The Lufthansa Group will start to administer an additional A$22.97 (16 euros) per ticket charge from 1 September for consumers and travel agents who book flights via portals other than the group’s own, in a bid to contain GDS distribution costs.
The Distribution Cost Charge (DCC) will automatically calculated per booking via a GDS and will be implemented across the entire group including Austrian Airlines, Brussels Airlines and Swiss, except for customers or travel agents who book via Lufthansa’s trade portal, website, service centres or airport ticket counters.
Consumers booking via online travel agency sites, all of which use GDS’s to access flights, will be subject to the surcharges but the full fare will be always be displayed.
According to Lufthansa Group general manager Australia, Anil Rodricks said the cost is to offset the high GDS fees the airline group current incurs, but does not expect the extra fee to deter Australians from booking flights with the group to Europe.
“We have to recognise high GDS costs and factor them into a meaningful user-pays philosophy. In Australia, this means a marginally higher end price and that travel agents continue to manage their margin,” Rodricks told Travel Weekly.
Rodricks insists that the move will not affect travel agents’ business “due to the nature of routings and interlining” fares, and will be offering the use of the trade portal where appropriate and “when it is ready for this market”. He also confirmed there is no impact to any current agency group agreements.
Lufthansa are reportedly developing a new way for agents and corporates to connect directly to Lufthansa sites through IATA’s New Distribution Capability thereby bypassing GDS’s, but the technology is still in development.
“In the coming days we will provide full details to our trade partners as to how this will be reflected in ticketing transaction. The end price of tickets will only be marginally impacted,” Rodricks told Travel Weekly.
Lufthansa is the first airline group to make such a move, but the group’s chief commercial officer Jens Bischof said he believed the timing to be right.
“We believe the market is ready for this change. … Somebody’s got to do it”, Bischof said during a media call Travel Weekly reports.
“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. We want to counteract this trend by refocusing our commercial strategy.”
Meanwhile, the full impact of the move is yet to be seen but has already triggered backlash from GDS’s including Amadeus who said the airline group has “chosen to go in a different direction” that would eventually “penalise travellers”.
“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,” Amadeus IT Group, svp Distribution, Holger Taubmann said.
“LHG have 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.”
“Also, 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,” Taubmann said.