internet partners, then setup the agreement in ATPCO to ensure
Booking Engines). In a retailing state based on dynamic a display of the O / D fare and auto pricing using the right
pricing, booking classes in a traditional way no longer booking classes (as well as points of transfer, authorized
make sense. During the transition, a two-step process mileage or specific routing, etc.).
is possible (though other options could be considered,
either on its own or in combination). Initially, legacy Although the MITA arrangement mechanism has served
processes are retained, creating fares with the fare filing the industry well over many decades, e.g., ensuring smooth
vendor, and adjusting the output depending on other interlining between ticketing carriers, it has shown its limits
data feeds e.g., bid price, willingness to pay. for new types of partnerships, like ticketing-to-ticketless
This phase is based upon booking classes. In the second carrier. This shortcoming has been filled by new players who
step, Offers are created in real time from the Offer introduced “virtual interlining”, aggregating content from two
Management System (and will not be retrofitted into different carriers and building a solution for the end-customer.
existing workflows). However, these workarounds are complex to implement and
not always customer friendly, and airlines have lost control of
• Booking classes are used to feed internal systems that the end-to-end offer.
need a specific value. There are up to one hundred
systems in very large airlines, across the full scope of the Different interline models are likely to co-exist. GDS-based
commercial activity (e.g., corporate sales management, interline is likely to remain until late in the transition to Offers
disruption management, Frequent Flyer Programs, etc.). and Orders; airlines and their technology providers are
The data elements associated with booking classes may expected to implement the new SRSIA framework; 3rd parties
not be actively used but kept in downstream systems may try to further develop solutions like they do today,
during the transition. although this may face resistance from airlines due to their
lack of control.
In the end state, booking classes should not be necessary.
However, it is not a priority to remove them in the short to The future of interline is especially relevant for new types of
medium term as this would create too many IT challenges, flows, such as air and rail combined, as well as full service and
since they feed many airline systems. A new start-up airline LCCs.
may wish to consider operating its revenue management
without booking classes (like many LCCs do today). The initial There is currently a growing focus on interline, as it is crucial
step should be to remove booking classes from the price to corporate traffic, and in the context of smaller networks
creation flow. Travel agencies also use booking classes to feed operated by many carriers, who are relying on partners.
their systems and will be impacted as well. It is a major project
to remove booking classes and requires a detailed assessment. Code Share
Code share is a commercial arrangement whereby an airline
In the future, the notion of inventory will not be based on sells seats on a flight operated by another airline. This
booking classes: it will be a stock counter monitoring the mechanism was introduced to enable airlines to expand the
physical capacity to sell (i.e., total number of seats in the range of destinations they can offer or maximise the number
aircraft plus potential overbooking for the sales process). of frequencies on a given route.

Interline It provides two advantages for airlines:

Interline is the action of selling a combined journey with at
least two different carriers with one contract, one price and • Historically, this increases the number of flights
one currency and ensuring that the passenger and her / his displayed in the GDS green screens.
baggage is managed seamlessly during her / his journey.
This includes the end-to-end transfer of the passenger and • It provides bigger reach, by increasing the commercial
baggage, as well as protection in case of disruption, etc. The coverage, leveraging the partner’s brand, especially in
Interline partnerships are managed via the Multilateral Interline non-home markets.
Traffic Agreement (MITA) Framework. In the context of the
modernization of airline distribution, a new framework is put
in place: SRSIA, the Standard Retailer and Supplier Interline
Agreement. The framework introduces the concept of a
15 Airline Retailing – An industry vision for Offers and Orders © 2021 International Air Transport Association. All Rights Reserved.

These objectives are less relevant in a retailing world. Offers

are now displayed in user interfaces and are ranked following a
set of criteria (elapse time, fare level, departing time, etc.) that
can often be specified by the traveller. It is straightforward to
display a group of carriers in a user interface. On top of this, as
airlines create Offers, they may choose to create full itineraries
on their interline partners and would not need airline codes for
this. Lastly, airlines have the ability not only to create, but also
to fulfil Offers with different operating airlines, using an order.
In the end state, traditional code shares appear less relevant
and may not add much if any additional value. They also trigger
massive complexity in the systems. Airlines recreate artificial
codes and tickets with players that do not use them (e.g.: train).
Airlines need to ensure their ticket stocks are connected
and must develop complex processes, like real time bid price
cascading. An evolution of traditional code shares is foreseen
in the retail-supplier interlining framework using Offers and
Orders. Legal aspects need to be further analysed, for instance
in the framework of the evolving CRS Code of Conduct.

In the environment of Offers and Orders, moving away from

code sharing to concentrate on an efficient interlining is
certainly appealing. However, transitioning away from code
shares is a project that goes well beyond the retailing scope of
this paper.

1.2.4 Customer as a reference

We have described an offer- and order-based end state. The

order is a reference attached to a customer and its flight as
well as products and services. One industry vision is to use the
customer identity as reference. The great added value is that
this goes beyond the sales process. The same identification
can be used during the entire customer journey, i.e. in the
airport (security, etc.), possibly during the flight. There is no
contradiction between an ambition to process Orders and an
ambition to use the customer as a reference, they complement
each other. There will always be an Order to reflect the
customer purchase, this is central to operating airline
commercial IT. The industry is expected to allocate more
time on this concept in the future and address some of the
challenges raised, for example on data privacy and security.
16 Airline Retailing – An industry vision for Offers and Orders © 2021 International Air Transport Association. All Rights Reserved.

2. Individual airline transition

2.1 Possible business paths Technology dimension

The airline should assess its capacity to drive significant
IT projects. Does it have the expertise, the resources, the
In this chapter, we will cover the main possible technology and willingness? Does it have experience of large IT projects? Can
business options based on the Airline Retailing Strategy Matrix it build solutions in-house or manage integrations with its own
and some possible transition paths inspired from examples of tools? Does it prefer to rely mostly on IT supplier, or is it ready
early adopters in the industry. to handle several suppliers that bring interoperable systems?

It is not easy to build common paths, as airlines, business These key questions concern relationships
models, commercial models are very different. A minimum between Offer / Order Management and PSS, RMS,
common ground could be based upon focusing on the offer shopping / merchandising engine, etc. There are naturally
first (create offer, enhance them with dynamic pricing, new pros and cons in operating with one supplier vs several, in
products, etc.), then Orders (create Orders, process them) and in-sourcing vs outsourcing. They depend both on the supplier
towards an omni channel approach. and the airline capacity to steer.

Business dimension
2.1.1 Airline Retailing Strategy matrix The airline should assess its capacity to implement business
transformation. Is it ready to embark into changes of its
The full transition to Offer and Order management for an airline business model? Is it willing to negotiate different types of
should be considered as a transversal project. It involves high commercial deals with its suppliers?
cooperation and appetite to change from both the business
side and the IT side. The Airline Retailing Strategy matrix is thought as a
collaboration tool to inspire airlines and trigger discussions
There are two main dimensions in this transformation that internally between their departments. We invite all airlines
need to be jointly considered: to position themselves on the matrix based on their current
capabilities and to think where they would like to be at the end
1. Business dimension: appetite and capability of an airline to of the transformation journey. The transition paths inspired
make its business model evolve towards greater freedom from the industry will provide further guidance of the main
to distribute content. considerations and source of value creation throughout the
journey.
2. Technology dimension: appetite and capability of an airline
to improve and simplify its IT systems and platforms.

The appetite for business model change is expected to vary Chart 1: Airline Retailing Strategy Matrix
greatly between airlines. Some may want to keep existing
models as they are, while others may pursue ways to get more +
freedom in the way they manage content.
Product-based Full scale
approach retailing
The same applies to technology. Some airlines may have
a high reliance on the PSS and distribution via the indirect
Business model change

Less
channel using legacy technology. Others may have much likely
scenario
stronger IT capabilities, including in-sourcing of core systems.
Partner-based
approach

Less likely scenario

-
- IT change +
17 Airline Retailing – An industry vision for Offers and Orders © 2021 International Air Transport Association. All Rights Reserved.

2.1.2 Analysis of potential paths 2.1.3 Setting up the key roles

Where to start? – is the question most airline executives ask One of the first steps is to set up the right organisation. The
themselves. The strategy matrix can help determine possible airline needs to determine the skillset needed from their
paths. teams. This industry transformation breaks the traditional
airline silos. Here are possible points to consider:
A common theme to most – if not all – implementations, is
the desire by the airline to create and control the offer. This • Distribution: Sets the vision, the timeline, and the overall
enables value creation (e.g., from enhanced sales, ancillary project management. It may create a position of leader
sales in the indirect channel and overall upsell via richer of the Transition.
content or better customer segmentation). Implementing NDC
can take several forms. The starting point is to have a pricing • Revenue Management: Is a major stakeholder as it will
engine and create the Offers in the airline environment (like for look at the impact on the revenue management system
direct sales). Airlines may also wish to have a merchandizing and prepare dynamic pricing; interlining teams are
platform to offer specific ancillaries, as well as optimize the expected to look at new partnerships.
choice of payment instruments in order to maximize the sales
conversion. • IT: Will orchestrate future platforms and suppliers
RFIs / RFPs.
A key differentiator between strategies is expected to be the
management of interline. How much is it in the critical path for • Finance: Is involved to help determine payment
the airline? Interline adds substantial complexity but is equally strategy, supporting the most efficient mix of payment
a significant selling-point for many customers (who wish to alternatives; it will look at payment costs, cash flow but
combine full service, LCCs, rail, bus, etc.). also conversion challenges. It will also investigate the
impact on the Revenue accounting and ERP. It should
Possible transition considerations work hand in hand with Distribution teams.
In general, an airline’s approach to retailing is expected
to consist in a mix of focus on IT change and on business • Sales: Will negotiate enhanced deals with travel
model evolution. The airline is expected to implement new agencies and corporates, based on content, money
functionalities, while ensuring business continuity. PSS and collection forms, etc.
OMS need to coexist for that purpose.
• C-level suite should understand and support.
Potential paths identified are:
This transition requires a change of mindset: be ready to
• Product-based approach: Focus is on creating new review organisation, processes.
Offers with enriched content and by implementing
dynamic pricing and dynamic bundles. The airline will
maximise short term value creation opportunities. It will
also seek to expand new distribution channels. To be
able to achieve this, it will use workarounds for some
of the flows (example: fulfilment and servicing). In this
scenario the IT focus is on the Offer Management and
the quality of the pricing engine.

• Partner-based approach: Focus is on a smooth

integration with partners such as air and non-air
interline. The airline will focus on achieving value
creation by selling efficiently through 3rd parties but also
by significantly simplifying all accounting and settlement
processes. In this scenario the focus is on Offer and
Order Management and the efficient interaction with 3rd
party systems.

• Full scale retailing: It will consist in removing platforms

duplication, maximizing business and IT flexibility with
optimized data analytics. This is likely the end-state for
many airlines. It already corresponds to the situation of
most LCCs.

These are not necessarily mutually exclusive.

Some airlines may also take into account their Joint Venture
(JV) partners and / or their Alliance partners – and focus on
their interline strategy.
18 Airline Retailing – An industry vision for Offers and Orders © 2021 International Air Transport Association. All Rights Reserved.

2.2 Technology roadmap separated from the booking itself, it is just a matter of status.
EMDs serve to issue payment receipt for ancillaries. Many
airlines find the cost rather expensive and they have not been
The end state has been clarified in the previous chapter. widely accepted when they replaced vMCOs. On top of this,
The objective now is to determine how to get there from interline EMDs has not been implemented by many carriers.
an individual airline perspective. Considering the ‘strategic’ Removing EMDs should be possible as soon as airlines
focus has been clarified, what are the main technology process Orders: ancillaries would be booked into the order.
developments to be made. It is important to have in mind that
the airline will need to onboard several processes that were
originally carried out by the GDSs. In a world of retailing, with Offers and
Orders, the airline will simply need to
2.2.1 Evolution of the PSS modules update the order statuses to record
the fact that it has been paid and then
The end state is about transitioning PSS modules to modern
Offer / Order retailing platform. This will not happen overnight. delivered for revenue recognition. No
For many airlines, the PSS is likely to remain in place until the more ET and EMD will be required.
end of the transition. Other airlines may manage to do it faster,
but it is likely to take several years. Concretely, the information is flagged in
the order and kept in the order history.
The general logic is to start by building new workflows on
top of the PSS. The target should be to address some of the
identified pain points and reap the benefits of having Offers PNRs to evolve into Orders which will include the legacy
and Orders. At one stage, the number of processes still ticketing information
needing the PSS will be so reduced that the final phase out PNRs play a core role in the distribution process acting as the
process can start. This aspect is one of the main focus of the source of truth for reservation information. Additionally, PNRs
airlines. Operating dual systems adds costs and complexity can be regarded as the gate keeper of an airline’s seat and / or
and this phase should not last too long. ancillary inventory, decrementing the number of available units
based on the booking status. Information available in a PNR
can be mapped into an order, thus the path of PNR evolution
2.2.2 Removing legacy standards (ET, EMD, etc.) into Orders has commenced. Only when the inventory
management function of a PSS can be decoupled from PNRs,
When should the airline remove its legacy standards, and what and the source of truth of booking, payment and inventory
should be the priority? IATA believes that things need to be information (or stock management) resides in the Order, the
looked at in sequence. A prerequisite will be to create Orders. full retailing benefits can be achieved.
As soon as this is done, airlines have a base upon which to
operate. They can leverage these Orders but still retrofit into
existing legacy technology, and this is a core principle to 2.2.3 Evolution of other supporting systems
facilitate the transition. In the end state an airline will no longer
retrofit, and legacy standards will become obsolete. The The end state diagram presents several supporting systems
industry will need to identify if current standards are sufficient that enable retailing. Most of them will be impacted at some
to operate the “old” and the “new” worlds in parallel. stage by the transition.

E-Tickets (ET) and Electronic Miscellaneous Documents We list three important principles to evolve these systems:
(EMD) are no longer required
E-tickets are the contracts between the airline and the • Modularity is essential to ensure systems adapt to each
customer. They are also the customer’s receipts for their other’s.
payment of a flight and facilitate the delivery tracking and
revenue recognition. The same receipt exists for ancillaries • Full interoperability must be ensured, and this may
and is called an EMD. They date back from the early stage of require specific standards to be included.
aviation and the need to have paper tickets. Airlines would
provide travel agencies with paper documents so that they • Data ownership needs to be clarified – both for privacy
can issue airline tickets. As soon as the agency was going to but also economic reasons.
run out of documents, it would request new ones from the
airlines. This was an efficient way to prevent fraud, as airlines The most likely scenario is to implement the Offer and Order
could monitor and restrict sales by agencies until they safely Management in the initial setup, and to have detailed business
collected the funds. requirements for the different modules. Afterwards, the airline
can decide on how to transition the supporting systems.
When the industry moved to E-ticket, it did not change the Some flows and possibly systems will be removed, some will
underlying processes, i.e. E-tickets are in fact E-paper ticket. change; detailed business requirements will be needed for
However, 15 years later, it is wise to raise the question: do we each of them.
still need E-tickets? The answer is no, and the same applies
to EMDs. In a retailing industry, payment information is not
19 Airline Retailing – An industry vision for Offers and Orders © 2021 International Air Transport Association. All Rights Reserved.

3. Industry transition

3.1 Value creation industry turnover post-COVID. Industry commercial systems

IT costs are approximately 10 billion USD 3; hence this specific
transition would require around 10% of current airline IT
3.1.1 Overall value for the industry costs and in some cases could be all or partly financed by
reallocating resources and priorities.

According to a study performed by McKinsey & Company

(McKinsey) end of 2019 2, the value of airline retailing for the 3.2 Transitioning a full eco system
industry can be significant. McKinsey estimated that the
industry could create approximately 40B USD in additional
annual value by 2030. This represents up to an extra 4% of A full eco system consists of several hundred airlines, more
the total industry revenue or $7 per passengers at the end than a hundred IT providers and then thousands of airports
of the decade (it is important to point out that customers and Travel Sellers.
gain value as well by greater choice, innovative new products
and services tailored to their specific needs, greater pricing
flexibility, etc.). McKinsey estimated that 70% of the value 3.2.1 Onboarding industry players
creation would be driven by additional revenues and 30%
by reducing costs. This would come from the sale of extra Implementing Offers (NDC) required a good cooperation
ancillaries, optimising payment, and aggregation costs, and between airlines, technology providers, and sellers. It started
changing many internal processes such as how to do pricing mostly with pilots involving a limited number of players. An
or exploit data. They also concluded that 40-50% of the value airline could sign a deal with a specific aggregator and target a
created would likely be sustainable in the long term through small number of travel sellers to start with.
broad adoption of retailing capabilities.
A full industry transformation will require many more players to
There is no major industry transformation without value for get on board, as practically anyone handling PNRs or ETs will
all players. Travel sellers will be more competitive with airline have to adjust to the new environment.
websites as they get richer content and more products. They
will be able to better serve their customers, enrich reporting Airlines
with more data, improve duty-of-care by having access to real Airlines are expected to drive the transformation. By enabling
time information. They will be able to better compare products new workflows, airlines will support and facilitate the rest of
from airlines and advise their customers. Aggregators the industry to transition. They will be the most impacted as
and Intermediaries will benefit as well through enhanced they have to change their platforms and processes.
competition. Aggregators in their capacity of interface
between airlines and the wider landscape of sales partners, Travel sellers
will be able to monetize technology, software development, Travel sellers who have implemented NDC have gone
data analytics capabilities and implementation experience. through a significant transformation. They have adjusted
Finally, more partnerships may be implemented, involving a user interfaces to include new products, they have adjusted
large scale of transportation modes. internal workflows (data feed to mid and back office), etc. The
transition to processing Orders appear to be much simpler by
This transformation is for the benefit of the end customer, comparison. They will gain substantially from the simplification
gaining an efficient access to new products and services, of the selling process, as well as the accounting part. Early
and being able to compare much easily than in the legacy adopters who have tested using Orders report massive time
environment. and resourcing savings.

Technology providers
3.1.2 Transition costs Technology providers are likely to be among the early
adopters 4. We have seen with NDC that many start-ups
How much will this cost? McKinsey’s 2019 study estimated embraced the change at an early stage. There is little doubt
that the industry will have to invest between 3 to 15 billion that more innovation will come, especially in the space of Offer
USD over the next decade. If we take a median estimate, this and Order Management, to gradually phase out the PSS, and in
is about 1 billion USD per year, i.e., about 0,15% of expected optimization (Next Gen RM system, channel management, etc.).

Airline retailing: The value at stake, McKinsey & Company, mckinsey.com/industries/travel-logistics-and-infrastructure/our-insights/airline-retailing-the-value-at-stake

2

Source: IATA ACMG, 2020

3

List of players available on IATA website: iata.org/ndc

4
20 Airline Retailing – An industry vision for Offers and Orders © 2021 International Air Transport Association. All Rights Reserved.

Airports and ground handlers but behind the scene. Modern processes are implemented,
Airports and ground handlers will process Orders. Some and they use Offers and Orders. Any new process, workflows,
adaptations are required from the DCS, but current insights etc. are built around Offer and Order Management. These
suggest they are not massive. A great added value will be the are processes that were not possible or too cumbersome
information flow going both ways, i.e. the capacity to update with legacy technology and that add value thanks to the new
the order with all changes happening in the operational window. capabilities.

Governments, regulators Behind the scene, things may be different: there is an analysis
Several processes are currently based on PNRs or ETs. needed of all the processes that still rely on legacy. They have
Examples range from APIs, PNR Gov, tax collection (in some to be looked at one by one and changed to be able to run
countries, etc.). As this is essentially a flow of information, with Offers and Orders. During the transition phase, all these
the transition should not be complex, as the challenge is processes are therefore reviewed and adjusted. The approach
mostly reformatting the data. It may however require close to transitioning is dependent on each airline’s internal system
coordination and some advocacy effort. architecture. “On top” or “encapsulation” are the two most
likely approaches to be followed.

3.2.2 Change management and mindset shift There is a need for a simple way to interact between the
new world and the old world. It can be a translation API,
The transition requires efficient change management. Each that recreates what is needed for back-office processes to
player will handle its specific roadmap. IATA’s role could be to function correctly and ensure proper synchronization.
maintain an industry roadmap, with a vision, KPIs, concrete
deliverables. The ambition is to gradually remove the need for this translation
API, until the moment when no back-office system or process
The main motivation for change is to gain competitive needs it. Ultimately the traditional PSS will be replaced by
advantage in the airline industry and survive in the marketplace. processes and modern standards, and its functions are moved
The key steps for the industry are to: to a modular retailing architecture as described in the first part
of this document. Airlines and IT providers will build processes
• Understand the case for change. based upon their individual cases.

• Embrace the long-term vision.

3.2.4 High level timeline
• Build relevant business case.
How long will this take? This seems to be the burning question
• Focus investment on the right technology. for many people within the industry. The shorter the transition,
the higher the pressure on the airlines (while they lack
• Break internal silos. financial resources to invest) and the longer the transition,
the higher the risk of lost opportunities and added costs due
• Get C-leadership buy-in. to the maintenance of dual processes. The COVID-19 crisis
has opened up some opportunities, as appetite for change is
The transition will require a change in culture, mindset, and higher and the industry wants to rebuild better.
skills for many impacted departments within an airline to
enable retail-like sales and servicing practices. Retailing Looking at the NDC example: some of the NDC Leaderboard
champions will need to be identified to help with education carriers (23 airlines, early adopters of NDC) have experienced
as to how and why the new workflows will help airlines. A a very strong growth of their bookings from 2018 to 2020 and
common issue is that people generally tend to get very they collectively surpassed the 20% industry target during the
attached to existing, well known processes and systems. Thus, summer of 2020, amid the pandemic – albeit on low volumes.
those champions will need to consider how Offer and Order
Management can be implemented into an airline without being However, many other carriers are also live, but have limited
adversely impacted by internal resistance. volumes. IATA has identified over 200 airlines that could
benefit from an airline retailing strategy.
The same applies to other players across the value chain. For
example, many sellers are insourcing new technologies and To achieve transition at scale, the industry needs a
need to train their staff. combination of:

• Airline readiness to distribute more content.

3.2.3 Operating dual processes
• Aggregator readiness to process the content.
Transitioning will take many years as there will be a gradual
phase out of legacy technology. However, a few guiding • Travel seller readiness to consume the content.
principles can be established.
• Corporates asking for new content.
The PSS has been core to the airline IT. It will progressively
be replaced by Offer and Order management. During the
transition, it stays in the back, i.e., legacy processes remain
21 Airline Retailing – An industry vision for Offers and Orders © 2021 International Air Transport Association. All Rights Reserved.

The final industry performance will be dependent on these It will require cooperation well beyond the current scope
four types of players being ready, together. of any classic distribution project. Indeed, besides airlines,
travel agencies, technology providers, other players will also
need to come onboard: airports, ground handlers and even
To support the industry driving this governments.
transformation, an aspirational goal The chart below is a projection of NDC volume growth over
of 100% Offers and Orders is being the coming years. Of course, there are many variables that will
influence this curve.
considered, with the sunset of legacy
standards. In the end state, legacy The speed of adoption is expected to increase at a fast pace,
standards will be decommissioned. as customer demand, intermediaries and sellers already have
done the necessary heavy lifting thanks to the Leaderboard
push during the last 2.5 years. Many people in the industry
This is an ambitious and complex challenge and it will have contributed to make this happen, both on the standard
be reviewed as we continue to understand the industry and implementation side.
dependencies as well as the speed at which the industry re-
starts and recovers from the COVID-19 crisis. However the Volumes of Orders are expected to increase gradually from
DAC believes this sets a tangible goal. Technology providers 2022 – 2023, but there will be a retrofit to legacy in order to
are already fully on board regarding the end vision of Offers feed all systems. Initial ‘orders only’ transactions could be
and Orders and such an ambition will only reassure them in for example for simple flows (domestic point to point as well
their strategy and investments. as for interline and settlement). It will then expand to include
gradually all airline processes: travel sellers, airports, etc.

Chart 2: Retailing adoption rate (in %)

100

90

80

70

60

50

40

30

20

10 Total NDC

0 Source: IATA Forecast

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
22 Airline Retailing – An industry vision for Offers and Orders © 2021 International Air Transport Association. All Rights Reserved.

3.2.5 A move towards widespread adoption

The industry will not transition without a significant effort by

all parties and this will need to start with the commitment from
airlines, with their top management involvement.

Lessons from the ET transition is that leaders have influenced

followers. For example, an airline that had implemented ET,
would require the same from interline partners, in a reasonable
timeframe.

There is no doubt that at some point during this journey, the

industry will wish to accelerate in order to remove complexities
and duplication of systems and processes required for the
duration of the transition (ET was handled in this way) in order
to reduce costs.

Finally, it seems reasonable to expect that any IT solution in

the future be built around the notion of Offers and Orders. This
does not mean that there will not be any retrofit. Future RFIs
and RFPs could reflect this. Many IT providers have already
built order-centric solutions and only fall back to legacy
processes because they must.
23 Airline Retailing – An industry vision for Offers and Orders © 2021 International Air Transport Association. All Rights Reserved.

Conclusion

It is a long journey that is ambitious but achievable. It requires

top management support to drive the transformation and to
approve funding and therefore a robust business case.

The industry in 2030 will be more agile, more efficient, and

create more value for the airline, its customers, and the value
chain players. The COVID-19 crisis has shown the need to
continue to innovate fast and to be resilient to future chocs.
We list some key highlights to drive this transformation:

• New customer expectations based upon

personalization and contextualization.

• Modern technology that can address these customer

expectations.

• A desire to modernize and simplify an industry that

is unnecessarily complex, after decades of layers of
processes that seem unreal to younger generations or
people outside the industry.

• A simple aspiration: 100% by end 2030.

• A driving spirit from technology providers to enable

this to happen.

• A historic opportunity for this industry to modernize

itself.

As the industry comes out from its worst crisis, it is motivating

to think about the future. A general sentiment is to focus on
the return to “normal”. With regards to airline distribution, it is
difficult to talk about normality: most processes are bespoke
to our industry and have only just evolved over the last
decades, but they now need to be modernized.

What seems obvious in most industries (the customer at

the centre) is not the case today in the airline technical
environment.

IATA will support its airline members through this critical

industry transformation in collaboration with all the key
stakeholders across the value chain.
24 Airline Retailing – An industry vision for Offers and Orders © 2021 International Air Transport Association. All Rights Reserved.

Acknowledgements

IATA, with DAC sponsorship, has consulted many industry

stakeholders and expresses its sincere appreciation for the
discussions that took place. IATA also got some guidance from
consultant Renaud Arnoux Prost – from Copernicus Software
Solutions.

Below is a list of stakeholders that gave feedback and

provided general support for this approach.
25 Airline Retailing – An industry vision for Offers and Orders © 2021 International Air Transport Association. All Rights Reserved.

Glossary

API  Application Programming Interface

ARC  Airlines Reporting Corporation
BSP  IATA Billing and Settlement Plan
CRS  Computerised Reservation Systems
DAC  Distribution Advisory Council
DCS  Departure Control System
DOT  Department of Transport
EMD  Electronic Miscellaneous Document
ET  Electronic Ticket
GDS  Global Distribution System
IBE  Internet Booking Engine
LCC  Low-Cost Carrier
MITA  Multilateral Interline Traffic Agreement
NDC  New Distribution Capability
OTA  Online Travel Agent
PNR  Passenger Name Record
PSS  Passenger Service System
RA  Revenue Accounting
RFI  Request for Information
RFP  Request for Procurement
RMP  Revenue Management Pricing
RMS  Revenue Management System
SLA  Service Level Agreement
SRSIA  Standard Retailer and Supplier Interline Agreement
TMC  Travel Management Company
VMCO  Virtual Miscellaneous Charge Orders
26 Airline Retailing – An industry vision for Offers and Orders © 2021 International Air Transport Association. All Rights Reserved.