The process of Offer & Order Management in airline distribution has evolved significantly over the last decades. In the past, airlines primarily relied on manual processes for managing offers and orders, which were often time-consuming and prone to errors. However, with the evolution of technology, airlines have been able to automate and streamline these processes, resulting in improved efficiency and accuracy.
Despite the many changes and innovations that have taken place over the years, many airlines still rely on legacy systems. That dependency prevents airlines from easily creating, managing, and tracking offers and orders in real time, making it challenging to deliver a seamless customer experience. As the airline industry continues to evolve, we can expect to see more advancements in Offer & Order Management, further improving the way airlines distribute their products and services.
Our Director of Digital Solutions & Consulting, Radu Iliescu, joined us for a conversation about the evolution of Offer & Order Management distribution and how airlines can prepare for the inevitable changes that are coming.
What is Offer & Order Management distribution?
Fundamentally, it's about two things. Firstly, it's about recognising that our airline technologies that we are using for digital retail distribution and, I guess ERP, you could call it in non-airline terms or resource planning and resource management, have historically been very airline-centric or booking-centric. We are looking to change that and transform them into more retailing or customer-centric, central systems, offer and order management systems. This will enable us to bring some improvements and efficiencies throughout the entire digital journey of the customer.
The second thing is getting rid of roughly seven decades of technical debt. Historically, airlines have been very, very bad. I think we, as an industry, have been very bad at taking advantage of new technologies and using them in novel ways and, previously, whenever a new technology wave arrived, what we've mostly done was to remodel the previous business processes based on new technology, but without taking advantage of the new possibilities and thinking how we could transform the processes as well in line with the possibilities, the new opportunities offered by the new technologies.
So what we have today, what most large, full-service carriers are working with today is technology based on business processes, which are — without exaggerating, this is not a euphemism, I actually mean it — about a hundred years old business processes and that explains a lot of the problems that we are facing.
Can you give some examples of drastic changes? Will GDS disappear? Does it mean that a group of 50 people can book online with no constraints?
Yes, both of those and a lot more than that. So firstly, yes, we foresee that legacy distribution channels, including both Globe GDSs and host-to-host links used currently for interline and codeshare to be completely decommissioned within the next, I would say, eight to 12 years, or at least fundamentally transformed. So host-to-host links for interline codeshare, we expect those to be replaced completely by interline NDC connections. GDS, in my view, would either disappear as well, well at least for the large carriers, they might disappear or they would become effectively NDC aggregators. But the actual technical connectivity, which is used today by GDSs, meaning either artefact or teletype messages, we expect those to completely disappear.
Group bookings as a concept might remain, for very large groups, where there is a commercial reason to negotiate a deal with a larger group, so more akin to how Charter works today, but for groups of more than nine adults and children, which is the bread and butter of so-called group booking to date, there would be no reason for that to exist in the future because this constraint of maximum nine adult and child passengers would completely disappear. This is a legacy technology constraint, which has no equivalent in the future world of true offer and order management.
More than that, we are looking at greater benefits, like more contextualised and potentially kind of fully dynamically generated bundled offers, which would be based on truly continuous pricing. I would expect these to completely replace today's fare brands. Some airlines have already made a lot of progress in this respect. So I would actually expect the more advanced airlines and earlier adopters of true offer management to use truly continuous pricing and dynamically build up bundles within the next five years or so. That is on both direct and indirect distribution. Obviously, these would not be available on legacy distribution channels like GDS and host-to-host links, but on NDC and direct channels, I would expect this to become the norm within the next five years or so.
Aren't low-cost carriers doing this already?
They are to a certain extent. So, I guess the answer to that question is yes and no. Low-cost carriers do some of these things, not all, by the way, but some of them. But they can only do them because they tend to live in a very isolated world, as opposed to a full-service network carrier, which has to interconnect with a myriad of partners, including other airlines and distribution partners.
A low-cost carrier who is mostly selling, or exclusively selling, a single carrier point-to-point itinerary lives in a very different universe than a large network carrier. They effectively can ignore the rest of the ecosystem, which removes the majority of the legacy technology and business process constraints that large full-service carriers like Lufthansa, British Airways, United, American, and Delta of this world are facing.
The great leap that we hope, and trust, that NDC and one order are going to bring in the near future is that all these things like truly continuous pricing elimination of all the constraints related to file fares and availability distribution and schedule distribution and all this baggage would be eliminated. Not only in the context of one isolated airline that is just selling its own content but industry-wide, including for the large, complex full-service network carriers, for whom connecting flights, including interline codeshare (through check-in), underpinned their entire business model. We hope to finally see these interline codeshare processes completely remodelled based on interline NDC and fully working without the constraints of the legacy distribution channels.
Does IATA support this?
Of course. Not only they support it, but they are also the number one proponents and drivers of this transformation. However, IATA has limited power and influence over this and the NDC standard definition and evolution have proven this. NDC has been evolving for more than 12 years now. I think anybody would recognise that it was pretty slow to evolve and to be adopted as a standard by airlines.
This has proven that IATA has limited power to push through deep transformative changes, especially when those changes imply hugely complex technical processes and technical transformations. Ultimately, IATA can only issue recommendations and standards. They cannot force airlines into the massive scale investments and transformation programs necessary to actually turn this into reality.
IATA, of course, is supporting this transformation, but I'm actually hoping more for the leading technology providers and large early-adopter carriers to push and to become the champions of interline NDC and One Order, and to bring about the finalisation of the standards and the large scale adoption within the industry.
We know already that there are a number of carriers who are trying to push this forward. Some of the airlines I've already mentioned before: Lufthansa, American Airlines, British Airways. And the number of others who are publicly speaking about their work in One Order and developing the first One Order compatible through order management systems.
What are the key benefits of these changes and who benefits from them? The business, the customer, the airline staff?
Hopefully, everyone will benefit from it. I think the primary benefits are probably for the airline, for the business, and the main two that spring to mind are:
Revenue optimisation opportunities. The fact that large airlines, full-service network airlines, can switch, or shift, to much more flexible true continuous pricing systems. As well as expanding their product catalogues with more ancillaries, especially non-air ancillaries, which historically have not been supported at all in the industry standards. The ability to deliver more tailored offers. For example, being able to optimise their pricing, not only based on a genetically calculated bid price but also based on willingness to pay. These are quite significant commercial opportunities, and revenue opportunities for the airlines.
Another big one, of course, will be the reduction in distribution cost, brought by the shift towards NDC which hopefully will prove to be significantly more cost-effective than GDS has been historically.
For the customer, the benefits will be less obvious. I'm hoping that the transition would be largely transparent. But one thing that is clear that that will be easier for the customer is that they will no longer have to deal with the multitude of booking references that they have to mock about today. Like we have a PNR reference and then you have tickets, and then you have EMDs, and then you have boarding passes. I think for the vast majority of airline passengers it is completely unclear why they need so many different documents and references.
In addition to that, we expect to face less complexity and hassle in some of the involuntary changes, and not only involuntary but in all booking servicing scenarios. So changing a booking or updating or cancelling a booking, or whether it's voluntary or involuntary change. We expect all these to work more easily in the future.
To give you an example, historically, very few airlines have been able to support online changes of an existing booking, which led to a split PNR. So, basically, any change that you make to a booking, which is impacting not all the passengers within that reservation but only some of them, technically this has a significant impact and it makes the process more complicated because that booking will actually have to be split into two different bookings.
There are of course airlines that support these scenarios, but not that many. So this is an example of something that, in the future, should not have any special complexity around this use case compared to a normal change to a booking or order, which is equally impacting all the passengers within that booking.
How does it affect travel agencies, TMCs, and corporate buyers? Do they need to change anything?
Everybody will have to change something. That's the problem with an industry-wide transformation and that's part of the reason why it has taken so long to bring about this fundamental change.
Of course all distribution partners, all airline distribution partners are going to be impacted. Actually, I can foresee that even payment services providers, payment gateways and acquirers will feel a slight impact of this transformation. This being said, we hope and expect the impact outside airlines to be fairly moderate or light, especially for those who would have already implemented the latest NDC milestone version, which is 21.3.
For those that haven't implemented any NDC connection at all, the impact is going to be quite substantial. Basically, they will have to switch to an NDC integration. I expect there will come a certain point in time, who knows, maybe in 10 years from now, when there will be still a long tail of small travel agents, for example, or legacy airlines, who haven't moved on and switched to true One Order compatible offer and order management, which may be forced to be disconnected from the ecosystem by some of the larger carriers who may not be willing to continue supporting GDS connectivity just because there is a handful of travel agents somewhere in the world who haven't made the switch to NDC.
For those distribution partners who have not already moved to NDC, there will be a significant impact. For those who have, and who have also integrated the newer versions, or one of the newer versions, I expect the impact, and I think it's fair to say, that the future world of One Order is significantly less complex than the current legacy distribution ecosystem.
Change is never easy and, for everyone, the change will bring some impact. But once you've passed that initial hurdle of switching from GDS connectivity, for example, to NDC, the overall complexity of the ecosystem and of the business processes should be significantly lower. So, everything should become easier.
Would it be easier to integrate trains or other ground transports?
Hopefully. IATA hasn't made much progress, unfortunately, in expanding the NDC standard to non-air products. For example, they haven't made much progress with the JSON or REST version of NDC either. But we are hopeful that at some point the NDC schema will be expanded to include non-air products. Until then, I expect various technology providers and airlines to develop their own, expansions or customisations of schema to support non-air products.
If several airlines and large distribution partners adopt a certain version of it, maybe that could become the basis for the future non-air version of the NDC schema. This has been known to happen in the past. Ultimately, after all the NDCs, even the original NDC schema was not a completely new invention. They were an adoption of the APIs of a certain technology provider in the industry. We are hoping that this will change because it is one of the more visible, more glaring, gaps within the current NDC standard.
Can airlines still cooperate with other airlines or do you think this approach will change completely?
Not only they should be able to cooperate, but hopefully, the cooperation should be better and easier than it is currently. The overall business process should be simpler in the future world. Unfortunately, the interline NDC standard is still one of the parts of the standard that is outstanding it's not yet fully defined.
The new approach to interline and codeshare, which is based on the supplier-retailer model, will be fundamentally different from the one of today in a number of ways. For example, a supplier airline, meaning a supplier basically is the operating carrier within an airline or co-chair booking created by another airline, so if “airline A” sells to a passenger, a booking, which includes a segment operated by “airline B”, “airline A” represents the retailer airline, and “airline B” represents the supplier airline. It's actually quite similar to a marketplace type of concept. For example, Amazon is selling on their own storefront products coming from other digital e-commerce online retailers.
One change compared to the business process of today, is that the supplier airline will no longer be responsible for the involuntary servicing of a passenger on their flight. So if “airline A” sells the booking, including a segment operated by “airline B”, and “airline B” for whatever reason is cancelling or changing that flight, they will have no responsibility towards the passenger being impacted. “Airline A” will simply have to bite the bullet, accept the change, and find another solution for the passenger. This is an example of one of the areas within the standard, which is a little bit nebulous still. The business process is not quite fully defined. But I think there are already reasonable hypotheses on how this should work. So, I'm hopeful that within the next couple of years, let's say two or three years, most of these things are going to be closed out.
Airlines aim for the completion by 2030. Why so long (7, 8 years)?
I guess the question is why so long and I suppose long is a subjective perception. Some airlines may be aiming for completion by 2030, some may be aiming for later. Some, I'm sure, are aiming for sooner. Lufthansa Group has made some statements recently, at a couple of industry events, which indicated that they are aiming for potentially sooner than 2030 to complete such a transition.
I think most airlines are accepting that the entire transition, up to the point where the legacy reservation systems, inventory ticketing, as well as GDS and host-to-host links are fully decommissioned, may come even later than 2030. I don't think anybody has a very clear view of when this will happen. I expect this to vary quite significantly by, firstly, the type of airline. There are airlines that will be earlier adopters than others. The transformation will come with significant investments in technology. For airlines, transformation will be very profound and therefore expensive. Unfortunately, in terms of IT, whatever is profound means also expensive.
Some airlines, I'm sure, will be tempted to postpone or deprioritise this until they don't really have a choice, simply for cost reasons. I also expect there to be regional differences. Some regions within the world are less well connected to the global travel distribution ecosystem. An example, I guess, could be Russia, which, because of the war, is unlikely now to be motivated. Airlines in Russia are unlikely to be motivated to invest in transforming and switching. to Offer & Order Management, given that there are virtually no sales outside their internal market.
Also, Asia is somewhat disconnected. They're mostly working on their own GDS TravelSky. Less connected and dependent on the rest of the world, in particular East Asia. I think what is likely to happen is that some airlines are, and distribution partners, are going to push this forward much more energetically than others, and I expect that these early adopters, who are very likely going to be fully One Order compatible and true Offer & Order Management compatible probably within the next five years, at some point they will be drawing a line in the sand and tell their partners that whoever hasn't moved to the new standards by a certain cutoff date, they would be simply disconnected from their ecosystem.
I think it's unlikely for a large carrier to be willing to continue paying the costs associated with the legacy technology stacks like the legacy PSS, just in order to maintain connectivity to a couple, or a handful, of distribution partners who may be representing 0.1% or even less of their overall volumes. That's my expectation. It'll be driven by the larger earlier adopters. I guess the majority of the industry will have to migrate, and I expect this to execute the migration, within the next five years or so.
Then there would be the majority of the players will probably adopt the standards and do the switch between maybe five and 10 years in the future. And then there will be a long tail of partners and airlines that will maybe still be, even 10 years from now, running on the old legacy stacks. But some of those will be given, perhaps, an ultimatum by the rest of the industry to either move or be disconnected from the ecosystem. And some may continue to work in a disconnected state because, certainly, not all airlines require full deep integration within the ecosystem. Even very large carriers, like Ryanair or Wizz Air, manage to do well without being fully IATA compatible.
How does this transition work for an airline?
It is going to be pretty complex, to be honest. Especially for the early adopters who are going to have to handle, in parallel, the old world and the new world for a significant period of time. Fundamentally, we are assuming that the deployment of the new Offer & Order Management platforms will be in parallel, or side by side, with the legacy PSS stack. So, you will have, on the one hand, I guess what we could call a legacy Offer & Order Management platform, which will be the legacy PSS plus your shopping and pricing engine and your merchandising engine, sitting side by side with a new true Offer & Order Management based system.
This means that we will have at least two parallel representations of the same booking. One booking is going to be represented, on the one hand in the legacy PSS, still based on the legacy concepts and documents of like PNR tickets and DMDs. And at the same time, it'll be represented as a One Order compatible order in the new Order Management system. These two will have to be kept in perfect synchronisation, near real-time synchronisation. Which, I'm sure, is not going to be trivial. But I think this is the way things are going to work in the early, and even let's say mid-level stages of the transition.
We will have the new world and the old world running in parallel within an airline and with a near real-time synchronisation between the two. This is going to be necessary, I think, for two reasons. On the one hand, we will need that in order to, while deploying the new Offer & Order Management systems, maintain compatibility with the legacy distribution channels. The infamous ones: the GDS and the host-to-host links for legacy interline and codeshare. Until all the industry partners have made a transition as well. Also, I think this will be necessary in order to mitigate the massive risk inherent in such a complex and far-reaching transformation.
I know that large and, even not necessarily large, mid-size carriers will have accrued over years, many different processes, which are running on top of their legacy PSS. All sorts of robots, for example, that are running within the reservation system. I think it will take us some time to unpack all of that and develop equivalent solutions on top of the true Order Management systems, the One Order Management systems.
My best guess is that, for an early adopter, we are looking at a minimum of five years of parallel running of the legacy tech stack, the legacy PSS, and the true Offer & Order Management systems that will be newly implemented. So, probably from the moment true Offer & Order Management are in place, for another three to five years at least, I would say the legacy PSS is still going to be there running in parallel with it.
What other ways can get airlines to customer centricity faster?
There are always workarounds and shortcuts that one individual airline or a group of airlines at best could adopt for themselves looking at their own products and direct channels. This can be facilitated by adopting, for example, a cutting-edge retailing initial experience platform, like Branchspace’s own Triplake platform.
But as long as you are looking to do it in isolation from the rest of the industry, you are restricted to only direct channels. Large full-service carriers could optimise their own directions and reap a huge amount of benefits from that alone. But, as long as the transformation is not industry-wide, not all of those benefits will become available. Even in the direct channels, there are some benefits that cannot be delivered standalone.
Why haven't airlines been doing this before when it seems so logical?
I can think of several possible answers. In reality, probably there is no single answer that covers everything. It's probably a combination of multiple things, and, I've mentioned before that I think, historically, as an industry, we've been really bad. In a way, we've been both good and bad at adopting new technology. We've been good at adopting new technology in the sense that the airline industry was usually an early adopter of new technologies.
In particular, it was alongside banking, one of the first industries to migrate to electronic systems from paper-based to electronic systems back in the late fifties, and early sixties. In terms of pure adoption, I think it was always a rather early adopter of new technologies.
Unfortunately, it was also a bad adopter of new technologies because we've tended, at each opportunity, to adopt a new technology by just remodelling the same processes that we had before onto a new technological platform, but without rethinking the process as well. The reason why that happened, historically, was that there was a big communication gap between those people who understood the airline business processes, which are, to be fair, very complicated, and also, because of the security implications and the safety implications of the industry, it's also not an area where you can afford not observing, not following the processes in the slightest detail.
So, on the one hand, you had the airline people who understood the airline business processes, and on the other hand, you had the techies, who understood technology and software. And, historically, there was very little overlap between these two groups. So, it was always one group of people who understood the process and one group of people who basically wrote the code. Because none of the groups had much understanding, or even appreciation, of what the other group knew and understood, what tended to happen was the techies were telling the airline people: “Just tell us what to code”, and the airline people were just telling the coders or the architects: “This is what we are doing today. Go away and build again what we are doing today”.
I think it was only fairly recently, within the last 10, 20 years or so, that we started seeing large enough groups of people who had the understanding of both the processes and the technology and could finally start figuring out how the technology can be used to deliver better, simpler, faster processes. I think this is one fundamental reason.
Another reason is just the depth and magnitude of the impact and the fact that the change needs to be aligned across literally thousands of organisations throughout the industry, including some which have very divergent objectives. For example, in the early days of NDC, the big GDSs were hardly supportive of it, to say the least. So, it's very easy to drive such a fundamental transformation when you have such a hugely fragmented ecosystem of players, and not all players are even necessarily supportive of the direction of the change.
What advice would you give to smaller, medium-sized airlines outside of the big groups?
I know it sounds a bit counterintuitive, but probably the advice that I would give right now would be to stay out, for the time being, of the big tech changes. The technologies involved in true Offer & Order Management, at least at the large scale necessary for a full-service network carrier, are still immature and even the standards themselves and the business processes are still being defined.
I think for a small carrier who is, on the one hand not necessarily interested in driving the industry forward, and, at the same time, maybe cannot afford a massive investment into a large-scale transformation program, and the risk that comes with experimenting a bit at this stage with One Order. it probably makes more sense, for now, to wait and see in which direction things evolve and primarily to wait for the solutions on the market to mature a little bit. There are a handful of very large carriers that will be driving and pushing this forward anyway, and those will proceed I think regardless of what the small and medium carriers do.
But I think, in the interest of somebody who is not willing or able to invest tens of millions or hundreds of millions in pushing the industry standards forward, and being early adopters of these technologies and processes, I think for them it might be a good idea to wait for a couple of years. Maybe from 2025, 2026 onwards, when some of the leading tech providers in the industry expect to have the new generation solution’s platforms in place, I think that will be the right point for smaller and medium carriers to start looking at that.
Given that these new Offer & Order Management platforms are expected to completely replace the legacy PSS, which is a huge transformation for an airline, it is a good time now to already think about the future transition. So, do not necessarily jump into it at this stage, by doing tenders and signing contracts, but, perhaps, consider, for example, when your PSS and GDS contracts are coming to an end, preparing for RFPs. An RFP for a large-scale Offer & Order Management platform is something that could easily take a couple of years. Even if you do it in a kind of accelerated mode it's unlikely to take less than six months. So, there is preparation work that makes sense to be done already now, but I would suggest not jumping into an actual implementation before two or three years from now.
How do you see this progress in 2025?
I am hopeful that by 2025, a lot of progress will have been made. However, I don't think it's going to be super visible from the outside. I think probably a handful of very large carriers, maybe four, five, six, who knows, will have already implemented or delivered true Offer & Order Management capabilities into production, but I would expect those to still be in a pretty immature state.
Even those early adopters are going to still probably support a mix of legacy distribution channels and new Offer & Order based distribution channels. I expect in 2025 still the majority of interline and codeshare to work through legacy connectivity. But I also hope at the same time that the fundamentals of the new next generation of Offer & Order Management platforms will have been developed and delivered by then.
I would expect the technology, most or a large part of the technology, to be delivered by the end of 2025. I expect the proper way of adoption to start from 2026, 2027 onwards, but the bulk of the new platforms, I would hope to be available by the end of 2025 for the early adopters in particular.
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