Lufthansa Group Airlines Are Going to Charge You if You Don’t Book Directly, and That’s a Big Mistake

Fights between airlines and reservation systems are as old as time. Global Distribution Systems (GDSes) have held the upper hand for years, and because of that, they charge the airlines a lot of money for every booking. Airlines, consequently, are always looking for ways to bring costs down by taking bookings directly. (For those want to know more, you can read my distribution series.) Lufthansa Group and its airlines (besides Lufthansa itself, this includes Austrian, Brussels, and Swiss) have decided to hit hard by slapping a fee of 16 euros on every ticket issued in a GDS starting in September. That may sound smart, but it brings a lot of collateral damage with it. This may make sense in the future, but for now it’s a big mistake. Let’s hope this is just posturing.

Lufthansa GDS Fee Punishes Many

Lufthansa Group announced the change on June 2 in a very typically dry and bland release entitled “Lufthansa redirects commercial strategy.” (If you fell asleep just while reading the headline, my apologies.) Let me summarize it in plain-speak.

“The GDSes charge us too much. So now we’re going to punish those who use GDSes by slapping on a 16 euro fee to every ticket.”

The problem here is that while the beef is with the GDSes, the punishment hits others just as hard if not harder. Anyone who books through an online travel agent will now pay 16 euros more. It’s really Lufthansa that suffers the most in that scenario because in a comparison shopping world, Lufthansa is going to now look more expensive. People aren’t going to go to Lufthansa.com to see if it’s cheaper. They’re just going to fly someone else. But hey, if Lufthansa doesn’t think it needs that lower-fare traffic to fill up the back of its airplanes, then fine.

But what about all those actual travel agents, especially those that handle corporate and high-end leisure travel? Those are high dollar bookings that are highly desirable. And for better or for worse, travel agents use these distributions systems because there aren’t any better alternatives… yet. Technology is slowly getting there, but it’s not there today.

In the release, Lufthansa had the nerve to say that Lufthansa corporate deals can be booked directly at LH.com. That implies cutting out the corporate agent. Even if the corporate agent does book it, it won’t feed into the agency’s back office systems so it’s going to be a mess for the agencies and the companies.

The same goes for Lufthansa’s online agency portal, which I believe is either new or going to be nearly-relaunched. Sure agencies can go book there if they want, but it’s a huge pain in the butt. First of all, agents are going to have to remember to subtract 16 euros from any price they see in the GDS, since that’s still where they’ll do their comparison shopping. (That’ll be a lot of fun for people who don’t book in euros.) Then they’ll have to go to the portal and book. And since the booking likely won’t go into the back office systems, there will be a bunch more work to be done. In addition, those bookings that require multiple airlines won’t be possible on the portal, presumably. It’s going to result in fewer bookings for Lufthansa.

In short, this is going to piss off some of the airline’s best customers (and the people who issue tickets for the airline’s best customers). It’s probably also going to make United and Air Canada mad since those airlines share revenue with Lufthansa Group airlines over the Atlantic. This is going to hurt their business as well.

That’s why we can only hope that this is truly posturing. Most interestingly, the announcement was made on June 2 but it doesn’t go into effect until September 1. So that gives Lufthansa Group time to extract concessions from the big three GDSes out there, Amadeus, Sabre, and Travelport, before putting it into place.

Eventually, there will come a time where the airlines hold more power in this relationship, a time when alternatives for reaching agencies will be functional and viable. But we aren’t there yet. Right now, Lufthansa Group is just too early to market with this. And because of that, it’s playing with fire.

[Original middle finger photo via Shutterstock]

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27 Comments on "Lufthansa Group Airlines Are Going to Charge You if You Don’t Book Directly, and That’s a Big Mistake"

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John Tarik
Guest

Google flights, Kayak and similar will not be affected: they do comparison shopping. OTAs, who don’t do so, are the ones to be affected.

Customers overall won’t be affected if they comparison shop.

Gantt
Guest

How much are the GDS companies charging for a segment booked via thier channel these days? Isn’t it still sub $5.00 per segment? Sorry, but to me, that seems like a CHEAP distribution model. If I could sell a $1000-2000 (round-trip) product for less than $10 in marketing costs, I’d do it in a FLASH.

haolenate
Guest

$4.09 per segment when booked in the US, $6.49 per segment in the same continent, $7.89 per segment when booked OUTSIDE the US

Add in the costs by the airline PSS and it gets up there.

Henry
Guest

Depends on what “value” the GDS provides. If it’s just transactional, those fees always get beat down in the end. I don’t think the GDS provides any “marketing” value, so it’s not a valid comparison.

Professor Sabena
Guest
The technical cost is now closer to an AVERAGE of $8 per net booking. The figures quoted here have not taken into consideration additional charges that need to be averaged out. The US model is closer now to $6.50 and non-US is more than $8. (You need to add back in loads of additional fees that the GDSs have placed on the airlines over the past few years. When it comes to unbundled pricing – the GDSs make the airlines look like pussies). hope this helps. I have seen some GDS contracts where the average price is $12 per net… Read more »
David SF eastbay
Member

Could be game playing like the airlines like to do to get the GDS systems to lower costs. Other airlines will watch and see how it plays out and if it works, they to will do the same thing.

Mike
Guest

Most LH flight are short-haul flights. A couple of dollars/segment is quite a lot for a short-haul flight costing 50-100€/segment.

darkstar
Guest
@Gantt Funny question, why you say? Because GDS companies love to threaten litigation to those who discuss the rates charged to airlines. Rates are negotiated and in theory the most volume client should have the lowest rates but without transparency most have found out that its not entirely true. Imagine negotiating with a team of used car salesmen. Couple that with some favored nation clauses and you are not negotiating with one company but a cabal. The res fee is not the answer, since it punishes agents. The industry needs a tech solution to the issue that will work for… Read more »
David M
Guest

I wonder if codeshares could be used to do an end-run around this? If LH/OS/SN/LX flights booked as codeshares with UA or AC or other Star Alliance partner flight numbers, I think this would avoid the fee. This only works though if UA or AC or another partner offers fares equivalent to what LH and friends offer themselves.

BookieNJ
Guest
I actually just booked a PHL-MUC trip last week through Orbitz as a codeshare through UA on Lufthansa. It was a great fare (which went up by $600 the next day) but what sucks is Lufthansa won’t allow me to pick my seats on their flights because I didn’t purchase the ticket, which was about $500 more, on their website. When I log on to the Lufthansa it even says ‘Not booked on LH.com.’ When I click to choose/pick my seats it’s says ‘Unfortunately, seat reservations are not possible.’ I can’t even upgrade, which I’m not going to do anyway… Read more »
lithdoc
Guest

Not only that, but it will very likely be a “K” class fare and not give you any FF miles on UA.

BookieNJ
Guest

Looks like it’s a “L” fare.

USBT
Guest
I agree this looks line cutting of your nose to spite your face. If you’re going to do something like this you need to to it from a position of strength, Delta-like strength. And Delta is strong while Lufthansa AG is a financial basket case. Delta recently pulled its fares completely off some of the metasearch engines and online bookers. According to this BBC article it pulled fares off Skyscanner but put them back when Skyscanner agreed to only link through to Delta.com. http://www.bbc.com/news/technology-32990724 I checked it out and indeed the vast majority of DL itineraries only link through to… Read more »
John
Member
I might agree that the 16 EUR is a BIG charge, but fundamentally I agree that such a charge should be there. First, Travel agents are middle man whose life the airline shouldn’t make easy by design, i.e. making agents the preferred seller of airlines product. If customers value this service, they pay for that. In the classic approach airlines pay commission from fare, thus giving away part of revenue that shouldn’t be taken for granted from TA point of view. TA should operate with the concept of added value in mind, but this value must be covered by passenger,… Read more »
Ethel mertz
Guest

Hi Cranky, Could you sometime write a column about why when booking an international flight (for me starts with AA, then transfers to IB and BA/AA on the return) I cannot reserve seats with IB and BA? And I’m EXECPLAT!! I called the AA EXECPLAT desk and they could not be of any assistance. I wrote a complaint to the Oneworld desk and received a B.S. automated reply. Thank you in advance

Professor Sabena
Guest
Actually BA and AA are better than AF/KL with DL and I am Diamond. I can write legions on this topic. Suffice to say there are a lot of problems and challenges in the current airlines system that need to be fixed and have not been. Now Airlines are making money they need to invest more to solve these very basic problems. Frankly the GDSs must shoulder a lot of the blame for not listening to their airline customers and preferring to go through the typical legal restraint route rather than investing in their product. All GDSs UNDER INVESTED in… Read more »
Nick Barnard
Member

Perhaps this is an end run around the GDS’s full inventory/pricing clauses?

Maybe LH just plans to drop all of their prices by $16 Euros so they’ll still be just as competitive, but this way their customers can get a cheaper option by going to LH.com?

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