Lufthansa Group ruffled feathers across the travel trade yesterday with
their announcement that along with what they are calling “an overall change in
commercial strategy", the group is initiating a new Distribution Cost Charge of
€16 on every ticket issued by a booking channel using a GDS.
In what is clearly an NDC (New Distribution Capability) play, the
Lufthansa Group, comprising LH, OS, SN and LX, says they are embarking on
a program to differentiate booking channels; offer modular fare packages and customized
offers as well as developing new booking channels to form direct links with
their sales partners. And, what this means is that they have determined they
must reduce the cost of ticket sales in favour of increasing the revenue earned
from actually operating flights by adding fees for ancillary services.
statement released yesterday, Jens Bischof, member of the Lufthansa German
Airlines Board and Chief Commercial Officer of Deutsche Lufthansa AG, said:
“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."
states that currently the costs for using global distribution systems (GDS) are
several times higher than for other booking methods, such as their own online
portal. In total, the group's yearly GDS costs have topped the hundred million
effective 01SEP15 LHG airlines will implement the “Distribution Cost Charge"
(DCC) of €16 for every ticket issued by a booking channel using GDS. The new
charge will not be added to flight tickets purchased using LHG's own booking
channels which predominately includes the airlines' websites as well as service
centres and ticket counters at airports.
suggests travel agencies will be able to book tickets without the DCC, using
the online portal at www.LHGroup-agent.com.
Furthermore, corporate customers will be able to book their individually
negotiated contract rates excluding the DCC at www.LH.com.
says they are in the process of developing a new booking method to enable sales
partners to connect to their IT systems directly based on IATA's new data
standard NDC. The first NDC pilot project is currently being tested at LX and
should begin at LH during the course of this year.
explained: “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."
reacted immediately to the news saying they had contacted LHG's Director for
Canada, Hans DeHaan to
discuss the impact of the announcement on Canadian distribution. ACTA said, “We
find it discouraging that the Lufthansa Group could not find other mechanisms
to absorb the 'distribution costs' of E16,00. By passing this cost on to the
agent, or forcing them to use an alternate booking platform, will have major
impact towards off-selling Lufthansa product. We simply do not understand why
Lufthansa would make such a move to make things more difficult and expensive
for the Travel Agency Community to sell Lufthansa. We will continue to monitor
this story as more information becomes available and appreciate any comments
that you may have."
Amadeus reacted to the news criticizing
LHG's decision by stating that... “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," Amadeus