Lufthansa Group to Levy Credit Card Surcharge

Lufthansa will begin levying a credit card surcharge on tickets issued on or after Nov. 2 in six European countries.

The “optional payment charge” will apply to all channels for five Lufthansa Group carriers – Lufthansa, Austrian Airlines, BMI, Brussels Airlines and Swiss – for flights departing from airports in Germany, Belgium, Finland, the U.K., the Netherlands and Switzerland.

The charge per ticket will be €5 on domestic routes; €8 on intra-European routes, and €18 on long-haul routes (about $7.07, $11.32 and $25.48, respectively).

U.S. agencies with multinational clients will be affected if they use a service such as eGlobalfares, which allows them to benefit from lower fares in particular countries. If the ticket is issued in one of the six countries, it will be subject to the surcharge.

Lufthansa said the decision was due to “rising payment transaction costs in recent years and new developments in forms of payment.”

It noted that since 2006, it has levied a credit card surcharge on bookings made through its direct channels, such as its website, call centers and ticket counters.

The ‘next frontier’
Credit card surcharges are common among low-cost carriers, but they have been making their way into network carrier policies as well in recent years.

Credit card fees have long been targeted as the next frontier in distribution cost cutting following the elimination of travel agency commissions and the ongoing quest for lower GDS fees.

It is likely, however, that Lufthansa’s charges exceed the fees it pays on credit card transactions.

BCD Travel, a Dutch multinational travel management company that has a large U.S. presence, published a white paper a year ago that outlines the negative effects of such surcharges on TMCs and their customers. (See Resources below.)

“Passing along merchant fees through TMCs drives up travel program costs even more than would simply hiking fares,” it said. “Unable to absorb merchant fees, TMCs must pass along those charges to corporate customers, as well as related administrative costs.”

Big financial impact
The costs could be significant, BCD said.

“Surcharges and restricted access to airline merchant accounts represent a hike of up to 3% in corporate air travel costs. A company with an annual air spend of $20 million could see their costs rise by as high as $560,000 per year if all airlines adopted a surcharge.”

The cost would be even higher if airlines blocked access to their merchant accounts. “If airlines forced TMCs to establish their own merchant accounts it would add up to $600,000 to buyer costs,” the white paper said.

Payment options
Lufthansa said both private and corporate customers will continue to have payment options that do not incur the charge, including:
– Non-credit-card payments at travel agencies.
– Payments made via Electronic Direct Debit (EDD) on the Lufthansa website or at a Lufthansa Service Centre.
– Cash payments or payment by EC-Card (Maestro) at Lufthansa ticket counters.
– Payments by corporate customers that use the AirPlus Debit Accounts offered by AirPlus International.

That last item is likely to raise some eyebrows, given that Lufthansa owns AirPlus International.

RESOURCES 
BCD white paper on the cost and impact of adding merchant surcharges.