Lufthansa to add surcharge to every booking made via the GDS

By Kevin May | June 2, 2015

The "value of the GDS" debate has returned with a bang, with Lufthansa introducing a levy on all bookings made via a GDS after announcing a new commercial strategy.

The Euro 16 surcharge will apply worldwide from September this year on every first issue ticket for Lufthansa, Austrian Airlines, Brussels Airlines and Swiss International Airlines.

The Distribution Cost Charge will not be added to any tickets bought via the websites of the individual carriers.

Leisure agents are being encouraged to book via a dedicated portal, whilst travel management companies will be able to secure tickets online, using their existing negotiated rates.

Lufthansa Group chief commercial officer, Jens Bischof, explains:

"At present, airlines are not yet able to market their services via all sales channels, as it is common in other industries. The contracts and structures have previously prevented any deregulation in many areas. "We want to change this with our new commercial strategy and take advantage of greater degrees of freedom in our sales activities, providing our customers with the exact tailor-made services that they are looking for and wherever they are looking for them."

Lufthansa's new stance came at the end of a lengthy statement from Bischof, outlining what he calls a strategy "to ensure, in future, a greater portion of revenue will be from flight operations; the actual area of service to the customer".

"Until now, the percentage of revenue generated from the sale of flight tickets by our airlines has continuously decreased. "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.

Lufthansa claims the costs for issuing tickets via the GDSs are "several times higher" than other booking channels.

Bischof says this cost of distribution means the airline is now paying a "three-digit million Euro" fee, despite what he claims are services which are "primarily used by other partner sites in the value chain" - namely, online travel agencies.

Amadeus has reacted angrily to Lufthansa's move, issuing a statement that says Lufthansa's move "will make comparison and transparency more difficult" to consumers and arguing that "industry overall stands to lose from this distribution model".

An official adds:

"LHG (Lufthansa Group) has chosen to go in a different direction by introducing charges that will penalise 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."

Lufthansa's Bischof claims the technology associated with its current sales systems "cannot adequately display the individual offers, with their variety of product components", a bit of a jab in the eye of the GDSs which have been working to introduce their own merchandising technology to the market over the past few years.

Furthermore, Lufthansa says it is in the process of developing its own booking process to enable third parties to connect their own systems directly to the airline, using the NDC protocols being developed by IATA.

Sabre, in a strongly response issued today, says it is ready to "work with airlines globally that wish to sell and retail their products through Sabre" and the Lufthansa shift "disadvantages consumers and travel agencies".

An official adds:

"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."

Also reacting, Travelport says the move is "not in the interests of the end-traveller or the airline group".

"We continue to remain focused on providing our travel agency customers worldwide with the broadest possible travel content and providing our airline partners with cost-efficient and highly effective global distribution. "Many of our airline partners, including the Lufthansa Group, are now also taking advantage of our suite of industry-leading merchandising solutions. "These solutions allow airlines to connect to us and display and retail all of their content, including their ancillary content, in a flexible way that meets their business needs."

NB: Lufthansa check-in image via Shutterstock.

Amadeus

Lufthansa

Sabre

Travelport

Lufthansa to add surcharge to every booking made via the GDS

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