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IATA Warns of Change in Air Distribution SystemOctober 16, 2012 By: George Dooley Travel Agent
Travel agents must adapt to the need for a New Distribution Capability (NDC) to enable the airlines to offer more options to customers and to reach them seamlessly regardless of distribution channel, according to Tony Tyler, the International Air Transport Association's (IATA) director general and CEO. "We have an opportunity for a revolution in airline retailing,” said Tyler.
"Airlines are trying to escape the commoditization trap through differentiation, and merchandizing. They are developing products and services, such as special meals, expedited boarding, roomier seats and access to airport lounges. But the travel agent sees only fare codes—F, J, Y and their various derivatives—which cannot fully describe options available. Customers expect more," Tyler said in his recent address to the World Passenger Symposium in Abu Dhabi, United Arab Emirates.
“The solution is the NDC powered by open XML standards. This will enable innovation in the way airline products are distributed. One key outcome will be closing of the gap between airlines and their customers so that customized offers can be made to travelers even through travel agents,” said Tyler.
IATA’s role is to lead the industry to adopt a new, modern infrastructure that will accommodate more choices for personalized travel offers, provide the foundation for the development of efficient tools for agents and lower the overall cost of distribution, Tyler said.
To this end, IATA will propose a roadmap and business case for the NDC, Tyler said. “We expect to complete the Standards definition next year. Then competition and travelers’ needs will guide airlines, agents, system providers and new entrants with tremendous opportunities for innovation. Forty years after the birth of the current distribution paradigm, we have an opportunity for a revolution in airline retailing,” said Tyler.
"The internet economy has fundamentally reshaped the ways in which sellers and consumers interact. Customers expect to be recognized when they shop online. And they are used to receiving tailored offerings based on their past purchasing behavior. Airlines are able to participate in this new model with those customers purchasing directly from their websites. They can recognize return visitors and make offers based on travel history, loyalty status, credit card brand or other metric. And customers have complete visibility of additional products and services on offer,” said Tyler.
About 40 percent of ticket sales by value come through airline websites, he noted. The rest is sold indirectly via travel agents using GDSs. "As a result, it is impossible for the airline to tailor its offer to these customers. Furthermore, this model is focused only on finding the lowest ticket price which is commoditizing air travel even as airlines innovate their products."
Tyler's presentation highlighted three priority areas for cooperation to create a more seamless and more interactive modern travel experience: simplifying airport processes with Fast Travel, implementing a Checkpoint of the Future (CoF) for passenger security and developing a New Distribution Capability in line with "modern retailing."
Tyler urged aviation stakeholders to work together to create greater value for customers across the travel experience while enabling greater efficiency for industry participants.
IATA also said it is working with industry stakeholders to implement self-service options with its Fast Travel program. "This gives passengers more control over their airport experience in six key processes: check-in, bag check, travel document scanning, boarding, flight re-booking and baggage tracing. “
IATA said its CoF project will enable a walk-through security checkpoint experience without stopping, removing items of clothing and liquids, or taking computers out of bags. “CoF will replace today’s one-size-fits-all approach to screening with a model based on risk assessment. By focusing resources where the need is greatest we will make the system more secure and reduce the hassle for our customers,” Tyler said.
"Our 2020 vision is for a fast, seamless curb to airside experience that is predictable, repeatable, secure and globally consistent. An important component of that vision is ubiquitous one-click access to Wi-Fi at airports. This will enable travel services providers to exchange data in real-time with passengers,” said Tyler.