Lufthansa: Book Through Us Or Pay a Fee
The Lufthansa Group has decided it will become the latest airline to try to buck the established system of buying tickets.
The airline group announced Tuesday that beginning on Sept. 1, 2015, it will add a 16 euro surcharge ($17.80 at current exchange rates) to any ticket that isn’t booked through its websites, service centers and airport ticket counters.
“We believe the market is ready for this change,” Lufthansa chief commercial officer Jen Bischof said during a media conference call Tuesday. “Somebody’s got to do it.”
Lufthansa is complaining that it is paying an unfair amount in fees to global distribution systems such as Sabre, Travelport and Amadeus – costs that amount to “three digit million euros,” according to Bischof. The company does not believe it gets fair value for paying such fees and that the GDS services are of more value to “other partners in the value chain.”
Online travel agencies use the technology to display fares, so consumers will be charged this fee by booking through the OTAs.
“Until now, the percentage of revenue generated from the sale of flight tickets by our airlines has continuously decreased,” Bischof said. “While other service and system partners in the value chain are recording increasing margins and returns, our airline’s earnings have been compromised over time, even though they are the actual providers of flight services. We want to counteract this trend by refocusing our commercial strategy.”
The airline group – which also includes Austrian Airlines, Brussels Airlines and Swiss – acknowledged that it lacks the technology at present that would engender cooperation from travel agencies and corporate travel managers.
Lufthansa said Tuesday it is developing technology to allow agents to connect directly to its systems and get needed analytics and reports using IATA’s New Distribution Capability. That technology is still under development. Bischof said Swiss is testing the software and that the technology should be available for wider use at some point this year.
As expected, the reaction to Lufthansa’s announcement from the travel community has been swift and loud.
“This new model will make comparison and transparency more difficult because travellers will now be forced to go to multiple channels to search for the best fares. Ultimately, the industry overall stands to lose from this distribution model,” Amadeus said in a statement.
“Amadeus believes that the traveller is at the heart of the travel industry. Travellers today are looking for consistency, transparency and choice across all channels and we as an industry can deliver that best by connecting and integrating all players.
“LHG have chosen to go in a different direction by introducing charges that will penalize travellers based on the shopping channel they use. Travellers will either pay more for the same service or, in the case that travel agencies are forced to accept this new commercial strategy by modifying the way they access content just for LHG, there will be extra IT costs that may ultimately be passed on to the traveller, putting the travel agent, and/or the end consumer, at a disadvantage.”
Travelport was brief and to the point, saying, "We believe this proposed surcharge is not in the interests of either the end traveler or the airline group."
Sabre also defended the GDS model steadfastly and lashed out at Lufthansa’s actions.
“"Lufthansa’s proposed 'cost distribution charge' disadvantages consumers and travel agencies. The GDS is the most preferred and efficient channel for consumers and travel agents to shop, book and manage travel, and provides consumers with transparency, choice and the ability to comparison shop. We stand behind the significant value we provide airline customers and agencies around the world, and we expect to find a mutually beneficial solution for both Lufthansa and our agency customers."
The travel agent community is also speaking out loudly against the move. Travel Leaders Group CEO Barry Liben said the move was “at best disappointing and at worst counter-intuitive.”
“Their move effectively places them at a competitive disadvantage on airfare pricing. Simply put, consumers who comparatively shop on price will pay more to fly on Lufthansa,” Liben said. “For the vast majority of our clients, the economics will dictate that we book them either on other carriers that serve those routes or through codeshare partners.
“As we pursue the best interests of our clients, Travel Leaders Group will continue our ongoing discussions with our airline and GDS partners.”
This is not the first time an airline has tried to buck the GDS system. Northwest Airlines tried a similar move in 2004 but backed down 10 days after announcing its plans after intense pressure from all corners of the travel industry.
The American Society of Travel Agents (ASTA) was just as critical of the move.
"While still studying the potential impact on travel agents, (ASTA) considers this move by the Lufthansa Group to be discrimination against the channel travel agents choose to use to book tickets for their customers," ASTA said in a statement.
ASTA sent a message to its members Tuesday, saying it will "continue to, investigate today’s developments, including potential impact on agency operations, and keep members informed as details and GDS reactions and plans evolve surrounding what appears to be significant channel discrimination.”
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