Lufthansa To Charge €16 Fee On GDS Bookings

Open Jaw

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.

In a 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."

LH 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 Euro level.

Therefore, 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.

LH 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.

LHG 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.

Bischof 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."

ACTA 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 continued.




Steve Elman - June 3, 2015 @ 15:06
I am not surprised at Lufthansa. It has been a few years since the then chairman of this airline stood up at an IATA meeting and stated that " travel agents, online and bricks and mortar, are our competitors in selling the airline seat" This is just an result of this policy. I for see that all airlines will assume this model in the near future. GDS companies became greedy many years ago.

Irene - June 3, 2015 @ 12:06
I assume the charge will be added to the myriad of taxes already applied to tickets, or hopefully so. This will impact all agencies including OTAs. LHG is not endearing themselves to the travel sales community. We sell what works for us and our customers. Customers who are going directly to the airline web sites are not our customers anyway...

Hanna - June 3, 2015 @ 10:06
So adding 16Euros is supposed to endear us to them to make more bookings? PLUS charge for seats?
If they're losing money, THIS is not the way to increase your support of the agents nor the public. Of course this will be passed on to the consolidators also as they use GDS.

Brian - June 3, 2015 @ 09:06
There are many other options for Canadian travellers. Use them. If LH won't support agents, then agents shouldn't support LH. Simple as that.

Richard - June 3, 2015 @ 08:06
Isn't charging for pre-assigned seats extra money for these airlines ?.
They expect agents to spend more time going on diff websites to book.
Why don't they charge for pillows and blankets instead
I will be giving my clients other flight options other than these guys.
Auf Wiedersehen


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