The travel trade press is full of articles about efforts of major airlines to transform their distribution practices from an era of simply selling airline tickets to embracing a robust retailing model.

This transformation generally is associated with implementation of the International Air Transport Association’s New Distribution Capability. ATPCO’s recent announcement around attribute pricing and dynamic offers further promotes this transformational change from static prices to dynamic bundles.

But can these efforts be implemented in the corporate travel sector?

Visa’s work on an NDC bundle with United Airlines was significant enough to help Kim Hamer win BTN’s 2022 Travel Manager of the Year award. But looking at this initial NDC implementation raises concerns that the corporate market and airline retailing remain out of sync.

For example, in its initial incarnation, the Visa deal appears to deliver little more than a standard United bundle with seats and bags that’s white-labeled as a Visa corporate bundle. As of this writing, servicing of the bundle needs to be handled directly with United.

If you look under the surface of NDC agreements, whether with online booking tools, global distribution systems or travel management companies, the key is the level of detail available via the NDC connection being used. As covered in The Beat, for example, Lufthansa Group offers three main options in GDS deals: traditional EDIFACT, public NDC and bilateral NDC.

Other carriers have not publicly divulged these classifications, but continue to upgrade to the latest NDC version, which often contains more functionality. It does appear that bilateral agreements could be required by airlines to get full NDC access, including the after-booking service elements so needed by the corporate travel sector.

As bilateral NDC options eliminate GDS segment rebates and other forms of TMC compensation, the source of resistance may be economic, not technical, though more complex NDC schemas require more technical resources.

Large TMCs earn a significant share of revenue from GDS and other supplier compensation. For some, this share is growing relative to fees paid by customers. Thus, the resistance in the market to embrace bilateral NDC connections is partially driven by economics. This resistance also acts as a barrier to enable the airlines to improve their corporate discounting approach.

According to McKinsey & Co., airlines need to rethink their corporate discount strategy to better “tailor discounts and benefits according to each corporate account’s travel patterns.”

McKinsey global airline program manager Prashanth Kuchibhotla echoed this in The Beat, writing that corporate buyers should “understand non-price components your company and travelers value and put them on the table as part of the overall package you are looking for.” 

Further industry evolution is needed to reach this balance where soft benefits are combined with discounts to deliver travel benefits.

What does it mean to match discounts and benefits with corporate travel patterns? Here’s an example: When a corporation changes its business-class eligibility policy to eight-hour fights from six-hour flights, many corporate travelers are forced into the economy cabin. Why not create a bundle for those specific flights? Disserved travelers could be ensured premium economy. If they already qualify for premium seating based on their status, then a lounge pass or other perk could be provided.

So here is the reality. Airlines will continue to move to dynamic pricing and traditional corporate players will resist new models that jeopardize a major source of their revenue. As a result, the volume of complaints from corporate travelers who find better deals on a supplier-direct site will likely increase as more dynamic bundles emerge.

There will be a clear separation between those TMCs and OBTs willing to change their model for dynamic content and those clinging to outdated compensation models. Will the GDS ultimately solve this problem? It is possible, but again the onus is on the TMC or OBT to accept the NDC bilateral terms, even if a comprehensive solution is offered by the GDS, which as of this writing has yet to emerge in the corporate travel sector where NDC uptake is less than 1 percent.

When corporate buyers complain about legacy infrastructure preventing innovation, often the driver is not the infrastructure but the economics behind the scenes.

I am hopeful that greater transparency that is enabled by Web3 smart contracts will help remove some of these inefficiencies and allow airlines to truly shape their corporate programs around the pain points of the managed traveler, rather than white-labeling cookie-cutter packages as corporate bundles.

Corporate buyers must demand that all NDC connections be bilateral and customer bundles be matched to their company’s specific traveler pain points. Unless driven by the buyer, TMCs and OBTs will continue to prioritize their own compensation over the needs of their corporate customers.