Lufthansa Group pax (incl. SN) to pay a €16 fee when booking through a travel agent

[sn26567]

Travellers booking Lufthansa Group tickets through an agent will soon face paying an extra booking fee of 16 euros (£11.60).

The new fee applies to all the carriers in the Lufthansa Group — Lufthansa itself plus Austrian Airlines, Brussels Airlines and Swiss.

Until now, Lufthansa has subsidised the extra costs when passengers book through an agent, who in turn completes the transaction using a GDS such as Amadeus.

Lufthansa claims that GDS fees are several times higher than if the booking was made through one of its own online channels.

Full article from Business Traveller

[airtrainer]

Maybe a bit off topic here, but there is also something I don't understand: last week I booked a flight on LH metal, the booking was 15€ cheaper on germanwings.com than on LH's website...

[airazurxtror]

It shows at least that Brussels Airlines is completely controlled from Germany by Lufthansa.
Brussels Airlines "Belgian national" airline ? Let me laugh !

The Belgian travel agents have not even been consulted.
http://www.lalibre.be/economie/actualit ... 87ac683b83
"Brussels Airlines a agi de manière unilatérale, sans nous consulter, explique-t-on au BTO. Cette décision est une attaque frontale contre les GDS, mais nous allons aussi en souffrir." L’association prendra une position officielle ce mercredi, notamment sur l’aspect juridique de cette décision. "Je ne sais pas si cette taxe colle avec les contrats signés avec Brussels Airlines", explique un membre du BTO.

" Brussels Airlines has acted unilaterally , without consulting us, do we explain the BTO . This decision is a frontal attack against the GDS , but we will also suffer.
" The association will take an official position on Wednesday , including the legal aspects of this decision. " I do not know if that tax is compatible with the contracts signed with Brussels Airlines ," said a member of the BTO .

[Inquirer]

Very interesting reading, with a lot of background and opinion about what is happening here:
http://www.tijd.be/ondernemen/luchtvaar ... am_popular

According to a study De Tijd referred to, GDS have a 20% profit margin for distributing data -first loaded by the airlines themselves- and making it available to travel agencies.
In this day and age, internet makes several alternative mediums for intermediate data providing to travel agencies possible, so why still pay a intermediate data platform a significant commission for doing just that, almost exclusively? The only reason I can think of is because the GDS have a loyal user base which you'd want to reach out to as an airline.
That's also why a low cost airlines like ryanair for instance was so proud to be finally available on GDS too, it had no problem raising its average ticket prices significantly in order to include the knowingly high costs of traditional GDS distribution in the base fare of their tickets rather than through a separate fee, so what is very interesting to see now is that the market leader in corporate air travel in Europe is leading the way in doing exactly the opposite by actually enforcing such a separate fee for the use of GDS systems!
IMHO, the reason they can do so is because they know that the loyal GDS user base is actually theirs rather than that of the GDSs, so I wouldn't be surprised to see them launch some sort of a free to use "group distribution channel", with the traditional GDS simply bypassed: customers (and travel agencies alike) will simply follow them no matter what, with the added benefit that the traditional GDS become fairly empty places and quite expensive distribution platforms for those few still remaining.
Wonder how long it will take before other airlines will follow their example, in fact? A small newbie to the GDS world needs to be kind and play along of course, or they aren't able to connect to the customer base GDS provides them access to, but the others?
Here at work we fly LH group only no matter what, so although we often book through GDS today, we will simply follow them to any new tool they offer us, tomorrow, and we wont be the only ones, I bet.
I think those who are poorly established in the GDS world and travel agency community may actually be the only ones remaining in a couple of years, even if it means they will have to pay millions to the GDS just for being loaded in their systems.
Strange world, in which outspoken low cost airlines start operating like high cost airlines, with the legacies beating them on distribution costs by as good as quitting the traditional GDS!

[sn26567]

Lufthansa explains its strategy in this post: https://www.aviation24.be/airlines_press_r ... -strategy/

[Inquirer]

although not aviation related,
this initiative by Accor (the group above Sofitel, Mercure, Novotel, Ibis etc) bears some striking similarities to the initiative of Lufthansa to twist the arm of GDS.

http://www.tijd.be/ondernemen/horeca/Ho ... 1433351902

I wonder if the Lufthansa group might also consider including non group affiliated airlines into their
http://www.LHgroup-agent.com website over time?

regardess, these are definitely though times for these kind of GDS driven booking sites; their share price plunged by more than 11% today!

[Passenger]

This is not Lufthansa versus travel trade, but Lufthansa versus Amadeus and the other GDS.

Not that long ago, Ryanair announced that they’ve joined (rejoined) Travelport and Amadeus. Given the previous demands from Ryanair towards Amadeus, one can assume that Ryanair got what they wanted: no fee or just a small fee in % – whilst the other Amadeus airlines pay a fixed fee for each segment (flight) booked.

Lufthansa Group then calculated what the return on investment in aviation is (see graphics on http://www.travel360.be). Figures show that GDS are doing extremely wel:

4 % airlines
6 % airports
7 % manufacturers
9 % lessors
9 % ANSPs
11 % all services
15 % freight forwarders
20 % Global Distribution Systems

With this mind, it's quite obvious that airlines like Lufthansa dislike the fact that Ryanair got what they wanted. Lufthansa’s move to add a DCC Distribution Charge Cost of 16 Euro for a GDS ticket is not aimed to fund the GDS bookings. It's aimed to move travel trade bookings away from GDS towards Lufthansa’s own system (intranet principle), where there is no charge: http://rsb.lufthansa.com/online/portal/ ... file/login

Bonus for Lufthansa : contrary to a GDS, their own system shows only LH, LH-Group and codeshared flights.

Ryanair may have an extreme high number of bookings, but I guess that 99% of them is booked online. The rest: call centre and a very very small number through GDS. So by accepting Ryanair, it looks that the GDS have shot themselves in the foot.

[airazurxtror]

http://www.fvw.com/direct-sales-travel- ... 4119/11245

Lufthansa announced on Tuesday that the new €16 Distribution Cost Charge (DCC) will apply per ticket for all bookings made through a GDS from September onwards for flights on Lufthansa, Austrian, Swiss and Brussels Airlines (but not Germanwings or Eurowings). The GDS fee will be paid by travel agents and consumers. There will be no similar charge for bookings made directly through the websites of the airlines or other direct sales channels.

Lufthansa passenger sales manager Jens Bischoff told fvw: “The time is right for direct sales.“

In response, travel agents in Germany reacted angrily to the plan. The German Travel Association (DRV), which represents the bulk of travel agents in Germany, criticised the plans strongly. DRV president Norbert Fiebig declared: “This step is going in the wrong direction both for customers as well as for the travel industry.“ The move was “an attack“ on travel agency sales and “a return to moves like 30 years ago“.

Fiebig claimed that the GDS charge would hit customers and sales partners alike. “Customers have a disadvantage as this step will put up ticket prices and prevent price comparisons for travellers. Customer transparency is thus reduced"..

The small independent agents association ASR reminded the airline of travel agents‘ support during the recent strikes “with countless re-bookings and time-intensive workload“. Vice-president Joachim Szech warned that agents could book competitors such as Gulf carriers more intensively as a result.

Michael Buller, president of the online travel retailers association VIR, even described the GDS fee as “a declaration of war“.

The reaction in Switzerland was even more dramatic with threats of a sales boycott. The Swiss Travel Association (SRV) said: “We have now reached a new dimension that we and every member cannot and will not accept in any way.“

A boycott is the obvious answer. One can do very nicely without Lufthansa, Brussels Hansa and C°.

[RoMax]

Take a look at the IATA value chain profitability report (on which many articles about this news seem to be based, but often ignore the travel agents):
https://www.iata.org/whatwedo/Documents ... 0chain.pdf

It is very obvious that with an average ROIC of 20% for GDS, even 44% for travel agents and just 4% for airlines, there is 'some' imbalance...

Instead of talking about a boycot, you should better be supportive of the airline industry (as a whole) and hope that other big airline groups follow suit to do something about that incredible monopolistic position of the GDS companies.

Airlines are at the very end of the value chain and the only really liberalised segment of it, making them extremely vulnerable for the monopolistic position of companies/services such as GDS (among many others).

[Passenger]

http://www.fvw.com/direct-sales-travel- ... 4119/11245

Lufthansa announced on Tuesday that the new €16 Distribution Cost Charge (DCC) will apply per ticket for all bookings made through a GDS from September onwards for flights on Lufthansa, Austrian, Swiss and Brussels Airlines (but not Germanwings or Eurowings). The GDS fee will be paid by travel agents and consumers. There will be no similar charge for bookings made directly through the websites of the airlines or other direct sales channels.

Lufthansa passenger sales manager Jens Bischoff told fvw: “The time is right for direct sales.“

In response, travel agents in Germany reacted angrily to the plan. The German Travel Association (DRV), which represents the bulk of travel agents in Germany, criticised the plans strongly. DRV president Norbert Fiebig declared: “This step is going in the wrong direction both for customers as well as for the travel industry.“ The move was “an attack“ on travel agency sales and “a return to moves like 30 years ago“.

Fiebig claimed that the GDS charge would hit customers and sales partners alike. “Customers have a disadvantage as this step will put up ticket prices and prevent price comparisons for travellers. Customer transparency is thus reduced"..

The small independent agents association ASR reminded the airline of travel agents‘ support during the recent strikes “with countless re-bookings and time-intensive workload“. Vice-president Joachim Szech warned that agents could book competitors such as Gulf carriers more intensively as a result.

Michael Buller, president of the online travel retailers association VIR, even described the GDS fee as “a declaration of war“.

The reaction in Switzerland was even more dramatic with threats of a sales boycott. The Swiss Travel Association (SRV) said: “We have now reached a new dimension that we and every member cannot and will not accept in any way.“ [/i]

Also in that article, but not copy/pasted:

At present, Lufthansa sells about 30% of its tickets directly. In future, the airline wants more leisure and business travel bookings to be made through its own sales channels, primarily the websites of the four airlines, travel agency portals and airport ticket counters. Bischoff said Lufthansa is no longer ready to pay the high GDS charges which cost the airline an average of €18 per booking, compared to just €2 per booking for direct online bookings. “It can‘t be right that we calculate with a margin of 1.9% while the GDS firms achieve a 20% margin for their services,“ he said.

Actually, this is the main issue: Lufthansa gets 70% through the travel trade, so why would they harrass them? Apart from the fact that GDS are too expensive, there is the presence of Ryanair on Amadeus. Amadeus wants Lufthansa to pay for Ryanair's Amadeus bookings. Amazing that Amadeus thought that Lufthansa would do so.

Also in that article, but not copy/pasted:

Other airlines are now expected to follow Lufthansa‘s lead on this issue, which has been compared to the introduction of zero commissions years ago.

The was huge protest when the zero commission was announced, but some time later the airlines announced that they themselves would ask a booking fee. And the travel trade is happy now with the zero commission, because they ask the same as their handling fee. I'm quite sure Lufthansa has something in mind with the new 16 € surcharge.

A boycott is the obvious answer. One can do very nicely without Lufthansa, Brussels Hansa and C°.

Even with that new fee, Lufthansa and Brussels Airlines remains by far the most travel trade friendly airline.

[Lysexpat]

16€/ticket is unfair.
A 80€ ticket will see an increase in price of 20%, whilst a 4000€ ticket will only see a 0,4% increase.
It is clear that airlines don't want to scare away their high yield passengers.
Strange that one uses procentual figures to demonstrate an inegality a and then does exactly the same in an attempt to rectify...
If they want to be consequent it should be an eg 1% booking fee, which could then easily be paid for by the GDS itself in order to remain competitive.

[RoMax]

Two things, GDS don't pay anything, they use their monopolistic power. Secondly that 16 Euro fee is a fixed fee which is currently paid by the airlines. How do you justify giving 16 Euro from a ticket to the GDS just for facilitating the booking?

Btw the lower yield pax mainly book online anyway and therefore avoid GDS and this fee.

[airazurxtror]

Even with that new fee, Lufthansa and Brussels Airlines remains by far the most travel trade friendly airline.

Really ?

Le désaccord est total entre le Syndicat national (français) des agences de voyage (SNAV) et le groupe Lufthansa.
Le communiqué du SNAV est clair : son président Jean Pierre Mas parle d’une « décision particulièrement hostile du Groupe Lufthansa vis-à-vis de ses distributeurs qui représentent une large part de ses ventes sur le marché français, et cette mesure ne sera pas sans conséquences sur les relations commerciales des agences avec ces compagnies ». Cette décision arbitraire est tout à fait contre-productive et préjudiciable aux agences, à leurs clients et in fine aux compagnies qui l’appliqueront.

Disagreement is total between the French Syndicat National des Agences de Voyage ( SNAV ) and the Lufthansa group.
The press release is clear: SNAV President Jean Pierre Mas speaks of a " particularly hostile decision of the Lufthansa Group vis-à- vis its distributors who represent a large share of its sales in the French market , and this measure will not be without consequences on trade relations agencies with these companies . " This arbitrary decision is totally counter-productive and detrimental to agencies, their customers and ultimately the companies who will apply it.

[Passenger]

Even with that new fee, Lufthansa and Brussels Airlines remains by far the most travel trade friendly airline.

Really ?
Le désaccord est total entre le Syndicat national (français) des agences de voyage (SNAV) et le groupe Lufthansa. Le communiqué du SNAV est clair : son président Jean Pierre Mas parle d’une « décision particulièrement hostile du Groupe Lufthansa vis-à-vis de ses distributeurs qui représentent une large part de ses ventes sur le marché français, et cette mesure ne sera pas sans conséquences sur les relations commerciales des agences avec ces compagnies ». Cette décision arbitraire est tout à fait contre-productive et préjudiciable aux agences, à leurs clients et in fine aux compagnies qui l’appliqueront.

Disagreement is total between the French Syndicat National des Agences de Voyage ( SNAV ) and the Lufthansa group. The press release is clear: SNAV President Jean Pierre Mas speaks of a " particularly hostile decision of the Lufthansa Group vis-à- vis its distributors who represent a large share of its sales in the French market , and this measure will not be without consequences on trade relations agencies with these companies . " This arbitrary decision is totally counter-productive and detrimental to agencies, their customers and ultimately the companies who will apply it.

This is exactly the same that happened when the zero commission was announced. Travel agents and trade organizations were also furious and announced that they were going to take airlines to court. But the system now works.

Lufthansa absolutely wants to shift trade bookings from GDS (specially Amadeus) to their own '"intranet", and it will work.

[airazurxtror]

Lufthansa absolutely wants to shift trade bookings from GDS (specially Amadeus) to their own '"intranet", and it will work.

Lufthansa is dictating its terms - and antagonizing the travel agents - dragging along Brussels Airlines (whose so-called managers have nothing to say in the matter, it seems).
Is it the best way to make business ? We'll see the results.

[airazurxtror]

A good analysis of the problem here :

http://www.eturbonews.com/59855/bundesk ... ssional%29

Excerpts :

Lufthansa Group’s (LHG) recently announced a proposal that it would surcharge customers 16 Euros if they purchase a ticket anywhere other than its websites, service centers and airport ticket counters beginning on 1 September 2015 represents a possible abuse of it dominant market position and should be investigated by Germany’s competition authority, the Bundeskartellamt and the EC’s DG COMP.
LHG claims that the goal of its Distribution Cost Charge (DCC) program is again to reduce distribution costs. However, that claim is belied by the fact that the surcharge would not be applied to the two most expensive LHG distribution outlets – its own airport ticket offices and reservation centers.

DCC is an extension of some major U.S. and European carriers’ relentless war on price transparency and competition, a war that is all about protecting and increasing revenue. LHG appears to be pursuing a five-part strategy to drive new revenue levels – all generated from consumers and the managed-travel community.

[sn26567]

Air France-KLM is considering following a move by Lufthansa (Germany) to levy a charge on tickets booked via third parties as a way of increasing its per-ticket earnings.

[RoMax]

A poll at the IATA AGM showed that almost all IATA members are in favour of this and might consider it. Although from specific CEO comments you hear that most first want to see the reaction of the market and/or still have quite long running contracts with GDS companies which would make it legally and practically difficult or even impossible for the time-being.

[airazurxtror]

Air France-KLM is considering its options, the airline's chief executive said on Monday, although no decision has yet been made.
"It's a key issue, an absolutely key issue for us. The majority of our revenues comes from GDS," Alexandre de Juniac told reporters on the sidelines of a meeting of the International Air Transport Association (IATA).
Lufthansa has said that two-thirds of its flights are booked via GDS. De Juniac declined to specify further which percentage of its ticket sales came via the systems.
He said, however, that Air France-KLM still has two years left to run on its contract with Amadeus, meaning implementing a surcharge similar to Lufthansa's would be very complex from a legal, contractual and financial point of view.

Reaction of the SNAV :
« S’il est avéré que les compagnies majeures européennes ont passé entre elles, un pacte pour contrôler la distribution des billets d’avion sur Internet, il faudra solliciter les pouvoirs politiques et judiciaires pour obtenir les termes de ce pacte opaque. Avons-nous affaire à une entente licite ou illicite… et de nature à porter atteinte aux intérêts du consommateur ? »

"If it turns out that the major European companies have passed between them a pact to control the distribution of airline tickets on the Internet , we'll have to request the political and judicial powers to obtain the terms of that opaque pact. Are we dealing with a lawful or unlawful agreement ... likely to cause a prejudice to the interests of the consumer? "

[Passenger]

Travel Weekly U.K. reports this clarification from Lufthansa (it's too much text to summarize):

http://www.travelweekly.co.uk/Articles/Details/55880