IATA introduced the term ‘airline offer’ when it launched NDC - a standardized API and supporting program aimed at promoting the digital transformation of the airline industry. Over the years, we've witnessed the growing adoption of NDC as airlines crack open the distribution landscape and take control of the offer. We’ve also seen a sizable number of airlines now on the path to creating and optimizing dynamic offers. For example, they're implementing advanced seat merchandising, dynamic fare families, continuous pricing, attribute/affinity shopping, and even customized connection building. In this article, we examine a distinct opportunity resulting from the marriage between dynamic offers and NDC, that is the corporate bundle.
In his recent article ‘Fringe of the Final Frontier,’ Farelogix CEO Jim Davidson took time to reminisce. Jim recalled his excitement at the prospect of NDC shaking up relationships, especially between corporate travel managers, TMCs, and airlines.
At the Lufthansa Group Distribution Partner Circle event are (L:R) Steffen Weinstok and Arber Deva, Lufthansa Group; Jim Davison, Farelogix; and Moshe Rafiah, Travelfusion.
“Our marketing team sent me to events all around the world to evangelize a brave new world that would mean better choice and value for all. To underscore the point, I would show up to business travel events and attend focus groups armed with paper bags and poker chips, each chip representing a different choice, and would ask corporate travel managers “what’s in your bundle”? The point I was making was that with NDC, business travel executives would have the power to select the best value products and bundles for their customers and negotiate unique deals with their airline partners,” said Davidson. “Well, that was in 2013, so corporate booking was clearly on a much slower trajectory than I had anticipated, but that is the nature of our industry.”
Jim was delighted by articles highlighting the foray made by American and United Airlines into corporate bundles powered by NDC.
American Airlines has joined forces with clients of three travel management companies (TMCs) – AmTrav and Marplay in Mexico, and Brazil's Copastur. The TMCs connect to American Airlines’ NDC API to get access to, and sell, bundles of preferred seats, ticket changeability, and extra bags. The bundles appear in fare displays for booking, and the TMCs settle American’s bundles through ARC/ BSP - as they do with negotiated corporate fares1.
At United, the airline is testing its “Dynamic Bundled Fares” on TripActions' NDC-compatible platform. The TMC’s customers can now purchase Wi-Fi, premium seats, lounge access, and bags, and can also upgrade to Economy Plus – either as individual items or bundled into a single fare. Business Travel News reported that United negotiates bundle content and price with corporate travel program clients. These bundles are made available to TripActions through the airline’s direct connect.2”
What are innovators like American and United looking to achieve? One could argue that the answer is revenue. According to GBTA BTI™ Outlook² estimates, spending on business travel reached $1.33 trillion in 2017 and was forecast to grow 7.1 percent in 2018. According to research conducted by Answair and IATA, the consolidated travel-spend of 12 corporations in its survey topped $3 billion per year3. Answair also reported that 92%4 of these corporations plan on including NDC functionality in their upcoming RFPs and expect to adopt NDC “as soon as it makes sense, progressively through pilots e.g. specific region, selected carrier(s).” Any move to bring the offer closer to meeting the customer need with dynamic offers and NDC will certainly carve a large slice of that opportunity for enterprising airline retailers.
Identifying the needs of different groups within the corporate channel is not always straightforward. Unlike the B2C market, there are several stakeholders in the value chain, each with a diverse set of business requirements.
Suppliers (e.g. airlines, TMCs, OBTs):
o Revenue gains and cost savings
o Defensible market share
o Ability to retain and win more business.
o Lower total cost of employee travel
o Compliance with more granular process and policies
o More productive travel experiences that reflect the employer brand.
o Access to consumer-grade shopping and best-in-class booking experiences
o Greater choice and empowerment
o Greater personalization and recognition of status (e.g. company VIPs, road warriors, and occasional business travelers).
How are Corporate Bundles created?
Airlines dynamically bundle fares with ancillary products and services (e.g. Wi-Fi, lounge access, meals, bags, premium sets, insurance, comfort packs, priority boarding, fast-track, upgrades, etc.), and use new generation offer engines to make corporate bundles. The bundles are created based on any number or combination of factors. For example:
|• Corporate ID||• Availability|
|• Loyalty Tier||• Connections|
|• Load Factor||• And more!|
The data passes from the corporation (via their Online Booking Tool or TMC), to the airline-controlled offer engine via the airline’s NDC API. Retailing rules within the offer engine, which reflect the conditions of the corporate contract and company travel policies, dynamically create the offer. The offer is returned to the corporation via the NDC API.
Corporate Bundle configuration in the Farelogix Design and Offer Manager
Corporate bundles are great for a variety of reasons. For example, they enable airlines to change the nature of their relationship with travel buyers. Until now, discounted fares have been the sole focus of contract negotiations. With corporate bundles, discussions take on a wider perspective and put total offer value firmly on the negotiating table. This is a 'win' for both travel buyers who need to balance budget demands with employee satisfaction and for airlines looking to grow their customer portfolio. But the benefits don’t stop there.
Example Benefits of Corporate Bundles
- Relationships between sales executives, TMCs, and corporate buyers are enriched by increased flexibility and infinitely more negotiable options
- Airline sales executives have more levers to drive differentiation and win more business
- TMCs can leverage data to adopt a more consultative approach with corporate customers
- Corporate travelers are less tempted to purchase more expensive options that add to travel costs
- Business travelers need not venture to consumer-sites to satisfy needs, so they stay within existing processes and policies
- Employees can engage in attribute shopping (search for flights with available aisle seat, power, Wi-Fi etc.) when packaging the bundle, leading to greater productivity when traveling5
- Corporates can provide ‘road warriors’ with comforts that enhance the employer brand
- Senior company executives can get access to travel experiences that reflect their expectations and status.
I asked Philippe Der Arslanian, CEO, Answair to comment on this article:
“By addressing corporate travellers’ needs such as personalised bundles, the NDC-enabled retailing model has proven to be successful. But this is just the beginning”, said Philippe Der Arslanian. “Fully exploiting NDC-related data will unlock fine-tuned merchandising practices, allow for intelligence acquisition, and create an untold number of value-added services,” Philippe added.
NDC has become both a technology enabler and a focal point for greater understanding and collaboration across the corporate travel value chain. When NDC meets dynamic offers, the marriage results in fruitful innovation. One example is corporate bundles, which provide ‘wins’ for all stakeholders. Given their ability to satisfy stakeholder needs and the size of the opportunity on the table, expect to see more of corporate bundles in the near future!
|COLLABORATIVE & INNOVATIVE RETAILING - How to Improve Profits with NDC Business Drivers|
|Philippe Der Arslanian|
1 “AA Enables Corporate Bundles Through Three TMCs”, The Company Dime (12 June 2019), p.2
3 COLLABORATIVE & INNOVATIVE RETAILING - How to Improve Profits with NDC Business Drivers, Philippe Der Arslanian
(December 2018), page 11
4 Ibid, page 12 and 13