Lufthansa Group: Effect of GDS Surcharge Is ‘Broadly Neutral’

The Lufthansa Group’s implementation of a €16 Distribution Cost Charge on GDS bookings has been “broadly neutral” on its bottom line, according to Carsten Spohr, chief executive officer.

“We have seen no change at all in our booking trends in our home markets,” he said during the group’s third-quarter earnings call.

Spohr admitted to “some headwinds” in regions outside the group’s home markets. But he said direct bookings are growing “very strongly.”

Spohr emphasized that the group’s strategy is not just about the DCC. “More important for us is that the distributional freedom we created allows us to roll out branded fares, increase ancillary revenues, and implement a next-generation revenue management system in the future,” he said.

On Oct. 1, the group rolled out a new fare structure on its short- and medium-haul routes operated by Lufthansa, Austrian Airlines, and Swiss that Spohr said “makes it possible for us to offer personalized services.”

The branded fares, called Light, Classic, and Flex, offer bundles of services that can be augmented with additional ancillary products. (They are also available through all three GDSs.)

“Our customers now only pay for the services that they actually use,” Spohr said. “We are making very good progress here. We’re expecting €300 million ancillary revenues every year from 2018 and onward, and we think our new distribution strategy, with the DCC just part of it, is very important for us.”

Lufthansa has come under criticism for imposing the surcharge without offering a viable technology option. In its financial report for the first nine months of the year, it said, “In recent weeks, great progress has been made on developing partnerships with various sales partners. One important element here is the continued refinement and implementation of new, direct booking channels.

“Negotiations are currently under way with technology partners on setting up more advanced solutions to make bookings via direct sales channels even more attractive and more convenient for users in future.”

Pic: Adrian Pingston