Airlines have focused on digital innovation in an effort to disrupt their businesses and regain a dominant claim over their customers.

A new Airline Distribution 2022 analysis by marketing consultancy Dr. Fried & Partner, finds that airlines are making progress on this goal, claiming a greater control over retailing and distribution, and predicts a major shift for GDSs and aggregators as a result.

The study’s authors write:

“Airline distribution is set to steadily further evolve in the next three to five years. The desire of the legacy carriers to intensify and further expand their relations with their customers is the main driver here.

“The most important enabler for expanding and consolidating customer relations is, in the eyes of many specialists, the IATA-standard new distribution capability (NDC)..This NDC plays a vital role in realigning airlines’ customer relations, particularly from the airline perspective. In the present study, the change in airline distribution will be presented at the airline, the aggregator and the customer level.”

Some of the findings in the report are things we have already seen or suspect about current dynamics in distribution. LCCs have paved the road for change by embracing unbundled fares structures and improving their direct digital retail channels. The authors say that full service carriers are adopting many of these practices, re-shaping the role of GDSs.

“[T]he legacy carriers will endeavour to regain sovereignty over their product creation, to sustainably extend the depth of their value-adding activities. In a further context, the legacy carriers will seek to differentiate their distribution approaches more clearly and offer customers their products directly, especially in their home markets. The strengths of the global distribution systems (GDSs) will be seen above all in the airlines’ non-home markets, where exclusive market cultivation would be too expensive for a single carrier alone. The greater value-adding depth, the greater degree of their own involvement in creating the product and in their own market positioning and their closer proximity to the customer will sustainably enhance the airlines’ distribution efficiency and profitability, particularly for the legacy carriers.”

The role of aggregators in the relationship between airlines and customers will likewise evolve, the authors predict.

“Technological innovations in particular are permitting the automated provision of services and/or their replacement with self-service facilities for the travellers concerned. This separation of services and the increasing fragmentation of content will put a greater emphasis in future on the aggregator’s core function: providing content that is derived from a variety of sources. This in turn will change the willingness to pay for such functions, on both the supply and the demand front: while the future scope of an aggregator’s services is likely to be of lesser importance to the airlines, the availability of content from various sources will gain increasingly in importance in the customer’s eyes.”

Other predictions for future aggregation include:

• The GDS providers will aggregate NDC content and work on bringing greater flexibility to their income models.
• The business travel segment will see more TMCs and OBEs evolve into aggregators by involving airlines directly.
• The leisure travel segment will see agency multi-sourcing platforms and consolidators adopt an increasingly important role.
• Access barriers will be lowered, particularly by innovations in the NDC environment and by increasingly flexible airline APIs, and this will provide new aggregators with facilitated market access.

The authors also believe that airlines will adopt common practices of major internet companies to better serve their customers, improving product segmentation for “person-specific product and price differentiations.” They write:

“The broader involvement of the aggregators here should also provide access to richer content, which the airlines can take advantage of primarily via their own NDC-based channels.

“The customer of today may well be seeking much more individuality in the presentation and the provision of the services concerned. Experience in the (tourism-oriented) OTA field shows already that a filtering of data based on individual parameters can, along with the price, achieve differentiated results. This more flexible display approach can help the industry ensure that it not only sells its products based on price alone, but can also do so via the product’s potential to provide added value for the customer.”