The Current State of Airline Distribution

The airline distribution landscape has remained largely unchanged for decades, dominated by Global Distribution Systems (GDS) that were originally created by airlines in the 1960s but later sold off. Michael O’Leary of Ryanair aptly described the disconnect: I quote Michael O’Leary, Ryan Air. “The problem with aviation is that for 50 years it’s been populated by people who think it’s this wondrous sexual experience; that it’s like James Bond, and wonderful, and we’ll all be flying first class, when really it’s just a bloody bus with wings.”  ” This perspective highlights the outdated and overcomplicated nature of current distribution systems.

Today, three major GDS companies control most of the market outside China:

• Amadeus
• Sabre
• Travelport (including Apollo, Galileo, and Worldspan)

These systems were designed in an era of regulated monopolies and operate on legacy technology (EDIFACT) with significant limitations that impact airlines’ ability to modernize their operations AltexSoft.

Key Problems with Current Distribution Systems

There are several critical issues:

1. High Distribution Costs: Airlines pay substantial fees to GDSs for each segment booked, with technology costs decreasing in other industries while airline distribution costs remain high.
2. Inflexible Pricing: Traditional systems require airlines to file fares in advance with ATPCO (Airline Tariff Publishing Company) and are limited to 26 pricing points (A-Z), severely restricting dynamic pricing capabilities.
3. Limited Product Differentiation: Legacy systems make it difficult for airlines to showcase their unique offerings and ancillary services.
4. Technological Debt: Airlines are burdened by outdated systems that are expensive to maintain and difficult to integrate with modern technologies. This is also the situation for many other tools like manage manpower, maintanence and schedule of airplanes and financial systems.
5. Capital Fund Ownership: As you noted, GDSs (except China’s Travelsky) are now owned by capital funds focused on maintaining status quo and protecting their ROI rather than driving innovation.

NDC: A Half-Step Forward

The New Distribution Capability (NDC) was introduced 12 years ago as an XML-based data transmission standard to address some of these issues. However, NDC has significant limitations:

• Implementation challenges with legacy systems
• Lack of standardization across airlines
• Inadequate adoption strategy by many airlines
• Potential imbalances in competition favoring larger airlines
• Privacy and data security concerns

NDC represents an incremental improvement rather than the transformational change the industry needs CIS Wired.

Learning from Bus Companies

Research into bus company distribution systems reveals a striking contrast in technological adaptation. Bus booking systems like AllRide Apps offer:

• Modern, flexible pricing models
• Comprehensive seat management and optimization
• Customer-friendly interfaces
• Efficient payment processing options
• Substantially lower transaction costs
• AI-powered features and optimizations

The AllRide platform offers features that airlines could benefit from, including GPS integration, advanced customer management, and dynamic pricing – all at a fraction of the cost of airline GDS fees AllRide Apps.

The Proposed Solution: Virtual Ghost Airline Distribution System

I have earlier proposed a “virtual ghost airline distribution system” represents an innovative approach that bypasses traditional GDSs while maintaining compatibility with existing airline operations. Key components include:

1. Mirror Inventory System: Creating a parallel inventory system (e.g., “SAS1” for SAS) that functions like a codeshare partner.
2. Dynamic Point-of-Sale Pricing: Implementing true dynamic pricing without pre-loaded fares, allowing middle seats to be priced differently than window/aisle seats.
3. Comprehensive Ancillary Services: Including luggage, food, gifts, and other services directly in the booking flow.
4. Flexible Distribution Structure: Enabling airlines to control allotments, home market rules, corporate rates, and excess capacity management.
5. Mobile-First Approach: Prioritizing smartphone bookings with features like airport offers, upgrades, and loyalty point usage.

This approach cleverly works around GDS exclusivity agreements by treating the new system as a codeshare partner, with bookings ultimately flowing back into the main system for operational processes.

Benefits of the Proposed System

The proposed system offers significant advantages:

• Cost Savings: Bypassing traditional GDSs could save airlines substantial distribution fees, potentially dropping to €1 per seat as demonstrated by Travelsky in China.
• Greater Control: Airlines would regain control over their distribution channels, pricing strategies, and customer relationships.
• Enhanced Customer Experience: More user-friendly interfaces and personalized offerings could improve the overall booking experience.
• Increased Revenue Opportunities: Dynamic pricing and better ancillary service integration could boost airline revenues.
• Innovation Agility: Airlines would be better positioned to implement new technologies and respond to market changes.

Implementation Challenges

Several obstacles exist to implementing proposed solution:

1. GDS Exclusivity Agreements: Many airlines are bound by contracts with GDSs that limit their ability to create alternative distribution channels.
2. Technical Expertise: The airlines generally lack the necessary technology specialists to build and maintain such systems.
3. Initial Investment: The upfront cost of developing a new distribution system would be significant, challenging for airlines still recovering from COVID-19 impacts.
4. Integration Complexity: Ensuring seamless data flow between the new system and existing operational systems would be technically challenging.
5. Industry Resistance: Established players in the travel ecosystem have vested interests in maintaining the status quo.

Emerging Players and Partners

Here are a few emerging players that are already working to disrupt the traditional distribution landscape:

• Spotnana: A Travel-as-a-Service platform that offers direct NDC connections with airlines like United and Air France-KLM, providing access to continuous pricing (40% more price points) and avoiding cost-recovery surcharges Spotnana.
• FCm and ATPI: TMCs (Travel Management Companies) that are more open-minded about adopting alternative distribution approaches.
• Travelsky: China’s GDS offers distribution for approximately €1 per seat, demonstrating that more cost-effective models are possible.
• Hagon: A German company specializing in distribution systems for trains that could potentially adapt their expertise to airline distribution.

The Path Forward

Based on your analysis and additional research, here are steps airlines could take to move toward a more efficient distribution structure:

1. Pilot Programs: Start with limited test cases, perhaps focusing on specific routes or markets.
2. Strategic Partnerships: Collaborate with technology providers like Travelsky or innovative startups that already have relevant expertise.
3. Gradual Implementation: Begin with a subset of inventory to mitigate risks while proving the concept.
4. Data-Driven Approach: Use the insights gained from initial deployments to refine the model before broader implementation.
5. Industry Collaboration: Work with like-minded airlines to develop common standards and increase collective bargaining power with existing GDSs.

Conclusion

This proposal represents a bold reimagining of airline distribution that addresses fundamental issues in the current system. By learning from other transportation sectors plus retail and leveraging modern technology, airlines have an opportunity to create more efficient, customer-focused distribution platforms that could generate substantial cost savings and revenue opportunities.

The aviation industry faces multiple challenges, from increasing environmental regulations to post-pandemic financial pressures. Modernizing distribution systems represents a strategic opportunity to reduce costs and enhance competitiveness in this challenging environment. The proposed “virtual ghost airline” model offers a pragmatic path forward that balances innovation with the practical realities of working within existing ecosystem constraints.

The coming months and years will indeed be interesting as airlines, GDSs, and new entrants navigate this evolving landscape. Those who embrace change and prioritize modern distribution approaches will likely gain significant competitive advantages in the years ahead.

I got curious and tried to find out the cost and available software products for bus companies. When we are talking about big bus companies it is a little tricky to get transaction cost, as I was being asked about number of buses, routes and passengers. Finally, I did find an interesting product.  

First of all, I asked ChatGPT if bus distribution software could be used? Here is their answer: 

Yes, Can Bus seat distribution can be used for airline seat distribution. This technology uses algorithms to optimize seat allocation and balance passenger weight distribution for safety and comfort. The principles behind seat distribution in buses and airlines are similar and can be adapted for use in both modes of transportation. 

Then I looked at what they could deliver of AI and total package. You will be surprised of the dept of their offerings: Here is the LINK with the questions you may think about and here is a LINK to their offering and pricing. 

There are quite a big number of offers out there and it is a little fascinating to learn from that industry. Of course, there are differences between the 2 industries and designing the right product need planning, insight and wisdom.  

However, look at the corporate travel airline industry and weep. YES, the system does work and makes it difficult to change especially because the GDS`s apart from China`s Travelsky are owned by Capital funds being happy with their ROI and wish to maintain status que.  

Apart from a few new players like Spotnana and open minded TMC`s like FCm and ATPI we are still stuck with 12-year-old NDC as an alternative. 

I am aware that a number of airlines are forcing changes by charging the GDS fees and in the end the customers (passengers). It is going to be interesting months and years to come.