Lufthansa’s announcement of a €16 fee on all global distribution system (GDS) bookings dominated behind-the-scenes debate at the GTMC travel management company conference in Brussels.
Few were prepared to go on the record with their view, but Advantage corporate director Ken McLeod expressed a common fear when he said: “It’s a catalyst for every airline to charge a fee.”
Lufthansa unveiled the GDS fee or distribution cost charge (DCC) last week, saying it will apply in all markets from September 1.
The move surprised the industry. GTMC members said they had heard nothing in advance, despite Lufthansa insisting it had discussed the charge with travel management companies (TMCs) and leisure agents.
To avoid the charge, agents and TMCs will have to book direct with Lufthansa and sister carriers Swiss, Austrian Airlines and Brussels Airlines though a new web-booking platform at lhgroup-agent.com.
Lufthansa wrote to agents last week, saying the charge would be “globally consistent, levied on all tickets issued through a GDS, calculated automatically and factored into the ticketing”. It said: “We expect the DCC to be in the region of €16 per ticket.” However, it added: “We will notify you of the exact amount as soon as negotiations with the GDS companies are concluded.”
Many have taken that to mean the fee could be less than €16. McLeod said: “The fee will come down, but will the possibility of a fee remain?”
One senior industry source queried the value of the new Lufthansa platform for agents, asking: “What functionality will be available? Will there be all the things a corporate traveller expects from a TMC? It’s not clear it will support the Iata BSP [Billing and Settlement Plan]. How will it support changes to bookings? That is the heavy lifting TMCs do.”
A GDS source told Travel Weekly: “Every sector we book is booked on average three times and cancelled twice. The resource to manage that is expensive.”
Another source suggested Lufthansa had failed to factor in the true cost of direct distribution when it claimed a GDS booking costs at least €16 more than a direct booking, saying: “Once you factor in the resource to support bookings, you often find direct distribution costs more.”
The source added: “Intermediary distribution brings airlines sales in higher fare classes and distribution in markets where they are not strong. It’s a question whether Lufthansa realises the potential impact of this. If business travel was becoming more simple it would be easier to do, but it’s becoming more complex.
“There is a lot of time between now and September. It seems like an opening strategy; it’s like a game of poker.”
The GTMC air strategy group chairman Paul Allan, who chairs Ian Allan Travel, said: “It is not as straightforward as they [Lufthansa] think in just bunging on a charge. We’re the voice of business travel and we’ll make our voice heard. “
Allan declined to go into detail, but said: “We’ll find a solution where TMC clients are minimally affected.”
A senior industry insider said: “We have been here before. Other airlines will be rubbing their hands because a lot of TMCs will switch away from Lufthansa. If that happens, Lufthansa will see revenue loss. This will lead to commercial pain.”