Everything you need to know about IATA’s new Airline Retailing Maturity (ARM) Index
When IATA launched its New Distribution Capability (NDC) in 2012, the goal was to transform the airline retailing landscape; to commit to customers by putting their requirements first , while allowing airlines to take control over their product and most importantly, scale volumes and drive value.
The global pandemic may have brought unforeseeable damage in the business of air travel but at the same time, it provided airlines the time and opportunity to shift its focus towards developing its retailing.
Retailing is the process of selling consumer goods or services to customers through
multiple channels of distribution to create benefits for airlines and their customers. This can be through personalization, by creating and offering a range of products and services (flight, ancillaries such as extra bags, special seats, Wi-Fi on board
and other non-air services) and selling to their customer either via their direct channel (call-Centre, web) or via intermediaries (metasearch, travel agents, content aggregators, new type of sellers, etc.).
Embarking on a retailing journey requires airlines to think across the entire customer journey from shopping to booking, payment, delivery, and financial back-office processes. To complement the introduction of NDC, IATA has put in place programs, such as ONE Order, Dynamic Offer Creation and more to better serve the customer through effective personalization and efficient servicing at a technical level.
Since then, the number of NDC certifications (airlines, IT providers, sellers) grew to 193 players (in June 2021) and several third-party distribution agreements have joined the group including GDSs and IT providers, some incorporating new commercial models facilitated by NDC.
Today, as retailing evolves, IATA has introduced the Airline Retailing Maturity (ARM) index, with an added component of value creation guidance and tracking. The key feature of ARMi is to help airlines and their partners to have better visibility with airline retailing.
This is a remodelling of NDC and One Order certification, but is also broadening of airline retailing using Offers and Orders of the IATA programs of NDC, One Order, Settlement with Orders, Dynamic Offer Creation and Future of Interline – all in one certification.
According to IATA, the new certification will be based on three pillars: Capabilities verification (airlines, sellers and system providers) to know what technical standards (NDC, One Order Settlement with Orders) are enabled for capabilities like shopping for flights etc; Partnerships deployment (airlines, sellers) where partners must confirm capabilities that are Live with partners, their volumes, network reach etc. and their scalability across the value chain and lastly, Value capture (airlines) that enables airlines to capture value by shifting to airline retailing and be better equipped to move forward with an advanced airline retailing strategy.
The ARM index was rolled out at IATA’s recently concluded Digital, Data and Retailing Symposium 2021, which took place in Madrid, Spain.
While the previous certification programs (NDC and One Order) were comprised of one pillar which was the technical validation, the new certification program will recognize the benefits of the value chain collaboration and value creation. This also means an end to the various levels of certifications including the the leaderboard strategy.
One of the limitations of the previous certifications was that it did not allow for an accurate identification of airlines using these APIs to boost their retailing capabilities, the new ARM index is all about the business workflow and outcomes that an airline wants to achieve.
With better focus on the relationship between airlines and sellers and how they are working together to drive retailing volume, airlines can make better choices to capture value and understand their partners and more importantly, their end customer. This in turn helps sellers provide the right feedback to the airline.
More importantly, ARMi allows an airline to assess the maturity of their retailing capabilities and how they can use this to inform their future retailing strategies and meeting the expectations of today’s digital centric customer.
A key feature in the ARMi registry is the transition process. ARMi allows for a easy transition to the ARMi registry. Airlines and Sellers are required to have a live deployment (i.e. existing NDC and/ or One Order capabilities while system providers can be granted the ARM index participation, in a test environments that allows them to migrate into the new process.
According to a report from McKinsey, airline retailing has an industry average value creation potential of up to $7 per passenger, the equivalent of approximately 4 per cent of revenue.
“Retailing can move airline distribution to the future through de-commoditization, selling new products in new ways, and being closer to the customers. It will enable richer customer engagement and dynamic offer creation.”