Distribution Disruption and New Distribution Capability (NDC)

Distribution Disruption andNew Distribution Capability (NDC)
Untangling the complexity

NDC: One part of our broad
content strategy
From low-cost carriers to hotel booking
agencies to airlines‘ direct distribution
channels, effective corporate travel
programs and the travel managementcompanies that enable their successhave long had to—and will continue
to—embrace the reality of sourcing
content (fares, fare classes, rates,amenities, etc.) from multiple channels.
In this sense, NDC is a content
evolution, not a revolution; content
that comes through NDC standards
will naturally form part of BCD‘s overall
content strategy.
BCD’s content strategy hinges onaggregating, processing and distributing
a wide variety of quality travel content.
Our goal is to maximize content
quality, rates and the traveler booking
experience; at the same time, wehelp customers understand current
challenges in content distribution andwork with them to mitigate the impactof those challenges.
At the foundation of our content
strategy: core systems that deliver theright content at the right time to theright people, and drive the data fromthose content transactions into thedownline processes and platforms ourclients‘ programs depend on for seamlessservice, support and duty of care.

Distribution disruption is:
A A source of confusion and concern for travel program stakeholders
B Ripe for misunderstanding
C All of the above

If you have a stake in your company’s managed travel program, no matter
what answer you chose – though we personally vote for (C) – we invite
you to read this briefing. We’ll help you untangle the complexity behind
getting the airline fares (and ancillary content and full service and traveler
tracking and data storage and analytics) your travelers and your program
rely on – and share what BCD Travel is doing to help our clients navigate
those challenges.

What is New Distribution Capability?
In simple terms, NDC is a set of new technical communication standards for distributing
airlines’ fares and services. Launched by the International Air Transport Association (IATA),NDC will give airlines greater flexibility to differentiate and sell their products via thirdparty intermediaries (like global distribution systems, aggregators and travel managementcompanies) or direct to consumers.
The extraordinary impact of the coronavirus pandemic on travel has diverted attention anddiminished resources dedicated to NDC across the sector. But BCD has nonetheless madesignificant progress in executing agreements and developing our platforms and underlying
technology architecture to provide solutions for access to the increasingly fragmented aircontent market of the future.

What is BCD’s position on NDC?
We fully support it. We think NDC will lead to a better customer experience if it:© BCD Travel | 1

Distribution Disruption and New Distribution Capability (NDC)

The emergence of private
channel agreements
GDS surcharges are imposed bysome airlines as part of their own
commercial strategy to recover costs
and motivate GDSs to develop NDC
more quickly. Airlines claim that theGDS channel is now a more expensive
distribution option than their own
direct and new indirect channels.
A private channel agreement is
an agreement between BCD andthe airline(s) that specifies what
content we can access. As part of
the agreement, we also commit toworking with the airline and ourchosen technology provider (a GDS,
an aggregator or others) on NDC
connectivity. These agreementsallow our customers to avoid paying
surcharges to access the airlines’
otherwise restricted content, andto continue booking through BCD as
their most efficient channel of choice.
They also ensure that full servicing,data storage, traveler tracking,data analytics and full program
management remain available toour customers.
We’ve already signed channel
agreements with Qantas, British
Airways, Iberia and Qantas globally
and Air France/KLM in major markets.
We’re also closely engaged withother airlines to make sure any new
agreement guarantees access tocontent and protects our customers
from future surcharges.
We believe the introduction of
GDS surcharges unfairly penalizes
corporate customers—who typicallyprovide the airlines with a higher
average number of “journey legs”
within one ticket, the highest value
tickets, the most loyal travelers andfrequent repeat business.

Is distribution disruption a new development?
Changes in distribution aren’t a new phenomenon (see Title of sidebar). That said, there’s noImproves the traveler experience with a rich variety of booking choices in
one place, thereby eliminating the need to search multiple sites to determine
best options.

Allows travel management and travel technology companies to easily integrate
suppliers in a consistent, comparable fashion.

Lets customers buy “ancillary products” such as airline early boarding,preferred seating, special meals and anything else that adds to savings,
productivity or trip enjoyment.
doubt that disruption is accelerating and taking many forms. Most recently, we’ve seen theadvent of “exclusive agreements” between airlines and global distribution systems (GDSs).
We believe this move is contrary to the best interests of the industry and the traveler. If more
suppliers adopt this model, the industry will be left chasing the next “lost content” – which
will drive up costs for everyone.

Our strategic approach
Our emphasis is on the benefits to the customer. We’ve always sourced content in multiple
ways by leveraging relationships with our technology partners. We’re committed tocontinuing to source the content that’s relevant to our clients’ programs – whether that beGDS, NDC or low-cost carrier (LCC) content.
Our approach to NDC centers on the following principles:
We’re investing in technology
We’re investing heavily in our own technologies to deliver on the promise of NDC.
TripSource®, our proprietary digital traveler experience platform, integrates reservations
from GDS and non-GDS sources. We’ve also launched new agent technologies that allow
our agents to efficiently view, book and service reservations across channels. This newtechnology allows us to manage a wider diversity of booking channels. Finally, we’recommitted to working closely with the GDSs to launch their new NDC capabilities as theycome online.
We’re investing in operations
As NDC changes technically over time, our processes will also have to align. We’ve alreadyundertaken extensive reviews of the capabilities required to deliver NDC through ouragent channels using the GDS and third-party aggregators. We’re currently remapping ourprocesses – in partnership with supplier partners – to anticipate these changes.

© BCD Travel | 2

Distribution Disruption and New Distribution Capability (NDC)

Airlines want to develop
new distribution channels
in order to …
• Gain more control over theirdistribution strategy to allow
differentiated offerings and reducereliance on third-party distributors.
• Generate new revenue fromexpanded offerings, including
ancillary products and services, todifferentiate and market beyond asimple, text-based sort by price.
• Save through shifting and recovering
distribution costs by applying
surcharges in the GDS and leveraging
commercial negotiations with
distribution companies.

• Increase traveler engagement
by enabling insight into shopper
preferences and delivering
customized offers.

We’re focusing on the economics
As new distribution technologies and models take shape, they’re affecting the basic
economics of the distribution chain and requiring technology investment and higher
servicing cost from TMCs. Our goal is to provide clients with flexible distribution choices atthe lowest possible cost. However, not all distribution models, including NDC, have the same
cost. We’re committed to engaging with clients, so they can weigh the benefits of these new
distribution models against the cost.
We’re advocating within our industry
We’re part of IATA’s NDC Global Travel Management Executive Council and speak regularly at
industry events as subject matter experts on this topic. We’re fully engaged in testing NDC
use cases with the GDSs. It’s important to us to be included in discussions related to thefuture of distribution and NDC.
We’re educating our partners
Since much of the NDC transformation will be delivered through our technology partners(e.g., the GDSs, aggregators, online booking tools), we’re investing significant time with these
suppliers to influence their strategies. Our goal: to make sure our corporate clients’ content
and functionality needs are met.
NDC isn’t a “one and done” project for us. Given its scope, complexity and ongoing evolution,
we’ll release new functionalities in phases, ensuring that we deliver the benefits of NDC toour clients in a structured, prioritized manner.

The state of IATA NDC
Underlying NDC are the technical standards that IATA and its member airlines began
deploying in 2012. Today, seven years on, we’ve seen multiple revisions to the IATA
NDC technical communication standards. Scalability of these standards (e.g. theability to reliably handle transaction volume) is generally accepted for any standards
version above 17.2.
In 2018, 21 of the nearly 300 IATA airlines committed to being part of the IATA NDC
Leaderboard, which pledges to deliver 20% of their indirect bookings through NDC
by the end of 2020. While the coronavirus pandemic has slowed developments, weanticipate airline-driven NDC activity to proliferate over the next two years.
As interest accelerates, initial GDS-based solutions allowing “shopping and booking”
through NDC alongside traditional GDS functionality will begin deploying this year.
However, not all of the nearly 300 IATA airlines will adopt NDC in the same way and at
the same time, adding yet another layer of complexity to the expectation that TMCs
can integrate a world of NDC, non-NDC and traditional GDS content--not to mention
hotel, car and rail—into one display.

© BCD Travel | 3

Distribution Disruption and New Distribution Capability (NDC)

BCD is taking active steps to deliver NDC content
Can GDSs meet airlines’
future distribution needs?
We maintain that the scale andfunctionality required by the airline
industry and global service providers
like TMC’s means that broad deliveryof system-wide NDC solutions will be
best delivered by the GDS companies.
Doing so will require further
investment and system evolution.
It’s important to note that even whenGDSs deploy NDC solutions, thisdoesn’t guarantee that airlines will
distribute all content through thatchannel in future. Some airlines haveelected to move away from traditional
GDS “full content agreements”(agreements that guaranteed parity
with other channels). This indicates
their clear intent to control who gets

NDC Aggregator booking program
Our landmark NDC agreement with the Lufthansa Group allowed our agents to offer themost cost-effective choice to our pilot customers. The program using an NDC certified and LH
Group approved third party aggregator, let us validate key components of the NDC process—such as efficiency of booking, servicing capabilities and limitations, billing, data captureand duty of care— allowing us to refine our investments for the real world. After our initialpilot, we implemented an initial phase of NDC booking via an approved aggregator in key
European markets, including Germany, Belgium and the Netherlands.
GDS NDC programs
We’ve partnered with Amadeus (NDC-X), Sabre (Beyond NDC) and Travelport. Thesepartnerships are a natural evolution in our long-standing collaborative relationship with theGDSs and are part of our broader vision for further digital transformation of the bookingenvironment. We expect to test more robust and scalable GDS-based NDC solutions
throughout 2021.

NDC
Aggregatorbooking program

what in the future.
We’ve already seen the removal ofcertain low fares from traditional
GDS channels with some Europeanbased carriers. We recognize thatongoing airline commercial strategies
may mean content will not be
restored to the GDS. However, we
also strongly believe that GDSs playa vital role in enabling transparent
price comparisons, a keystone to any
corporate program. As a result, we’repushing all players, including IATA andairline NDC adopters, to make surecomparison shopping is enhanced,not diluted.

NDC
Certification

TripSource

GDS NDC
programs

Online bookingtools (OBTs)

Online booking tools (OBTs)
Integrating NDC content into OBTs naturally broadens the options available to travelers when
they book. We continue to work with our key OBT partners to certify their ability to passbookings and data to us to ensure customers have the appropriate blend of content to suit
their travel portfolio. Each OBT is taking a different route in its NDC development strategy;
some are working with aggregators, others are working with GDSs or airlines. Each is at adifferent stage of overall NDC readiness—and each presents gaps in the traveler experienceand the data we need to process and service bookings. Regardless of the route, we’reworking with the OBT to ensure our customers will have access to all fares, products and ratetypes that make sense for their program.
© BCD Travel | 4Distribution Disruption and New Distribution Capability (NDC)

TripSource
We’ve added air booking capability alongside the hotel booking feature alreadyavailable directly to travelers via the TripSource platform. This capability allows
travelers to access content sourced from traditional distribution, non-GDS and NDCenabled channels.
NDC Certification
In late 2019, we were designated NDC-Certified Level 3 by IATA. Certificationmeans that IATA confirms we can receive and send XML-based communications
from and to airlines using IATA NDC transmission standards. In addition to our own
certification, we continue to work with NDC-certified aggregators to deliver NDC for
our customers.

In summary
While many airlines are already operating
to the IATA standard, development andimplementation varies by airline. We’recommitted to being at the forefront of NDC
discussions and helping our customers
make the best decision for their travelers.
NDC, however, is just one area of focus
within the proliferation of technology
across the travel industry. These areasof change have created a very confusing
picture right now in the buyer marketplace,and we expect the confusion to continue
for some time.
Multiple channels will co-exist
We believe that industry-wide NDC solutions
are best delivered by the GDS companies,
but some industry participants will continue
to choose different distribution strategies.
We’ll support our supplier and technology
partners’ enhanced capability—when it
meets market needs—while educating ourcustomers on the changing landscape. We
expect conditions to continue to evolve
further in the next year.

Flexibility and diversity
NDC holds the promise of greater flexibility in
distribution and more customer choice in thefuture. TMCs can leverage the advantages ofNDC by integrating with content aggregatorssuch as global distribution systems moreeasily. But connecting directly with suppliers
requires costly and time-consuming manual
processing and, in most cases, creates
additional costs. NDC provides someadvantages to corporate travel programs,
but not without cost and not withoutsome potential loss of buyer privacy andshopping transparency.

Time will tell
Looking back, even technologies that
produced major cost savings for virtually
every player in the travel industry (e.g.,e-ticketing) took over a decade to adopt.
NDC won’t be adopted overnight, and no
magical “event” will flip the switch fromlegacy distribution to NDC. The transition will
be ongoing and lengthy. We’re committed toensuring the interests of corporate buyers,
and we’re placing travelers at the forefront
as our technology and supplier partners
move through this migration.

How are the GDSs implementing NDC?
All four major GDS companies are IATA Level 4-certified and are fully committed to using
the IATA NDC standards to connect to partner airlines. They’re focused on delivering a full
end-to-end NDC solution that addresses servicing a traveler throughout the trip, which ismissing from the experience today.

Initial GDS-based NDC solutions are being tested and we expect more to comethroughout 2021. For the latest status of industry NDC certification, visit theIATA NDC Registry.

© BCD Travel | 5