Airlines Have Outgrown Seat Distribution. The New Game Is Retail.

The airline industry spent a decade building pipes. Now the question is what flows through them. As carriers accelerate toward an Offer and Order world, the battleground has shifted from who controls distribution to who controls the sale.

By the TDN Editorial Team

For most of the jet age, an airline’s commercial function was relatively simple to describe: get the right seat to the right passenger at the right price, and make sure a travel agent could find it. That was distribution. That was the job.

That world no longer exists.

Quietly but irreversibly, the commercial logic of aviation has shifted. Airlines are no longer in the business of distributing inventory. They are in the business of building and selling offers, dynamic, personalized, context-aware bundles of products and services that begin with a flight and extend well beyond it. The seat is still there. But it is increasingly just the anchor point for something much larger.

The industry has a term for where this is heading: Modern Airline Retailing. Underpinned by IATA’s New Distribution Capability standard and increasingly driven by the Offer and Order framework, it represents the most consequential commercial transformation aviation has attempted since deregulation. And after years of slow progress, the signals now point to an inflection point.

“The seat is still there. But it is increasingly just the anchor point for something much larger.”

$148.4B Global airline ancillary revenue in 2024 Now representing 14.9% of total airline revenue globally — up from 12–13% pre-pandemic. Source: IATA, industry data.

$399B Projected ancillary revenue by 2033 Reflecting an 18.5% compound annual growth rate as the retail model matures. Source: Market projections.

$7 Additional revenue per passenger unlocked by full Offer & Order transition Per IATA and McKinsey analysis of the retail transformation opportunity.

The story of NDC is commonly told as a technology story. An XML standard, a new API layer, a way to route richer content through indirect channels that legacy EDIFACT pipes were never built to carry. That framing is accurate but incomplete.

NDC was always, fundamentally, a commercial argument. The argument that airlines had ceded too much product control to intermediaries. That GDS infrastructure, however efficient at moving inventory, had flattened the airline product into a commodity, a departure time, a cabin class, a price. That the richness of what an airline could actually offer a traveler had nowhere to go in that model.

The NDC standard, introduced by IATA in 2012, was designed to fix that. By enabling XML-based data exchange between airlines and any distribution partner; GDSs, OTAs, TMCs, aggregators, it gave carriers a mechanism to transmit dynamic pricing, ancillary bundles, personalized offers, and rich product content in a way the old systems simply could not support.

Progress was slow. Technical adoption was uneven. Agencies pushed back on the complexity. GDSs navigated a difficult dual role as both distribution incumbents and NDC enablers. But by early 2025, the landscape had materially changed. IATA’s Airline Retailing Maturity (ARM) Index was tracking verified NDC capabilities across 75 airlines. Sabre reported 42 live NDC airline connections. Travelport had struck NDC distribution agreements with carriers ranging from Royal Jordanian to Riyadh Air. All Nippon Airways went live with NDC content across 40 global markets. The pipes, after a decade of construction, were finally operational at scale.

But here is where the story gets more interesting and more consequential. Because the industry is now discovering that having the pipes is not the same as knowing what to put through them.

“The industry spent a decade building NDC pipes. It is now discovering that having pipes is not the same as knowing what to put through them.”

THE OFFER AND ORDER HORIZON

NDC was phase one. Phase two is Offer and Order a deeper structural transformation that would replace the industry’s legacy commercial artifacts entirely. No more PNRs. No more e-tickets and EMDs as separate documents. In their place: a single Order record that captures the complete commercial relationship between carrier and traveler, from initial shop through post-trip servicing.

The logic is compelling. Today’s booking process still generates three separate commercial documents; a PNR in the reservation system, an e-ticket, and an EMD for ancillaries even when those documents describe a single transaction. The administrative overhead is significant. The friction it creates for servicing, for personalization, for dynamic offer construction, is greater still.

ONE Order, IATA’s initiative to unify these into a single commercial document, represents the end state of the retailing transformation. And while the industry is clear-eyed about the distance still to travel as one major market intelligence firm noted in late 2025, we are in the very early days of this transformation, and for the vast majority of airlines, little has yet changed in practice the direction is no longer in doubt.

What is changing is the pace of executive commitment. The T2RL Engage Conference in London in late 2025 gathered representatives of carriers accounting for half the world’s airline passengers to discuss not whether to transform, but how, when, and with whom. That shift in framing from strategic debate to implementation planning is significant.

Behind the technology narrative is a financial one. Airlines are not pursuing Modern Airline Retailing as an ideological project. They are pursuing it because the numbers increasingly demand it.

Ancillary revenue; once the exclusive domain of ultra-low-cost carriers milking baggage fees has become a critical profitability lever for carriers of every type and size. Globally, the figure reached $148.4 billion in 2024, representing nearly 15 percent of total airline revenue. IATA’s own projections for 2026 show ancillary and other revenues growing a further 5.5 percent to $145 billion in that year alone, with ancillaries now accounting for nearly 14 percent of total industry revenue, up from 12 to 13 percent pre-pandemic.

For some carriers, that share is far higher. In 2024, five airlines crossed the 50-percent threshold generating more revenue from extras than from the base fare. While most of those carriers are ultra-low-cost operators, the trend lines are moving in one direction across the industry.

What is changing is not just the volume of ancillary revenue but its character. The first wave of airline ancillaries was blunt: charge for bags, charge for seat selection, charge for food. The emerging wave is something qualitatively different. Finnair is bundling seat selection with in-flight WiFi at a combined discount; the first carrier to offer such a package using Amadeus Nevio’s order management capabilities. Ryanair has launched a subscription product, Ryanair Prime, offering frequent flyers a bundle of benefits for approximately $105 per year. Airlines are beginning to offer hotel bookings, car rentals, transfers, and travel insurance as embedded components of the shopping flow, not redirects to a partner site.

This is not unbundling. It is re-bundling and it is a categorically different retail motion. The goal is not to strip the product and charge separately for every component. The goal is to construct offers that are contextually relevant to the individual traveler, competitively priced at the bundle level, and dynamically updated in real time. That requires a retailing capability, not just a distribution capability.

“This is not unbundling. It is re-bundling — a categorically different retail motion that requires a retailing capability, not just a distribution capability.”

No analysis of airline retailing transformation is complete without confronting its most structurally sensitive dimension: what it means for the GDS.

The GDSs — Amadeus, Sabre, Travelport — have been the dominant intermediaries in airline distribution for decades. Their model was built on EDIFACT, on centralized inventory aggregation, on the processing fee extracted from each booking that passed through their platforms. NDC, at its most disruptive reading, is an attempt to route around that model or at least to dilute it.

The reality is more nuanced. The GDSs have not stood still. All three have invested heavily in NDC capability. Sabre’s SabreMosaic Travel Marketplace, launched in 2025, positions the company explicitly as a unified content platform for a multi-source world. Travelport has pursued an aggressive NDC partnership strategy, signing distribution agreements with a broad range of carriers and integrating NDC content into its Plus platform. Amadeus has developed Continuous Pricing capabilities and invested in NDC adoption support for both airlines and agencies.

But the structural tension is real. A world of fully developed Offer and Order capability is one in which airlines control offer construction end-to-end. Where dynamic pricing is set by airline algorithms, not filed fares in ATPCO. Where the bundle is assembled by the carrier, not reconstructed by the GDS from separate data sources. In that world, the GDS becomes a channel rather than an architect — a distribution pipe, not a product builder.

Whether that constitutes existential disruption or strategic opportunity depends on how aggressively each GDS can redefine its value proposition around intelligence, aggregation, and servicing capability rather than content control. The answer will vary by player and by market. What is clear is that the old distribution model built on EDIFACT, centralized fare filing, and standardized content is being systematically dismantled.

There is a less-discussed challenge inside the retailing transformation that deserves attention: the growing complexity burden it places on sellers.

In a world where airlines are constructing dynamic offers rather than filing standardized fares, the content reaching travel agencies and TMCs is no longer homogeneous. It varies by channel, by passenger, by booking context, and increasingly by moment. A Sabre-commissioned survey in 2025 found that most travel agencies were managing four or more content connections NDC direct connects, GDS content, LCC feeds, aggregator APIs driving up costs and undermining booking consistency.

More than 80 percent of agencies surveyed said they wanted unified content access through a single platform. That figure reflects not just a preference but a pressure point: as airline content fragments across multiple distribution architectures, the operational cost of managing it rises, and the risk of content gaps increases. For corporate travel managers overseeing large programs, the implications are significant inconsistent content means inconsistent policy compliance, inconsistent reporting, and inconsistent traveler experience.

The aggregation layer whether provided by a GDS, an NDC aggregator, or an emerging intelligent platform therefore remains critical infrastructure in the retailing era. The question is not whether aggregation is needed. It is who provides it and under what commercial terms.

Underpinning the entire retailing transformation is a technology shift that is accelerating faster than the institutional change around it: the application of artificial intelligence to offer construction, pricing, and personalization.

The combination of NDC’s richer data transmission capabilities and modern AI creates a genuinely new commercial possibility for airlines. Where legacy revenue management optimized fares based on historical booking curves and static fare structures, AI-driven offer management can construct and price offers dynamically in real time, at the individual traveler level, with full awareness of seat inventory, ancillary availability, competitor pricing, and customer context.

Airlines like airBaltic are already applying AI specifically to ancillary pricing, optimizing seat assignment revenue with algorithms that account for booking patterns and customer behavior. PROS, one of the leading offer optimization platforms, describes the emerging model as one where airlines can deploy the same revenue management sophistication to ancillaries that they have long applied to base fares and eventually, to treat the right-to-fly offer and the ancillary offer as components of a single optimized commercial decision.

The 2026 horizon also brings the beginning of agentic AI into the distribution equation. Where generative AI created the ability to converse about travel options, agentic AI creates the ability to act autonomously on behalf of the traveler booking, rebooking, managing disruptions, optimizing itineraries within defined preferences. For airlines, this introduces a new class of distribution actor: not a human agent, not an OTA, but an autonomous system making booking decisions at machine speed. How those systems interact with airline offer APIs, how they are governed, and how airlines can influence their behavior commercially, will be one of the defining distribution questions of the next three to five years.

“Agentic AI introduces a new class of distribution actor: not a human agent, not an OTA, but an autonomous system making booking decisions at machine speed.”

Despite the momentum, a sober reading of current industry data is warranted. The gap between NDC ambition and NDC capability remains wide for most carriers.

IATA verifies 77 distinct NDC capabilities across six categories: Shop, Order, Pay, Settle, Account, and Setup. The majority of the 75 airlines tracked in the ARM program support only the most essential of these basic flight shopping, order creation, payment acceptance. The advanced capabilities that represent the real commercial opportunity continuous pricing, dynamic bundling, personalized offer construction, post-booking servicing at full functionality have been verified by only a small number of carriers. And verified capability, as practitioners are quick to note, does not always equal operational reality in live booking scenarios.

The gap between what NDC promises and what is currently delivered in the indirect channel remains meaningful. For agencies and TMCs, that gap creates a practical challenge: they must invest in NDC connectivity and workflow integration for a content quality that, in many cases, still falls short of what the GDS channel delivers for standard transactions.

That constraint is real, and it has slowed commercial adoption. But it is a constraint defined by where the industry is today, not where it is heading. The directional signals carrier investment levels, technology vendor roadmaps, GDS strategic pivots, the growing financial materiality of ancillary revenue all point in one direction.

There is a version of this story that can be told as a technology narrative APIs, XML schemas, order management systems. There is another version that is a competitive strategy narrative who controls the offer, who owns the customer relationship, who captures the margin.

Both are accurate. But the deeper story is about commercial identity.

Airlines are becoming retailers. Not metaphorically, but literally entities that construct, price, and sell multi-component products to individual customers using the same commercial logic that governs any sophisticated retail operation. They are building customer data assets, dynamic pricing engines, subscription products, and ecosystem partnerships. They are hiring retail talent and retail technology. They are being benchmarked against Amazon and Apple, not just against each other.

That transition is uneven. It is further along at Lufthansa than at most African or Middle Eastern carriers. It is further along at Emirates, which has been building its retail ecosystem quietly for years, than at regional operators still wrestling with basic NDC implementation. The pace of change varies enormously by carrier size, technology maturity, and commercial sophistication.

But the direction is not in dispute. The airline industry has outgrown seat distribution. The question now is not whether to become a retailer. The question is how fast, and what kind.

“The airline industry has outgrown seat distribution. The question is not whether to become a retailer. The question is how fast, and what kind.”

Travel Distribution News covers the business and technology of travel commerce. This article reflects editorial analysis and does not represent the views of any commercial partner. traveldistributionnews.com