Mark Pestronk
Q: I am very concerned about Lufthansa's new 16 euro fee for GDS-issued tickets. Do you think that the major U.S. and foreign carriers will match it? Is the fee even legal under the so-called "full-content" agreements between major carriers and the three GDS companies? If it's not legal, will the GDSs sue Lufthansa and any carrier that matches the fee?
A: The exact terms of the full-content agreements are closely guarded trade secrets known only to each airline and the GDS. So no industry observers know for certain whether charging a fee for GDS bookings breaches those agreements.
However, we can deduce a few things based on publicly available information. First, according to a US Airways brief in its ongoing suit against Sabre in federal court in New York, in the full-content agreement that is the subject of the lawsuit, "Sabre also prohibited surcharges or fees for those travelers choosing Sabre distribution. ...And Sabre also took steps to ensure that these restrictions couldn't be 'gamed.'"
Although US Airways has shown a consistent propensity to misstate the terms of agreements, we can probably take its characterization as accurate here, as Sabre's 33-page follow-up brief does not contradict US Airways' assertion. At least since 2006, Sabre has consistently been the innovator in negotiating full-content agreements, and the other GDSs have copied Sabre's example. From this, we can deduce that: (a) each major U.S. airline probably has a similar agreement with Sabre, and (b) the other GDSs probably have similar prohibitions in their contracts with the major carriers.
So if "surcharges or fees for those travelers choosing Sabre distribution" are prohibited, how can Lufthansa roll out the new fee as of Sept. 1? Amadeus has already announced that its full-content agreement with Lufthansa expired as of June 1, so we can deduce that it chose Sept. 1 because its agreements with Sabre and Travelport will expire on or before that date.
Finally, we can probably assume that, unless a carrier's full-content agreement likewise expires soon, it will be unable to match Lufthansa. Fortunately, Sabre has been clever enough to stagger its termination dates with carriers.
In its most recent annual report to the Securities and Exchange Commission, Sabre stated: "We renewed 24 out of 24 planned renewals in 2013 (representing approximately 25% of our Travel Network revenue for the 12 months ended Dec. 31, 2013). We renewed 28 out of 28 planned renewals in 2014 (representing approximately 22% of our Travel Network revenue for the 12 months ended Dec. 31, 2014). We have 38 planned renewals in 2015 (representing approximately 20% of our Travel Network revenue for the 12 months ended Dec. 31, 2014)."
Therefore, it is unlikely that much more than a quarter of all carriers will have the right to match Lufthansa in 2015, unless they breach their Sabre full-content agreements. I assume that Travelport and Amadeus likewise staggered their contract expirations, as they generally follow the leader.
If a major carrier were to breach its agreement with a GDS, the vendor would not have to sue. Instead, it could start biasing its system against the carrier, at least in the U.S., where such bias is not explicitly illegal. If my deductions and assumptions are correct, there is really not much chance that all the major carriers are going to match Lufthansa.