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The announcement from the Lufthansa Group that they are breaking away from the GDS system and will begin charging a 16-euro surcharge on Sept. 1 to any tickets not booked through their official channels (website, ticket counter, customer service phone centers) has sent ripples of concern and anger throughout the travel industry.
Industry leaders such as Travel Leaders Group CEO Barry Liben and the American Society of Travel Agents immediately reacted with outrage over the move Tuesday.
We asked a sampling of travel agents for their reaction to the move. Here's what they had to say.
What's your reaction to Lufthansa Group's plan to add surcharges to any bookings not made through its Web sites, service centers and ticket counters?
Claire Schoeder, Century Travel, Atlanta: It will certainly drive up the cost of tickets as agents will have to pass that fee along to clients. Agencies of any size cannot afford to absorb that type of fee. As long as other carriers do not follow suit, I would look for alternatives to my clients rather than recommending Lufthansa.
Gary Pollard, Ambassador Tours, San Francisco: I feel the supplier is always looking to protect their bottom dollar and finding ways to cut-out the travel industry and forcing us to charge more for our service and making us compete with those who might else go direct!
Judy Nidetz, Travel Experts, Chicago: This move will raise costs to consumers and travel agents. I think it's a tragedy that Lufthansa does not value the wonderful Sales Force they have in the travel agent community. Now, when clients compare airfares, Lufthansa will price higher and clients will look elsewhere. I have found brand loyalty to be not as important as it once was because service has declined across the board.
People are interested in the best price. This, I believe, will drive business away from Lufthansa, making this decision very short-sighted.
I still believe there are many travelers out there that value the services we agents provide, and are willing to pay us for this service, but that ends at paying a higher price. I hope the other airlines realize our value and don't match Lufthansa's move. If they do, in the end, it's the consumer who will pay.
Jason Olson, True Vacation Travel, Redding, Calif.: Learning about how Lufthansa Group is moving towards penalizing agents from using the industry standard which ensures centralized and efficient booking of clients is concerning. And while I appreciate their perspective which is that they can build a different mousetrap which saves them millions, and they want to encourage people to use that tool instead.
However in the process they are significantly increasing the administrative burden for agents, and introduces additional levels of opportunities for human error, coupled with new technology which is likely going to evolve over the years requiring consistent training.
Beyond the concern of fees, this is fundamentally taking a huge step backwards. And while IATA's New Distribution Capability has some promise of the next evolution of air distribution, it simply isn't here yet.
Returning to the fees for a moment, this approach runs counter to the standards of many businesses - if you want to encourage people, you do so by providing an incentive to try and use their new system. This could be in the form of commissions or better net rates when booking direct. That would encourage people to give it a try. Instead with this approach Lufthansa will price higher, and I expect them to see their revenue share decrease.
What's your reaction to its contention that it pays an unfair amount of fees to GDS systems?
Schoeder: That is not of concern to me. Lufthansa is wanting others to pay for a contract that it negotiated but now regrets because of cost. Lufthansa should be pricing their tickets to include their cost of doing business. I have no idea what fees they pay, but they are one of the responsible parties as they were participants in contract negotiations. If they do not want to book through a GDS then they should simply quit. I think they would find out rather quickly that that is not in their best interest, but blaming agents who book through a GDS for a contract that we had no hand in negotiation is simply ridiculous.
Olson: Reflecting on their assertion about GDS fees being excessive, there is no doubt that they are paying high fees to enable travel agencies, traditional and OTA alike, access their services. Other airlines have opted out of using this distribution method entirely, and have found it to be profitable for them. However the addition of fees makes me think of the merchant agreements we hold with credit card companies. We effectively pay hundreds of thousands of dollars to the credit card merchants. However, we are specifically prohibited from using fees or increased prices to discourage consumers from using a credit card. Instead we can only provide a cash discount for those willing to pay cash. It is simply a cost of doing business.
What do you believe the implications of this move are for travel agents?
Schoeder: It will drive up the cost of Lufthansa tickets we sell to our clients. And many of us will look for alternatives to selling Lufthansa as long as other carriers do not follow suit.
Pollard: Forcing us to charge more than what a client can get going direct, even when we provide more options, knowledge and service.
Olson: There is a definite concern among some agents that this is going to be like when domestic airlines first started capping and then eliminating commissions. There is a valid concern there. I have encouraged other agents to show their disapproval with their fare searches by considering those airlines non-preferred, and searching other preferred airlines first. We have the opportunity to get out in front of this, and start speaking with our voices and in action regarding this change.
What do you believe the implications are for consumers?
Schoeder: Consumers will be faced with the choice of either paying more money or dealing completely with the airline for all service issues. Airlines are not set up to deal with the numerous problems that come up during travel-from weather delays to individual problems that occur with travelers. And airlines are not known for exemplary customer service. Most have a take it or leave it approach that refuses to deal with unique issues that may occur. Consumers book through and pay fees to travel agents to get around the one size approach to customer service. Some consumers will pay the additional but many will choose to forgo service and save the money.
In the long run consumers will lose, either being forced to pay more for booking a ticket through an agent who provides better customer service or being forced to book through a website that offers nothing in terms of customer service. Airlines do not have the personnel needed to handle the volume of business that could result from this decision. Consumers will end up speaking with people who only can read a script and not actually understand the nuances of problems that arise. Consumers lose no matter what they will choose to do.
Pollard: Paying more for a ticket since the value to compare is gone.
Nidetz: This move will raise costs to consumers and travel agents. I think it's a tragedy that Lufthansa does not value the wonderful sales force they have in the travel agent community. Now, when clients compare airfares, Lufthansa will price higher and clients will look elsewhere. I have found brand loyalty to be not as important as it once was because service has declined across the board. People are interested in the best price. This I believe, will drive business away from Lufthansa, making this decision very short-sighted.
I still believe there are many travelers out there that value the services we agents provide, and are willing to pay us for this service, but that ends at paying a higher price. I hope the other airlines realize our value and don't match Lufthansa's move. If they do, in the end, it's the consumer who will pay.
Olson: It just furthers marketplace confusion for consumers, and the products are returning to a state of non-homogenization. That is, we can no longer accept that a flight from A is the same as from B. This sort of confusion leads to increased customer service complaints. However, this confusion will hopefully continue to support and drive the need for travel professionals who know the true and relevant differences between the airlines.
Do you believe it's a viable possibility that other carriers will announce similar strategies?
Schoeder: It is a possibility but I think most carriers will adopt a wait and see position to see how this works out. I think that Lufthansa has not thought through all the effects that will come along with this policy. It may cost them more in the long run than the GDS fees that they negotiated in their contract.
Olson: I believe that other airlines are going to be taking a wait-and-see approach to see how this change takes hold in the travel community before they jump on board. If agents are proactive and balk at the change both in voice and action, then we will hopefully see Lufthansa Group rescind this choice and the idea to die for another decade or so.
Pollard: Yes, but will it last?
Do you want to speak out over the Lufthansa Group's decision? Email us at [email protected].
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