Amadeus: ‘No New Deal with Lufthansa’

by Michele McDonald

Amadeus told its customers that it does not have a new contract with the Lufthansa Group, despite an assertion by an executive of the group that it has restructured its agreements with Amadeus and Sabre.

The group comprises Lufthansa, Swiss, Austrian Airlines and Brussels Airlines.

In addition, the group’s intention to introduce on Sept. 1 a €16 surcharge on any bookings processed by a GDS “was completely unknown to Amadeus” until Lufthansa issued a press release on June 2, Amadeus said.

In a media call held after the release was made public, Jens Bischof, chief commercial officer of Lufthansa, said the group had reached agreement with Amadeus and Sabre on a new definition of “distributional freedom.”

‘In place for  many years’
But in a memo e-mailed to Amadeus customers, the company said that as of June 1, the only contract in place between Lufthansa Group and Amadeus is a global distribution agreement (GDA), the baseline agreement that any airline has in order to be distributed through Amadeus, with or without a full-content agreement.

“The GDA is not a new contract model, and has been in place for many years now,” Amadeus said.

Amadeus said it had negotiated in good faith with Lufthansa for more than a year over a new, full-content agreement, and it had believed Lufthansa also was engaged in the process in good faith.

“It seems this was not the case, and LHG’s true intentions were not shared with us,” the memo said.

Putting agencies at ‘a disadvantage’
Without a full-content agreement, Lufthansa Group’s fares may differ between direct and indirect distribution channels, “but this does not imply that Amadeus agrees with LHG’s new commercial strategy. We believe that this surcharge in the indirect channel will put travel agencies at a disadvantage.”

Amadeus also took issue with Lufthansa’s math. In its press release, it claimed that the standard indirect distribution cost is €18 per ticket, while the direct distribution cost is only €2.

Amadeus said the €2 direct distribution cost “seems to be significantly understated. We do not know how LHG has reached this number, but we believe the technology and internal costs to LHG alone for direct distribution are above €2.

“Furthermore, this figure seems to omit the substantial cost of online traffic acquisition, commonly understood in the industry to be €15-€20 per ticket. Therefore, it seems LHG is driven by reasons other than cost.”

In other news, Mizuho Securities USA issued a research note that described Lufthansa’s actions as “likely unsustainable.”

“Most airlines are likely to continue using GDS as their distribution mechanism, as they benefit from efficiencies of scale offered by such systems, something they would lose if they were to build their own distribution mechanism,” it said.

In addition, “travel agents are unlikely to start working with multiple interfaces for reservations as it becomes difficult to shop tickets on price or routes in such cases.”

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