The Evolving Landscape of Airline Distribution: Navigating the Challenges of New Distribution Capability (NDC)

The airline industry’s transition to New Distribution Capability (NDC) has reached a critical juncture, with major carriers like American Airlines taking bold steps to shift their content exclusively to direct booking channels. A year ago in April 2023, American Airlines announced that it would offer a significant portion of its fares and ancillary products only through NDC-enabled platforms or its own direct channels, effectively bypassing traditional Global Distribution Systems (GDSs). This move by one of the largest U.S. airlines sent shockwaves through the corporate travel ecosystem, presenting a host of challenges for Travel Management Companies (TMCs), Corporate Travel Departments (CTDs), and Online Travel Agencies (OTAs).

And the pace hasn’t slowed. By May 1st, 2024, TMCs must meet one of three criteria set forth by AA for their travelers to accrue AAdvantage mileage:

  1. Booking directly through an AAdvantage Business account
  2. Booking via AA corporate contracts
  3. Booking by preferred agencies, defined as agencies whose NDC bookings reach at least 30% of all AA bookings by April 21st, 2024

Pricing Implications

As the industry moves quickly and painfully into this new NDC distribution paradigm, travel operators are being forced to navigate a complex landscape of enhanced content visibility and choice, personalized offerings, and more dynamic pricing strategies introduced by NDC while also addressing the myriad operational and financial challenges NDC poses.

One of the primary concerns surrounding NDC is the impact on pricing. NDC enables airlines to offer dynamic and continuous pricing, often resulting in fares significantly lower than those available through traditional channels, including contracted corporate rates[1][4]. This disparity can lead to cost savings for individual travelers booking airlines directly but undermine negotiated agreements between TMCs, GDS, corporations, and airlines, leading to broader negative financial implications for corporate travel budgets and operators[1][4].

Leakage Concerns

The attractiveness of lower fares offered directly by airlines through NDC channels can also drive up booking leakage when travelers start to bypass preferred booking channels to secure better NDC deals or to accrue mileage by booking directly on airline websites[1][3][4]. This impacts corporate travel budgets and complicates data aggregation and traveler tracking, posing challenges in maintaining compliance and oversight[1][4].


Tickets booked through NDC or other direct channels are more difficult to manage and modify than traditional GDS bookings. Travel operators have established processes and systems integrated with GDS platforms to efficiently handle ticket changes, refunds, and other servicing tasks. However, when bookings occur outside of these approved channels, operators must rely on airline customer service teams to assist travelers, leading to increased operational costs, service issues, and potential service delays for customers supported by TMCs and CTDs.

  • Tracking Unused Tickets: With the increase in booking leakage, tracking unused tickets becomes a complex issue for companies and TMCs. The fragmentation of booking channels complicates monitoring, reporting, and managing unused or partially used tickets, leading to potential financial losses and inefficiencies in travel management processes[3][4].
  • Ticket Credit Usage: The interoperability between EDIFACT (the standard for traditional GDS systems) and NDC poses challenges in managing travel credits. Specifically, the redemption of credits across different booking channels can introduce complications, such as system incompatibilities and policy discrepancies, affecting travelers and travel managers [4].

Corporate Travel Policies

The proliferation of NDC offers necessitates a reevaluation of corporate travel policies. Companies face the dilemma of adapting their policies to accommodate the flexibility and benefits of NDC while ensuring compliance, cost-efficiency, and the management of travel spending [1][4]. Balancing flexibility with control becomes a central challenge in policy formulation and enforcement.

Duty of Care

The shift towards NDC raises significant concerns regarding duty of care—a company’s legal obligation to ensure the safety and well-being of its employees while traveling. As more travelers book outside approved channels, maintaining visibility and providing support in emergencies become increasingly tricky, exposing companies to potential liabilities [1][4].

Increased Costs for TMCs, CTDs, and Agencies

TMCs, CTDs, traditional leisure agencies, online travel agencies (OTAs), and other larger purchasers of air tickets face myriad cost challenges with NDC, including:

  • Loss of GDS Segment Incentives: Bypassing the Global Distribution Systems (GDSs) for NDC bookings can lead to losing GDS segment incentives for agencies[6].
  • GDS Penalties: Bypassing the GDSs or handling NDC bookings directly through airlines may trigger penalties under GDS contracts with market-share or volume quotas[7].
  • Uncertainty in Incentives: To what extent NDC bookings handled through GDSs will earn incentives or count toward quotas, even under new GDS contracts[7].
  • Integration Costs: Records of NDC bookings made outside the GDS cannot be easily integrated into agency mid- and back-office systems with additional costs per transaction, diminishing the benefits of offering additional services[7].

The transition to NDC in the airline industry presents both opportunities and challenges for corporations, TMCs, and OTAs. Navigating the evolving landscape of airline distribution requires a strategic and collaborative approach, addressing pricing implications, leakage concerns, ticket tracking complexities, policy adaptations, duty of care obligations, and the financial impact on travel management stakeholders. By proactively addressing these issues and leveraging innovative solutions, industry players can optimize their travel programs and adapt to the changing dynamics of airline retailing.

Read more about NDC challenges in our NDC white papers.