Lufthansa Executive Takes ‘The Hot Seat’ at Business Travel Conference
by Michele McDonald /“Serious challenges” led Lufthansa to impose the Distribution Cost Charge, the €16 fee added to all GDS bookings, according to Juergen Siebenrock, vice president for the Americas.
The carrier is in the midst of a top-to-bottom re-examination, akin to an “in-house Chapter 11 process,” he said at The Beat Live, a business travel conference, in Washington.
Siebenrock sat in “The Hot Seat,” a tradition at the conference in which an industry figure answers questions from readers of The Beat and members of the audience about a controversial topic – and few topics at the moment are more contentious than Lufthansa’s fee, which went into effect Sept. 1.
For Lufthansa, which faces fierce competition from low-cost carriers in Europe, some of which do not participate in the GDS marketplace, the fee is a matter of “shifting the cost to where it happens.”
Siebenrock addressed several questions surrounding the issue:
- “It’s time to change the plumbing,” he said, a reference to the pace at which merchandising in the GDS channel has been enabled. “Lufthansa brings more to the table than fares and schedules,” he said. The idea in the future is to bring Lufthansa’s investment in better seats and other features to the forefront.
- The leaking of Sabre’s European booking data for the first two weeks of September was “unfortunate,” Siebenrock said. “From our point of view, bookings look stable.” During those two weeks, Lufthansa’s operation was disrupted by a strike.
- Lufthansa has had “very good, but very tough talks with the GDS companies in recent weeks.
Although the carrier no longer has full-content agreements with the companies, “at present, we have no plans to withhold content,” Siebenrock said. “We’re still providing the full range of fares and schedules.” Nor has the carrier found any evidence of bias by the GDSs, he said.
- Lufthansa’s dedicated online agency portal has experienced “higher demand than anticipated,” Siebenrock said. But he acknowledged that the portal does not provide the tools that travel agencies require.
- The Lufthansa executive had high praise for the GDSs, which account for 70% of the carrier’s bookings. “They are very efficient and refined systems. They offer value,” he said. “We are very conscious of what they do for the travel community. We don’t have a true alternative.”
- Despite the differences in the markets served by online travel agencies, which attract bargain hunters, and by travel management companies, which deliver higher value passengers, Lufthansa did not consider treating the two camps differently in imposing the fee.
- Nor did the carrier weigh discounting direct bookings, rather than imposing a surcharge on indirect business, a concept suggested by a corporate buyer in the audience.
- The Lufthansa Group has no plans to extend the GDS surcharge to flights marketed and sold by code-share partners. Although Siebenrock could not address the details of code-share contracts, they probably would prevent such a move. He said that it was too soon to detect a large-scale shift to code-share flights, but, he added, “I think there will be a shift.”