sums up the feelings of many when he describes the implementation of DCC as being “a fare-hike in disguise” and criticises Lufthansa’s alternative booking channels as being not fit for the purpose of booking business travel. “Transparency is no longer given and important booking data is no longer available, especially data needed for duty-of-care purposes,” he says. Mark Cuschieri, chairman of the Institute
of Travel & Meetings (ITM), believes that Lufthansa’s move is a “negotiating tactic” to secure a better deal with the GDSs and an attempt to force behavioural change among consumers. “We do not believe it is fair and just that corporate customers should be used as pawns in this game,” he says. “They are caught in the middle and will most likely be the ones that absorb the extra cost associated with any reckless change to the distribution model.” ECTAA (the European tour operators’
and travel agents’ association) has even gone as far as to file a formal complaint against Lufthansa with the European Commission on the grounds that DCC constitutes “a significant price increase for consumers and will put all travel agents at a competitive disadvantage”.
Much of the criticism of Lufthansa seems
to centre around the way Europe’s biggest airline has gone about introducing DCC, with no consultation or warning before the initial announcement in June. However, Christian Schindler, Lufthansa Group’s UK and Ireland director, told BBT: “There were good reasons why we couldn’t talk to anyone earlier. We needed to respect timeframes and clauses everywhere.” Agreements had to be signed off by au- thorities in all countries in which the airline operates, before Lufthansa could make the announcement, said Schindler. There is also the perception of failing to
provide suitable direct channels as viable alternatives to using the GDSs. But Luf- thansa points out it is working to improve these direct portals, and things are changing quickly, with developments such as the airline’s deal with expenses firm Concur to provide data from direct website bookings to travel buyers through the Triplink tool.
THE FUTURE OF DISTRIBUTION Looking beyond these short-term issues, will Lufthansa’s move be followed by other airlines as they look to take more control over their distribution channels and as-
BUYINGBUSINESSTRAVEL.COM
“We do not believe it is fair and just that corporate customers should be used as pawns in this game”
also likely be passed on to corporations,” says Valmorbida. He adds that airline web- sites cannot offer the same levels of service and MI provided by GDSs. “It is a technique used by the airline to extract more money from the consumer for no additional value, as with fuel surcharges in the past.” Alex Cousins, director of client services
for Chambers Travel Management, adds: “We’re not averse to the concept of GDS fees, but a Ð16 fee per ticket is exorbitant and potentially more than the transaction fee levied by most TMCs.”
sociated costs? Or will buyers successfully switch capacity away from Lufthansa’s airlines to such an extent that the company will be forced to think again? Also, what does it mean for IATA’s long-running New Distribution Capability (NDC) project to improve the selling of flights and ancillary services through third parties? Much of the condemnation of the DCC
fee has been focused on the amount. HRG’s chief information officer, Bill Brindle, says: “If it was only one or two euros, I don’t think anybody would be that bothered about it. But Ð16 is a significant increase in the cost of using the GDS channel.” Lufthansa’s Schindler says the figure
of Ð16 was reached following analysis by external auditors to find out the difference between the airline’s costs for GDS book- ings and those made via other channels. “The GDS is much more expensive than the other sales channels,” he says. “The Ð16 is not the cost of the GDS charge but the difference in cost. From our point of view, this puts the sales channels on the same cost-revenue ratio. As with any company, we want to have a choice as to where we distribute and to whom.” Unsurprisingly, the GDSs have reacted
strongly to Lufthansa’s move, with Sabre saying that the charge “disadvantages consumers and travel agencies”, while Amadeus claims it will make “comparison and transparency more difficult”, as travel- lers will have to search multiple platforms to find the best fares. Decius Valmorbida, Amadeus’s vice-
president of distribution marketing, warns that corporates could be forced to pay even higher costs than the Ð16 charge, due to the likelihood of extra handling fees from their TMCs. “Even if a TMC uses an alternative direct IT solution, the costs they will incur due to the inefficiencies and IT costs would
OPTING OUT There’s already evidence that buyers will vote with their feet. Graham Ramsey, chief executive of ATPI Group, says: “The reaction from clients has been pretty negative and we are being asked to move Lufthansa business to other carriers. I think Lufthansa could lose a lot of business unless they become very competitive on pricing. You have to go through a GDS to deliver MI – otherwise you would have to re-key it into a website at extra cost.” Continental’s Bruss confirms that his
company will use alternative carriers on routes across the Atlantic and to Asia where competition is strong. “Within Europe, it is not always practical to shift volume – we have to see what is possible and evaluate on a route-by-route basis,” he says. Bruss also thinks it is unlikely that many of Lufthansa’s competitors will follow its lead and introduce their own GDS fees. He believes that a lot of airlines know and value their corporate business enough to refrain from introducing such fees, “which create more harm than benefits”. Several major carriers, including Emirates and Delta, have ruled out adding their own GDS fees. However, Russia’s Aeroflot has stopped accepting direct card payments for GDS bookings to cut costs, while Air Astana CEO Peter Foster says he has “no doubt” other airlines will follow Lufthansa in charging fees for non-direct bookings. Willie Walsh, CEO of British Airways’ owner International Airlines Group (IAG), says he “admires” Lufthansa’s move, adding that it will be interesting to watch how it plays out. “We have deals with our GDSs, which clearly we will honour, but we’re always looking to negotiate more effec- tive deals for distribution,” says Walsh. “The issue of distribution cost is something we intend to address.”
BBT SEPTEMBER/OCTOBER 2015 31
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