IATA CEO Defends Distribution Policy and AA/US Air Merger

The threat of a new government regulation that would mandate how and where airline ancillary products are displayed continues to overhang the industry, Tony Tyler, IATA’s Director General and CEO told the Wings Club in New York City. Tyler offered a defense of IATA's New Distribution Capability (NDC), arguing that the initiative will to give consumers a more transparent air travel shopping experience. Tyler also offered a defense of the proposed merger of American Airlines and US Airways.

"Developing NDC is a priority for IATA," Tyler said. "NDC is about bringing the same level of capability to display and sell products and services through the travel agent channel that already exists on airline websites. That’s not the case today. On an airline website, you may have access to a wide range of add-ons and fare packages. On the travel agent website by contrast, all you usually see is the fare and schedule. "

There is a long explanation for why this gap exists, Tyler said. "But the short version is that distribution via travel agents is built on pre-Internet messaging standards. These don’t have the same capabilities as XML—the lingua franca of modern Internet-based commerce. This is changing: The global distribution system (GDS) companies are working towards making it possible for airlines to merchandize their products better. But each is working on its own proprietary solution. " 

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IATA’s raison d'être is to set global industry standards to enable harmonization and greater efficiency across the entire industry, Tyler said. "Standards enable innovation and make it possible for incumbents and new entrants to work from the same blueprint. We believe an NDC standard will enhance the air travel shopping experience for passengers."

After shown a video of IATA's NDC Tyler said the NDC " could deliver enormous value to consumers and create new opportunities across the travel value chain." "Creating the NDC standard will unleash innovation—and that will mean change. But, let me assure you of a few things. NDC will operate within the same privacy laws that govern every other business. That is no change from today. But, by giving travel agents more information, there will be greater transparency."

The NDC standard will enable much richer comparison shopping for travel products, Tyler said. "Not just the base fare, but the entire spectrum of offerings – including those ancillary fees and services that regulators have been cogitating about for so long. It’s another example of the market doing it so that regulators don’t have to."

IATA’s role is to set the standard, Tyler said, which IATA is doing collaboratively with a broad cross-section of industry players.  He noted pilot projects are underway and more are expected. He also noted IATA has  created two new groups—the Agents-Airline Forum and the Passenger Distribution Group Advisory Forum to provide representation for stakeholders including travel agents, GDSs and other technology providers.

A U.S. Department of Transportation decision on IATA's NDC is expected. The issue has divided industry and travel agents opinion. 

Tyler also targeted the US Department of Justice's (DOJ) announcement that it would sue to prevent the merger of American Airlines and US Airways a move Tyler said, " stunned the industry as well as Wall Street." 

"I have to agree with those in the investment community and elsewhere who have found DOJ’s arguments to be unpersuasive. Despite DOJ’s claims, the fact is that consolidation has resulted in a healthier, more profitable industry and that is good news for travelers as well, because it means airlines have the financial wherewithal to invest in their products and services--as US airlines are doing, to the tune of $1 billion per month according to  Airlines For America (A4A)."

Tyler said he disagreed with the DOJ's approach to airline consolidation. "Putting aside the matter of archaic ownership and control rules both here (in the U.S.) and abroad that impede airlines’ access to the global capital marketplace and prevent the emergence of a truly globalized industry, the fact is that airlines face higher hurdles than other businesses when it comes to mergers and acquisition."
A federal court has scheduled a trial on the DOJ's action in November.

Visit www.IATA.org.


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