q United Ponders the Future of Sales and Distribution in a New Post-Pandemic World – Cranky Flier

United Ponders the Future of Sales and Distribution in a New Post-Pandemic World

Distribution, NDC, United

United has been very clear that running an airline post-pandemic is going to be very different than running one before. You can read through earnings transcripts and see CEO Scott Kirby talk about the shifts that the airline has made as it tries to adapt. Though much has been said about the operation, this is something that involves every part of the airline, including the wild world of sales and distribution where so much has been changing around the industry as of late.

Over the years, legacy airlines have increasingly sold more of their tickets directly to consumers. The invention of the internet sparked that change, and airlines were some of the first companies to jump into e-commerce. This was a natural shift, but it was not a complete one. Third-party sales have remained important. Online travel agents are good at filling up the cheap seats when needed, but it’s the corporate and agency relationships that have historically brought in loads of high-yield tickets.

Like American, United believes that there are fundamental changes happening in this world. That being said, United appears to be handling the change in a more cautious way… as of now.

Corporate discount agreements have a volume component to them, and since the pandemic, companies have struggled to reach those volume goals. I believe American said on its most recent earnings call that more than 60 percent of its large contracted corporates are not flying as much as the contracts require. Though I think it’s too early to claim that this is a new normal, it’s certainly the reality today that things are different. Every airline sees this problem, but deciding how to handle it is a different story.

We’ve seen American get very aggressive by slashing corporate deals, dismantling its sales team, pulling back on travel agency offerings, and forcing adoption of NDC for selling tickets. United has taken a more cautious approach.

So far United has done none of those things, but that doesn’t mean the airline never will. I spoke with Chief Commercial Officer Andrew Nocella and SVP Worldwide Sales Doreen Burse, and they both emphasized how active they are being at trying to understand the right way forward. On the one hand, Doreen and her team are talking to their corporate and agency partners regularly, trying to get a real feel for what is happening with their input. On the other hand, they’re also analyzing all the data they can find to see where this is going. There will be no knee-jerk reaction.

Though I couldn’t get specifics on exactly what their private, internal data was saying (I tried), there is plenty of data to be analyzed. American has admittedly given several gifts to other airlines by being so aggressive. Most importantly, by going first, American has made it easier for other airlines like United to see if these cost-saving changes will move market share. If American is able to slash its costs by cutting overhead (employees) and diverting away from traditional GDS bookings to cheaper NDC bookings without losing share, then I can only assume United will be hard-pressed NOT to follow. (And to be clear, neither Andrew nor Doreen said this. This is just an obvious conclusion.)

That being said, these are early days. The great American NDC experiment still hasn’t been fully realized, with shifts to Transpacific and Transatlantic sales channels not yet live. We’re also approaching a summer with very strong demand, and that means that American will have little trouble replacing any lost corporate/agency share with direct sales. But what happens in the fall and winter? Or what happens during the next downturn?

These are all questions that remain to be answered, and that’s why United is paying such close attention both to the data and to its partners. But just because United doesn’t know the right answer yet, that doesn’t mean it’s sitting still.

Like American and Air Canada, United is leaning hard into the future of travel sales using NDC. United, in fact, has just pushed its NDC integration live in Sabre. Unlike American, United hasn’t pulled out any fare content from traditional channels, but that doesn’t mean the pricing is always the same. This is one reason why airlines really want NDC… they can do a lot more with it.

United has talked about how it is using continuous pricing on 40 percent of the tickets it sells. The traditional way of selling tickets has a set number of fare buckets and then a slew of filed fares. For agencies, the GDS does the computing work to determine which fares apply depending upon which buckets are open. Continuous pricing effectively fills in the gaps with potentially endless, granular changes based on demand.

United can use continuous pricing to offer additional fares above and beyond traditional methods through its direct channels, because it has its own pricing engine doing the work. Now with NDC, agencies can sell those fares as well, because it shifts the pricing work from the older GDS tech to United.

This is an additive strategy, it’s about providing more and better options that United can’t offer through traditional channels today while also keeping costs down. And yes, it can mean that fares will be cheaper through third parties. It also means third party fares can match what United offers directly today. That’s the kind of move that United can make without looking at reams of data. This creates a real competitive opportunity that’s harder for other airlines to match.

The idea for United, as is the case for all airlines adopting NDC, is that it wants more control over what gets sold through any channel. United is the one flying the airplanes and seeling those seats, so there’s nothing wrong with that. But United also realizes that the tools aren’t fully ready to handle a wholesale transition.

One thing United certainly isn’t doing right now is slashing its staff or cutting loose partners. With the jury still out on whether American is going to make this work or not, United seems content gathering data, sitting on the sidelines, and waiting for a more complete picture to appear before it makes any controversial moves. In the meantime, it’ll continue plugging along with high impact moves that aren’t embroiled in controversy.

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21 comments on “United Ponders the Future of Sales and Distribution in a New Post-Pandemic World

  1. When the crankyflier.com site shows this as the latest post (before the “All the Crankiness” section, and before clicking on the the preview of the post to read it further), image for this post is cropped/hidden just enough that United’s response isn’t shown (at least using my Chrome browser on a PC) .

    That may not have been intentional, but I’m going to give Brett credit and assume it was intentional, because it made my day when I clicked through to post and saw the full image with United’s response to the post-apocalyptic cliff-jumping scene. Sometimes it’s the little things that help you start Monday (and the week) with a smile. :-)

    1. It’s the opposite on my iPhone with the Safari browser. I can see United’s response without seeing what American is saying (or even that it’s American saying it).

  2. Corporate, agency… what about government? Uncle Sam is not an insignificant purchaser of airfare; possibly the largest single customer. And they have a unique way of doing business (the city pair program). Any effects on that?

    1. Ron – I’m sure they’re all still actively participating in the government programs as they are. I can’t imagine getting the government to move in order to play nice with airlines. It’s the other way around.

    2. AFAIK the US government bids the route out to airlines, and any given city pair has one airline that has that route. On that route there are usually two fares, a capacity controlled one, and a good to the last coach seat. (There are also some business fares, but those don’t seem to be the case on domestic routes.

      You can go browse it at https://cpsearch.fas.gsa.gov/cpsearch/search.do if you’d like.

      1. Also, I guess what I’m saying, is the City Pairs program is pretty simple from a pricing perspective, so I’m not sure it makes much sense to push it there earlier rather than later.

        1. Yeah but they would make more if they were able to get GSA to purchase through the NDC
          (direct from airline) instead of GDS (third party with commission). At least that’s how I understand it.

  3. I know that most of your audience are travel professionals, but amateurs ie. I pay for all my own travel) like to keep up with airlinr developements, to save money, yet you continually use abbreviations that I do not understand.
    If you use an abbreviation at least the first time you use it , TELL US WHAT IT MEANS, IN PARENTHESIS IF NECESSARY.
    SO CALLED EXPERTS DO IT ALL THE TIME ……………. WHY ? IF IT IS NOT CLEAR TO SOME READERS.

    THE AIRLINES AND THEIR FLIGHT/FARES JARGON ARE THE WORLDS WORST AT DOING THIS .

    1. CEO = chief executive officer
      NDC = new distribution capability
      GDS = global distribution system
      SVP = senior vice president
      Anything else?

      1. You missed some:

        sabre = Semi-Automated Business Research Environment
        60 = sixty
        40 = forty
        tech = technology

        I was going to list out the contractions, but are not (I did not want to use the word “aren’t” and cause further confusion) those considered abbreviations? Perhaps we should pose that question to CAPITAL BRIAN.

        1. there’s also this google thing which allows you to look up nearly anything you don’t know offhand. pretty fabulous.

    2. Geez, you must be fun at dinner parties. You’re showing a million dollars of indignation for a penny of infraction.

      It’s an industry blog, not a travel blog…. so it’s going to appeal to people in a certain niche, who are already knowledgeable – not the least common observers from the wing. That means there’s a small knowledge hurdle, and geez if only someone would invent this infinite loop of knowledge where we could ask any question we’ve ever had in the world to educate ourselves in minutes if not seconds…I’m not an insider, I’m not even in this industry but I find other industries have lessons that I can apply to mine, and I travel a lot for my work. I’ve made an attempt to educate myself on these abbreviations and jargon, not throw a tantrum because I don’t know.

  4. Seems like UA is not only keeping all of its options open by connecting its NDC to Sabre but also innovating by creating a substantial (40% is a big number) dynamic pricing bucket outside of the rigid fare structure required by the GDS. I’m definitely not a pro but it sounds like a best of both worlds approach while they continue to evaluate their options.

    It also seems like AA took the Roman Roy approach and fired a ton of people leaving the remainder to sort it out.

    I can’t believe I’m saying this because I’m pretty sure what will happen as a result but I wonder what DL is doing about this…

    1. Bill – Delta is really not doing anything with NDC at this point. They say it’s not ready and they’ll wait until it is. It’s a very different strategy.

    2. The downside of keeping both worlds is needing the staff and resources to keep both running so more expensive and complicated in the short term while they figure out what works and what doesn’t. But it sounds like a pretty sensible way of doing it.

    1. Thanks for the clarification. It seems this could easily be expanded thought the network once they’ve tested in certain fare elastic markets. Again, sound strategy.

  5. The way United manages distribution decisions will prevent them from actually making real changes here. They’ll make a lot of small adjustments over the course of a few years that may bring them on par with AA, but that may be the quickest they can act.

    Legacy sales leadership typically does not believe in NDC and will listen to their agency partners on all the downsides. These partner relationships have been there for decades and so it will take new leadership to upset that status quo. This is why DL doesn’t have NDC in their vocabulary.

  6. Sorry, very late comment to this topic, hopefully someone will still see it.
    I was wondering what effect, if any, NDC will have on carriers’ ability to monitor their competitors’ fares via ATPCO. To the extent they’re now generating the offers themselves in-house via NDC, will they still even be submitting to ATPCO? I’m sure ATPCO will still be relevant for several years, but eventually if everyone gets on board with NDC, will ATPCO cease to exist?

    1. Bob S – American is continuing to file everything through ATPCO so far, but United definitely does not. It still has its set pricepoints in ATPCO but the continuous pricing effort would not show in ATPCO at all.

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