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June 3, 2015

Lufthansa to Charge Fee for GDS Bookings; Travel Industry Responds




keyboardFollowing Lufthansa Group's (LHG) decision to begin charging a "Distribution Cost Charge" (DCC) of EUR 16 for every ticket issued by a booking channel using a GDS, major industry groups have been chiming in with criticism of the plan.

Travel Leaders Group CEO Barry Liben called the move, which applies to LHG member airlines Lufthansa, Austrian Airlines, Brussels Airlines and Swiss International Air Lines (SWISS), "at best disappointing and at worst counterintuitive."

"Their move effectively places them at a competitive disadvantage on airfare pricing," Liben said. "Simply put, consumers who comparatively shop on price will pay more to fly on Lufthansa. For the vast majority of our clients, the economics will dictate that we book them either on other carriers that serve those routes or through codeshare partners."

Liben also said that Travel Leaders Group "will continue our ongoing discussions with our airline and GDS partners."

In a message to its members, the American Society of Travel Agents (ASTA) said that it would continue to investigate the new development, including potential impact on agency operations, and keep members informed as details and GDS reactions and plans evolve.

"The Lufthansa Group also announced it is in the process of developing a new booking method to enable its 'sales partners' to connect to their IT systems directly based on IATA’s NDC (New Distribution Capability) standard," ASTA said in a message to its members. "The exact meaning of 'sales partners' in this context is unknown. IATA’s NDC is still in the development stage, though some limited commercial implementations do exist, so the timing of the Group’s new booking method is unclear."

Brian R. Chapin, senior director air and travel solutions at Ensemble Travel Group, said "We are disappointed by the direction that Lufthansa is heading since we think this direction is very counter-productive to the overall agent-airline relationship. With a fee assessed for booking via the GDS, agents wishing to avoid the fee will be forced to use an alternate booking source.  This is a disruption to the overall agent workflow and partnership that agents have with airlines." 

What Agents Are Saying

Travel agents have also been chiming in with criticism in our comments section and on our Facebook page

"Regularly looking for not only the best schedule but the best fare for my clients is an integral part of my responsibility," said one commenter on our website. "So, like I am sure many agents will do, just offering my clients a price driven choice will move travel agency channeled market away from Lufthansa. After tracking that shift in market share for a few months, Lufthansa will drop this ill-conceived effort."

In a dig at recent labor disputes at LHG's member airlines, Wil Postle said, "We should be charging them for all the extra effort getting our clients re-protected every time they go on strike!"

The EUR 16 DCC was announced June 2 in a move LHG said was part of a broder shift in commercial strategy to earn a greater portion of revenue from flight operations, as opposed to ticket sales. LHG said that costs for using GDS are several times higher than for other booking methods, such as Lufthansa's online portal at www.LH.com, leading to the decision to implement the DCC. The new charge will not be added to flight tickets purchased using the group's own booking channels, particularly the airlines' websites, as well as the service center and ticket counter at the airports. Travel agencies will also be able to book tickets without the DCC, using the online portal at www.LHGroup-agent.com.

Additionally, LHG has also said it is in the process of developing a new booking method to enable sales partners to connect to their IT systems directly based on the new IATA data standard NDC (New Distribution Capability). The first NDC pilot project is currently being tested at SWISS and should begin at Lufthansa during the course of this year, Lufthansa said. 

How do you think the new plan will affect your business? Let us know in the comments below. 


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