Lufthansa to add surcharge for GDS bookings

The airlines of the Lufthansa Group (Lufthansa, Austrian Airlines, Brussels Airlines and Swiss International Air Lines) will add a fee of 16 euros (about $17.78 at today’s exchange rate) to every GDS booking, starting Sept. 1.

The airlines will not add the “Distribution Cost Charge” (DCC) to tickets purchased through their own websites or at its service centers and ticket counters at airports.

The company said that travel agents can book tickets without incurring the DCC by using its online agent booking portal. 

Jens Bischof, chief commercial officer of Lufthansa, said during a media conference call about the group’s new sales strategy, “We believe the market is ready for this change. … Somebody’s got to do it.” 

“We have two strategic targets: to be able to display the content, the price and the product in the channel we think is the most promising for selling our product and services, and to more evenly distribute the cost of services in the travel chain,” he said.

Bischof said that the GDS channel’s high costs are not commensurate with the value that GDSs offer in the transaction chain. Lufthansa said that the costs for using GDSs are several times higher than for other booking methods, such as its own direct booking portal, and that yearly GDS costs amount to “three-digit million euros.” Lufthansa added that many GDS services “however, are primarily used by other partners in the value chain.”

“Until now, the percentage of revenue generated from the sale of flight tickets by our airlines has continuously decreased,” Bischof said in a statement about the new strategy. “While other service and system partners in the value chain are recording increasing margins and returns, our airlines’ earnings have been compromised over time, even though they are the actual providers of flight services. We want to counteract this trend by refocusing our commercial strategy.”

Lufthansa also said the GDSs have limited booking functionality and that "innovative ancillary services and enhanced price options require suitable sales technology."

"The Lufthansa Group’s airlines are, therefore, in the process of developing a new booking method to enable sales partners to connect to their IT systems directly based on the new IATA data standard NDC (New Distribution Capability). The first NDC pilot project is currently being tested at Swiss and should begin at Lufthansa during the course of this year," Lufthansa said.

In a statement responding to Lufthansa’s strategy, the Amadeus said the new model would make “comparison and transparency more difficult because travelers will now be forced to go to multiple channels to search for the best fares.

“[Lufthansa] has chosen to go in a different direction by introducing charges that will penalize travelers based on the shopping channel they use,” the statement said. “Travelers will either pay more for the same service or, in the case that travel agencies are forced to accept this new commercial strategy by modifying the way they access content just for [Lufthansa] , there will be extra IT costs that may ultimately be passed on to the traveler, putting the travel agent, and/or the end consumer, at a disadvantage.

“Ultimately, the industry overall stands to lose from this distribution model,” Amadeus said. 

Travelport said in a statement: "We believe this proposed surcharge is not in the interests of either the end traveler or the airline group."

In a statement, Sabre said, "Lufthansa’s proposed 'cost distribution charge' disadvantages consumers and travel agencies. The GDS is the most preferred and efficient channel for consumers and travel agents to shop, book and manage travel, and provides consumers with transparency, choice and the ability to comparison shop. We stand behind the significant value we provide airline customers and agencies around the world, and we expect to find a mutually beneficial solution for both Lufthansa and our agency customers."