Lufthansa grows profit, hails GDS charge

TWO months after
implementing its
controversial GDS
surcharge, Lufthansa has
seen little impact on booking
trends while profits have
soared.
The impact of the
Distribution Cost Charge
(DCC) has been “broadly
neutral” in terms of revenues
and profits, ceo, Carsten
Spohr, said in a press
conference following the
publication of the airline’s Q3
results for 2015.
The results show that nett
profit for the period from July
to September jumped by
41,5% to €794m (R11,9bn).
The Lufthansa Group is also
on course for a significantly
improved full-year result. After
the first nine months of 2015,
the adjusted EBIT increased
by 71,4% year on year to
€1,7bn (R25,6bn). “These
encouraging results confirm
that we are on the right track
and that our chosen strategy
is having its desired effect,”
said Carsten.
Although SA travel agents
do not support the move,
they have not opted to off-sell
the airline but to rather pass
the fee on to clients. Ceo of
Pentravel, Sean Hough, says
he doesn’t agree with the
new charge but that there
have been no issues with the
implementation of the DCC.
“It’s all working fine; like any
other tax,” he says.
“We are not happy with the
move but we cannot off-sell a
legacy carrier like Lufthansa,”
says Rachael Penaluna,
business manager of Sure
Maritime Travel.
But agents are steering
clear of Lufthansa’s agent
portal, which doesn’t carry
a surcharge for bookings.
“We need to keep our GDS
segments up, so we have not
offered our passengers that
choice,” says Rachael.
“We can’t do without
Lufthansa but we don’t
venture anywhere near its
portal,” agrees Allan Wolman,
ceo of XL Rosebank Travel.
He says the portal is slow
and cumbersome as well as
inefficient for travel agents.
“Bookings via the portal
don’t allow agents to track
a client’s booking or provide
adequate reporting. It also
takes the control away from
us in the event of change or
amendment of booking.”
Jonathan Gerber, director of
TAG, says Lufthansa will need
to discount its fares in order
to be competitive in the South
African market, as agents
will continue to pass on the
charge to their clients. “Our
clients generally want three
quotes. The Lufthansa quote
would include the additional
charge. If clients want to know
what the additional charge is
for, we tell them that it is a
direct charge from Lufthansa.”
eTravel operations director,
Tammy Hunt, agrees that if
Lufthansa “outprices” itself
via the GDS, clients will start
opting for more economical
routings.
The effect of the DCC on
corporate travel buyers has
been considerable, research
by the Global Business Travel
Association (GBTA) has found.
According to an online global
survey, in which 434 travel
buyers worldwide participated,
42% said they had reduced
bookings with Lufthansa,
93% said they were currently
not considering the option to
book directly on Lufthansa’s
site and 39% were seeking
alternative carriers. Only 2%
of travel buyers surveyed said
they would book directly with
Lufthansa to avoid the DCC.
“The resulting actions
demonstrate the high value
that travel buyers place in the
existing distribution network.
The efforts by Lufthansa to
fragment the distribution
system by artificially adding
cost is not working,” said
Michael McCormick, GBTA
executive director and coo.