The Lufthansa Group is the latest to fight the GDS distribution platforms, instituting a surcharge on all tickets sold through such systems effective 1 September 2015. The fee is meant to help the company offset the hundreds of millions of euros it spends on GDS-related sales costs annually. This is one of several new moves announced today to “redirect” the commercial strategy of the Lufthansa Group with a focus on ensuring “a greater portion of [future] revenue will be earned from flight operations; the actual area of service to the customer.”
There will also be a test deployment of IATA New Distribution Capability (“NDC”) systems from Group member Swiss later this year which furthers the company’s efforts towards fully integrating all sales offerings across all channels, something airlines struggle with today.
Other factors of the plan include fare families such as Light, Classic & Flex, similar to how Group members Brussels Airlines and GermanWings sell tickets today. This change, which was previously announced to be implemented this summer, includes furthering the modularity of fees associated with the fares. In other words, get ready for more ancillary fees on more flights in Europe.
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But the biggest news for consumers is the 16 euro per ticket “Distribution Cost Charge” (DCC) which will be levied on each ticket issued via a GDS. Travel agents and corporate booking agents can use dedicated portals for booking without the surcharges. Lufthansa has previously focused on pushing corporate bookings into its direct channel through a series of updates to its systems.
Custom bundles of benefits can be built such that during the booking process the system “automatically offer packages of tailored ancillary services which are focused wholly on corporate travellers’ needs, such as, baggage and preferential seat options.”
The Group is also looking to control costs through multiple subsidiary operations such as the recently launched EuroWings operation to handle some leisure-focused long-haul routes. Not to mention the shift of most domestic German flights to the GermanWings subsidiary.
Of course, Lufthansa is not the first airline to fight with the GDS companies or the OTAs (which typically use the GDS solutions to share fares). American Airlines famously had several lawsuits with OTAs regarding fare display and availability, all tied towards its efforts to push more transactions onto its direct booking channels and away from GDS-based queries. Ultimately the carrier successfully negotiated deals with the OTAs but it was not a pretty process.
While the Lufthansa Group calls this a win for customers it is unclear that is a certainty. Skewing results in different channels typically makes it harder for consumers to compare products and prices, not easier. Similarly, while the idea of only paying for the services you consume is a good one in theory, a complicated process to calculate prices on all those services makes it much harder to know up front what you’re actually buying. And that’s rarely a good thing.
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If someone really wants to earn Expedia/Orbitz points, is leveraging their “Best Price Guarantees” a good way to avoid the new DCC fee?
Spirit is already excluded from Expedia BRGs, likely because it is known that a similar surcharge exists. I’d be surprised if a similar caveat is not put in place for LH group flights.
Orbitz explicitly states that the rate must be different “before taxes and fees” so they may try to slide that in as a “fee” on the purchase. “The Best Price Guarantee applies only to the total airfare, which must exceed $50.00. It does not apply to differences based on service, booking, processing, shipping, paper-ticket and other fees not included in the airfare, other than any Orbitz service fee.” Hard to know if the DCC in this case will qualify as a fee or part of the fare.
Don’t aggregators like Google Flights use Direct Connect anyway? Or is it using ITA GDS tech under the hood?
You cannot book through Google Flights (yet) so it may not matter much. But, AFAIK, it is powered by ITA for most airlines. Back when Ryanair was being added in I think the talk was about that being a direct feed, but I believe most carriers are using the ITA feed.