The German carrier's plan to pass on the costs of global distribution system fees to customers is raising concerns
Lufthansa's decision in late January to transfer GDS fees to travel agents in Germany, Austria and Switzerland has angered the travel industry and puzzled the region's dominant GDS Amadeus. The move, which has been two years in the making, is part of Lufthansa's aim to cut its GDS costs in half. "We won't reach our goal [with this move], not right away, but it is a step in the right direction," says the carrier.
Lufthansa is following the lead of carriers like British Airways, Brussels Airlines, KLM and SAS in attempting to lower GDS costs in their home regions where they have a strong market presence.
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"We really thought we were close to reaching an agreement" David Jones Executive vice-president commercial, Amadeus |
To obtain Lufthansa's cheapest "Preferred Fares" the carrier says that by July travel agents must book direct via its own travel agent web portal. They can also book via GDSs if they sign up to the new programme, but must pay a fee of E4.90 ($6.60) per sector. Other agents can also book via the GDSs but will not have access to the low fares and will pay E15 extra for each one-way flight.
Amadeus executive vice-president commercial David Jones says the carrier's move was a shock. "We really thought we were close to reaching an agreement on a full three-year content deal," he says. The GDS provider says since January it has signed three-year deals with 34 European carriers including Air France, Iberia and KLM.
Jones says Amadeus, through its three-year-old "value-pricing" initiative, has "had the objective of pulling down the cost of distribution in an airline's primary market to the point where the economic incentive for airlines to want to bypass us went away". Some even believe GDS costs can approach what it costs an airline to make a direct booking on its website. "We have had more than one significant airline say to us that the [GDS] booking fees in their country are less than their cost of distribution," says Jones.
Amadeus, which has the largest market share in Germany, and Sabre, will discuss the move with Lufthansa. But the carrier, which has an 11.5% stake in Amadeus, says these will be talks about exchanging "information, but not with a view to changing the model". Sabre senior vice-president travel network Martin Cowley says Sabre is adopting a "wait and see attitude" for now but believes the traditional GDS model continues to deliver good value to all elements of the value chain. "We believe this will be sorted out over time," he says.
On the face of it, one interesting aspect of the deal looks like Lufthansa could significantly "over-recover" its GDS fees at the E4.90 rate. At present its deal with Amadeus sees it paying a GDS fee of E3.25. However, the carrier says that as it does not have any signed contracts with the GDSs after July yet it has calculated this rate at their higher list prices.
Source: Airline Business
