Opinion Piece by James Wells, Founder and Chairman of World Travel, Inc.
note:The Lufthansa Group is composed of Lufthansa Passenger Airlines, SWISS and Austrian Airlines, Germanwings, Brussels Airlines, and SunExpress
On September 1, 2015, the Lufthansa Group began charging the equivalent of 16 euros for airline tickets purchased outside of their website or reservation center. The majority of the Lufthansa Groups’ sales originate from third parties using Global Distribution Systems (GDSs) and the surcharge is applicable on all sales booked through this channel. Lufthansa claims not to have experienced any downturn in their bookings since this initiative was announced on June 1, 2015.
Global Distributions Systems...offer a robust system with the most content of any single distribution method today.
Take a look at the model of business for much of the corporate travel world. Global Distribution Systems play an important part when it comes to purchasing travel. They offer a robust system with the most content of any single distribution method today, allowing easy and efficient comparisons through a central point of aggregation. This provides both consumers and intermediaries with an effective mechanism to buy travel with confidence. But in order to avoid the GDS cost, the Lufthansa Group is now penalizing consumers that book through these systems.
Consider this comparison. Think of the GDS as similar to the real estate Multiple Listing Service (MLS). MLS contains listings of most available properties for sale today, allowing consumers through realtors to shop on an even playing field and see the largest pool of properties for sale in the marketplace. Of course, there is a cost associated with being included in the MLS, similar to how the GDS charges a fee to include a listing of transportation services. And just as there are some carriers that withhold content from the GDS, you will find a similar situation in real estate, often referred to as “for sale by owner”. These are in the clear minority of all listings, and normally they are short-lived.
Lufthansa Group penalizes those purchasing travel through an efficient GDS aggregating method.
A few media companies and a few airlines have praised Lufthansa Group’s decision. Certainly, all airlines would welcome the standardization of this charge, as it would allow them to transfer the additional costs of doing business directly onto the backs of consumers. The media companies writing positive responses about the new fee, meanwhile, may be receiving advertising dollars from airlines.
But most businesses, travel companies, travel managers and consumers are against the Lufthansa Group’s fee. It penalizes those purchasing travel through an efficient GDS aggregating method.
Airlines need to recognize that they are in business today because of their customers and partners. Airlines are enjoying record profits from ancillaries and lower fuel prices. Continuing to attempt to transfer costs to the consumer is inappropriate and it is self-serving. If successful, it will create a fragmented pricing environment, making comparison shopping more difficult and time-consuming for consumers.
No matter who is shopping for fares, the consumer expects to easily compare options for what they are purchasing. This new Lufthansa surcharge is one of pure greed, transferring a cost of doing business to the loyal customer. And while Lufthansa Group’s latest statements say that sales have not suffered implying that consumers are accepting the charge, we find this is not true. Our agency’s Lufthansa sales are down 31% since this anti-consumer-friendly GDS fee was announced over four months ago.
Jim Wells is the founder and Chairman of World Travel, Inc., the nation's 4th-largest independent TMC and 7th-largest overall TMC.