Lufthansa Adds GDS Fees, Builds Booking Portals In Distribution Shake-Up

Lufthansa Group announced a radical shake-up of its distribution strategy, including a €16 fee for all bookings accepted through global distribution systems beginning Sept. 1. However, corporate customers will be able to book negotiated fares via Lufthansa’s website without incurring the fee, while travel agents can avoid the fee if they book via the group’s online portal.

The new arrangement applies worldwide to all four Lufthansa group airlines: Lufthansa, Austrian Airlines, Brussels Airlines and Swiss. The announcement follows months of rumors within Germany that Lufthansa had been working on a corporate recognition process for direct bookings.

Lufthansa and Swiss in 2008 announced plans to add fees to certain tickets booked in four countries through GDSs but eventually came to terms with distributors to shield subscribers.

“The new commercial strategy includes a clear cost differentiation in the various booking channels," according to a Lufthansa Group statement. "Presently, the costs for using GDSs are several times higher than for other booking methods, such as our own online portal. In total, the yearly GDS costs come to a three-digit million euro amount for the Lufthansa Group.

“These services, however, are primarily used by other partners in the value chain," the statement continued. "A large number of services are paid by the Lufthansa Group carriers, but are only partly used by them. Among others, the GDS services comprise functionalities which offer many extra services in addition to the basic features of booking, processing and ticketing. Such examples include the option of combining and booking world-wide, multi-airline flight offers, as well as an integrated booking and invoice processing."

Lufthansa Group also announced that it is “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 New Distribution Capability.” The group is moving to the NDC model to achieve its ambition of offering services “on a more flexible and modular basis, with individualized price options and ancillary services.” A pilot is already under way at Swiss and will extend to Lufthansa later this year.

The statement quoted chief commercial officer Jens Bischof as saying, “At present, airlines are not yet able to market their services via all sales channels, as it is common in other industries. The contracts and structures have previously prevented any deregulation in many areas. We want to change this with our new commercial strategy and take advantage of greater degrees of freedom in our sales activities, providing our customers with the exact tailor-made services that they are looking for and wherever they are looking for them.”

A German travel industry source told The Beat the new commercial strategy makes sense for Lufthansa but criticized the lack of notice. “Change is important for business development, but unfortunately Lufthansa has not been willing to involve its partners at an early stage to give them a chance to create alternatives in their process workflows,” the source said.

According to the same source, the booking fee will not apply to documents issued by joint-venture partner United Airlines on Lufthansa-operated flights. Where applied, the fee will be non-negotiable. He added that one of the central aims of Lufthansa’s NDC model is to provide direct connectivity to corporate booking tools.