Lufthansa Group CEO Carsten Spohr remains bullish about the $18 GDS surcharge the company imposed last September, even as Lufthansa is now embroiled in a lawsuit against Sabre over the fee.
“Overall we are on the right track. The market was ready. I’m sure others will follow,” Spohr said during the company’s annual earnings call on March 17.
He added that the surcharge hasn’t impacted revenues.
“We lost bookings in some markets due to the additional cost,” he said. “We regained those bookings in some other markets.”
His statements came as Lufthansa reported that it narrowed its fourth-quarter loss by 88% from a year earlier, to 50 million euros (about $56.7 million), while revenue was up 4.9%, to 7.75 billion euros (roughly $8.77 billion).
Still, Lufthansa finds itself in a new battle over the GDS fee, which has alienated large swaths of the leisure and business travel agent communities in the U.S. and Europe.
Early this month, the airline company, which is levying the charge on bookings for Austrian Airlines, Brussels Airlines and Swiss International Air Lines in addition to its namesake Lufthansa German Airlines, filed a lawsuit against Sabre. The move came after Sabre told Lufthansa that it believes Lufthansa is in breach of contract because it is levying the surcharge on bookings through the GDS but not on bookings made via Lufthansa’s distribution channels, which Sabre claims are also GDSs.
“Sabre now claims that two distribution channels of Lufthansa Group, its Direct Connection and its Agent.com Internet portal, should be considered ‘GDSs’ and thus be subject to the fee, even though both channels are expressely excluded from being considered GDSs under the contracts,” the lawsuit states.
Lufthansa is seeking a ruling on whether the surcharge complies with its contracts with Sabre and that the airline can continue to apply it to tickets sold through GDSs but not on those sold through its own distribution channels.
Sabre said in a statement it has expressed its concerns to Lufthansa on “multiple occasions.”
“Sabre has worked diligently to understand and to be responsive to Lufthansa’s commercial objectives, and we have had several constructive discussions about how our technology solutions can support Lufthansa’s business,” the company said. “Sabre will defend itself vigorously against this lawsuit.”
Despite this new fight and the bad blood the surcharge has created among travel agents, Spohr said last week that the policy is accomplishing what Lufthansa had hoped. The company implemented the GDS fee for strategic reasons, not for cost and revenue reasons, he said.
By driving a greater share of traffic to its own distribution channels, Lufthansa has been able to gather more data on its customers, which it is using to tailor product offerings ranging from advance seat reservations to catering at home.
“These are small examples of how we are becoming more and more users of the data that we own and want to maintain ownership of,” Spohr said.
In the company’s official earnings statement for 2015, Lufthansa Group reported that the surcharge “had a slight adverse impact on bookings, which had, however, no significant negative impact on the earnings position of the airlines.”
In the earnings conference call, Spohr said that booking reductions were countered by a decrease in the segment fees that Lufthansa had to pay the GDSs, in addition to revenue gains from the GDS surcharge.
A study released last month by the U.K.’s Guild of Travel Management Cos. showed that among member agents, Lufthansa had lost 8.5% of its market share in GDS bookings from the U.K. to Germany.
Meanwhile, other carriers either matched or increased their market share during that time.