TRAVEL agents are
outraged by Lufthansa’s
plans to charge a
surcharge for GDS bookings,
but this could just become
the new ‘standard’ as other
airlines have shown their
support for the initiative.
The Lufthansa Group will
charge a surcharge of €16
(R218) for every ticket issued
by the GDS from September 1
this year. The airline group
said in a statement that the
reason for introducing the
‘Distribution Cost Charge’
(DCC) was that the costs for
using the GDS were much
higher than any other booking
method and amounted to
a “three-digit million” euro
amount yearly. The group said
travel agencies would still be
able to book tickets without
the DCC using Lufthansa’s
online agent portal. Corporate
customers will be able to book
their individually negotiated
contract rates, excluding the
DCC, direct online.
Airlines have applauded the
move. During the recent Iata
AGM in Miami, IAG ceo, Willie
Walsh, and Alaska Airline
ceo, Brad Tilden, expressed
their support for Lufthansa’s
decision to improve the
revenue earned on ticket
sales through third parties. Air
France KLM ceo, Alexandre
de Juniac, was quoted in
French newspapers as saying:
“We are also evaluating this
option.” Etihad ceo, James
Hogan, was quoted by Reuters
as saying: “I think it's a
brave step and I commend
Lufthansa for it.”
Henry Harteveldt, American
travel industry analyst
and adviser, says airlines’
frustrations with the GDS
distribution channel is nothing
new. “They’re disappointed
with what they consider to be
slow and inadequate actions
to support ancillary product
merchandising and sales.”
However, by penalising
travel agencies Lufthansa is
punishing two of its better
third-party sales channels:
traditional leisure agencies
and corporate travel
management companies, he
says. “These two channels
tend to produce aboveaverage
yields for airlines. In
Lufthansa’s strategy, agencies,
not GDSs, are going to be
penalised.”
Meanwhile, retail agents in
SA say they won’t hesitate
to off-sell Lufthansa if the
airline decides to pursue this
strategy.
David Pegg, md of Sure
Viva Travels, says he will
increase his service fee for
the Lufthansa Group “that
will put their quotes out of
contention”. “My relationship
with my GDS company is far
more important than that with
Lufthansa. I earn more from
the GDS company; it’s as
simple as that.”
Any airline’s decision to
levy charges for facilitating
bookings will negatively
affect a travel agency’s ability
to promote that particular
airline’s inventory, says Rian
Bornman, md of FlightSite.
He says FlightSite’s revenue
stream relies mainly on airline
commission, overrides and
segment income.
“I think [Lufthansa] will burn
its fingers with this move, as
the travel trade still accounts
for over 80% in sales for travel
vendors,” says Franz Von
Wielligh, gm Flight Specials.
“The trade is still the
heartbeat of travel facilitation,”
agrees Marco Cristofoli,
Harvey World Travel SA
md. He says although it is
understandable that airlines
need to find every avenue
they can to stay profitable,
it is strange that they would
attempt to cut off a significant
distribution channel for their
inventory. “Surely there is an
opportunity to engage to find
more equitable solutions,
rather than disadvantage a
channel that has contributed
to the success of many
airlines?”
Lufthansa is competing in a
space where OTAs seem
to be three steps ahead of
any airline site, says Allan
Wolman, md of XL Rosebank
Travel.
“Lufthansa will have to spend
a lot more than they think
by levying a GDS fee as the
cost of driving traffic to their
site coupled with their other
marketing, promotion costs
and merchant fees, not to
mention the high risk of credit
card fraud that might impact
adversely on their bottom line.
When will airlines realise their
cheapest and best sales force
is the travel trade?
“GDS technology advances
have proved an absolute
essential tool for the industry
and to try to drive a wedge
between agents and the GDS
is a flawed endeavour.”
This additional charge puts
agents in a difficult position
with clients, says Rachael
Penaluna, business manager
Sure Maritime Travel. She says
agents already have to explain
why they charge a handling
fee.
“Travel agencies will always
be on the back foot with
airlines. We distribute their
products and get nothing in
return. As a business model,
it just doesn’t make sense.
I imagine that if any other
airlines follow suit, more
travel agents will go out of
business.”
Corporate clients are
likely to be the hardest hit,
as they will find their travel
management programmes
severely disrupted, says
Claude Vankeirsbilck, chief
sales and marketing officer
of Tourvest Travel Services.
Lufthansa’s strategy is one
of disintermediation and
will significantly increase
TMC inefficiencies, he says.
“Ultimately the customer will
pay more to use Lufthansa
through a proven, efficient and
highly effective distribution
channel that has invested
significantly in developing
compliant travel management
programmes.”
Lufthansa has introduced
a travel agency portal on its
website where travel agents
can book tickets without
additional charges but these
portals won’t be linked to
agencies’ mid- and back-office
systems, agencies’ customer
profiles or to corporate travel
policies, Henry says.
“These shortcomings will
force agencies to do extra
work for any Lufthansa
bookings.”
