Senior figures in the travel industry have hit back at Lufthansa over its plans to charge an “exorbitant” fee of €16 for every ticket issued by a booking channel using a GDS.
Yesterday the Lufthansa Group announced that a ‘Distribution Cost Charge’ (DCC) will be applicable to all bookings on Lufthansa, Austrian Airlines, Brussels Airlines and Swiss not made through one of the company’s own channels such as Lufthansa.com.
GTMC chief executive Paul Wait said customers as well as TMCs “deserve better” while the COO of Wings Travel Management Paul East warned Lufthansa it is “heading down a slippery slope” with this move.
The charge will come into force in September. Lufthansa says travel agents will be able to avoid the DCC fee by booking through its online agent portal.
Operations director at Chambers Travel Management, Julie Cope, told BBT that it’s now clear Lufthansa is “encouraging business travellers to buy direct”.
“I would be interested to know how the airline manage to serve the business traveller when they need to change their trip or when there are strikes or travel disruption due to weather,” said Cope.
“Currently it's not easy to get hold of someone at Lufthansa if there's a problem. We're not averse to the concept of GDS fees, introduced historically by the likes of British Airways, but a €16 fee per ticket is exorbitant and will damage Lufthansa's business. It'll be interesting to see how the GDSs react. We've certainly not heard the last of this."
GTMC's Wait told BBT this fee further increases the “fragmentation of the reservation process” and “worsens the compliance to channel challenge”.
“[DCC] comes at a time when corporate customers are being more vocal about booking integration and channel compliance,” said Wait. “Customers want air and all ground transportation requirements to be in one place, however it appears that some in the airline industry are not recognising these customer needs.
“This is yet again is an airline-driven solution, not a market-driven solution. Customers – including TMCs – deserve better.”
The new charge comes as Lufthansa Group attempts to increase its profitability by “redirecting their commercial strategy”. It expects to generate an adjusted EBIT (earnings before interest and taxes) of more than €1.5 billion before costs.
GDS operator Amadeus also criticised the move, stating that travellers are looking for “consistency, transparency and choice across all channels” but this just “penalises” them 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 Lufthansa Group, there will be extra IT costs that may be passed on to the traveller, putting the consumer, at a disadvantage,” the company said in a statement.
However, Air Astana CEO Peter Foster told BBT that he is in "no doubt" other airlines will follow suit.
"We very much support the drive to reduce that element of cost because you’ve got some very large dominant suppliers operating at very high margins in a market where the ultimate customer is the airline.
“Airlines currently have limited control over the price and costs of that element of the supply chain,” he added.
Wings' Paul East told BBT: “The most important element of our role as a TMC is to manage client requirements efficiently and at the most effective cost.
“There are many factors that affect the decisions we take for our clients. If we were to use an airline website, this brings into question payment terms and who owns the booking for changes, let alone the whole debate about NDC.”
A Travelport spokesperson told BBT this charge is “not in the interests of either the end-travellers or the airline group”.
The news of the DCC was accompanied by confirmation that Lufthansa will introduce a new modular fares concept this summer (for flights booked in the autumn) which will see Light, Classic and Flex fares within Europe.
Each fare category comes with its own services and variety of options. It will be extended to all Lufthansa Group carriers although, as we have previously reported, it is already being trialled by Brussels Airlines and Swiss (at Geneva only).