Jeroen Hurkmans: Countdown to IATA’s ONE Order and effect on buyers

20 April 2018
Jeroen HurkmansVice President EMEA/ APACAdvito

Buyers will have better negotiating leverage when passenger information is in one place

Imagine how simple travel management would be if every transaction in the travel experience were tied to one record number. A single order would encompass the plane ticket, changes to reservations, seat upgrades, lounge access and more. What if hotel charges and ground transportation were included as well? Imagine the advantages of consolidating all purchase information for a traveller under one unique order number.

This vision is not a fantasy; it is the goal of IATA’s (International Air Transport Association’s) ONE Order initiative. While specific details about how this will work are still under development, this approach will transform the travel industry over the next decade. It holds tremendous advantages for corporations by simplifying travel management, enhancing the traveller experience and providing more leverage in airline price negotiations because total spend will be readily available and completely transparent.

ONE Order is an ambitious programme requiring changes from all stakeholders, including corporations. To prepare for the future and gain value from the potential benefits, it helps to peek under the hood to understand how it works. 

An initiative rooted in NDC

The industry is already in the midst of change with the introduction of New Distribution Capability (NDC). Launched by IATA in 2012, NDC is a new XML-based data transmission standard that modifies the way airlines operate as retailers, offering better ways to sell their products to buyers. According to IATA, NDC overcomes current distribution limitations, enables product differentiation, enhances time to market, allows access to complete air content and creates a transparent shopping experience. It transforms the airline business platform from pure ticket distribution to an “air-retailing model.”

ONE Order is the next logical step, further extending airlines’ capabilities. The current system involves a lot of patchwork behind the scenes. ONE Order eliminates that by implementing an industry XML-based standard for communication between Airline Order Management, Revenue Accounting and Delivery providers.

A journey through a series acronyms sheds further light on the challenges that ONE Order overcomes. The Passenger Service System, or PSS, is the heart of each airline’s reservation and ticketing system. It operates with three essential components:

  1. PNR: The Passenger Name Record, which is also referred to as a booking reference. Basically, this is a database with the passenger’s itinerary and is assigned a code composed of five letters
  2. E-ticket: This is the electronic ticket issued to a passenger with a 13-digit number
  3. EMD: The Electronic Miscellaneous Document is issued when ancillary services such as lounge access or seat upgrade are purchased. It has a separate identification system from the PNR and e-ticket

These three elements are the bricks airlines use to build the foundation for passengers to book, purchase, obtain an e-ticket and add ancillary services. The challenge with existing technology is that the different systems between airlines, airports, airline partners and additional service providers are constantly exchanging this information. The systems are built to synchronise with each other, but because the work behind the scenes hasn’t always been done properly, sometimes it doesn’t work. 

ONE Order is going to change that. It will eliminate the patchwork and replace the three elements, the PNR, e-ticket and EMD, with one order number. Hence the moniker, “ONE” Order, a single version of the truth. All the complexity will go away because there will be only one reference number that should make servicing clients easier, faster and more robust.

The advantage of simplification

The first and most obvious benefit to ONE Order is simplification. Today, data fragmentation creates tremendous challenges for travel managers. For example, you cannot match a specific trip with a specific ancillary service.

Rather than combining data from multiple sources to get a complete picture of travel spend, when the new initiative is adopted, stakeholders will only have to deal with one source of data. For travellers, this means a more streamlined experience, with fewer technology glitches. For corporations, there is even greater impact.

Better negotiating leverage

Because the travel manager will have better visibility into total spend, including add-on costs for upgrades, lounge access, etc., the negotiations will no longer be limited to the ticket price. The effect on discussions with airlines is obvious – the corporation will have more leverage. However, ONE Order raises even greater possibilities because other providers, such as hotels, have the ability to attach reservations to the same order. Suddenly, the world of corporate travel has the potential to change in even more significant ways.

Because of the flexibility the initiative gives to airlines as retailers, you can imagine that they might push partnerships with some hotel chains to offer bundled packages. The lines between different travel segments will begin to blur.

That raises more questions than can be answered right now. How will this impact corporate hotel sourcing? One option might be that instead of negotiating air and hotels in separate silos, you might gain more value by negotiating both elements together.

Yet there are other considerations. As hotels move into dynamic pricing, if you connect dynamic pricing approaches, you could even have more descriptors beyond the room itself, such as Wi-Fi access, inclusion of breakfast, etc. to ensure that deals are beneficial to your travellers. Another issue to address: you will want to ensure the airlines push programmes to your travellers that are compliant with your corporate travel policy. The “rules” that have governed corporate travel will undergo tremendous upheaval as traditional ways of sourcing air and hotel programmes eventually disappear.

Changes to reporting infrastructure

All the reporting infrastructure used today is built around the data sets from the PNR, the e-ticket and the EMD. Tomorrow, it will be replaced, requiring a new data specifications format that will have to be developed by every stakeholder involved in reporting. Be prepared for this as it will be part of the transition change management process for the entire industry.

Data security

With the advent of GDPR, all eyes are on data governance and security. One advantage of ONE Order provides is that instead of having to protect data from three sources, each entity will have to protect only one. The assumption is that will be easier to accomplish. 

However, as the initiative evolves, more players will attach to the order – possibly hotels, ground transportation and ecommerce providers. More connections will create additional security concerns.

Anticipate additional costs

ONE Order is a tall order that changes the airlines’ business model. It requires a huge IT investment. In addition, transformation, like the changes occurring today with NDC, creates contractual changes in the relationships between different stakeholders such as those between airlines and GDSs, aggregators and TMCs, for instance. 

There will definitely be a cost impact. Who is going to pay for that? Will investment costs be passed along to corporations and travellers? It’s too early to say; it will depend on negotiations between stakeholders. At the same time, it is also important to consider internal corporate costs for consultation, training and potential IT changes. 

Opportunity for innovation

ONE Order is a global initiative. Based on experience we have had with past data initiatives, there will be first movers. We will start hearing about their progress this year because the sharpest airlines and IT providers are going to test the concept and develop the standards. It will take years before the entire initiative rolls into effect. 

ONE Order will create an entirely new data ecosystem that the airlines want to open to the external world. The idea of closing the gap into ecommerce from the airline perspective will create opportunities for a lot of innovation and things we aren’t even thinking about today. As those doors and windows open, anything is possible.

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