Lufthansa adds surcharge for GDS bookings

Lufthansa plans to add a 16€ Distribution Channel Cost (DCC) surcharge to all flight bookings made through the GDS to offset the high commissions through those channels and to encourage direct bookings.

Lufthansa to add surcharge to every booking made via the GDS

Just like the hostel industry’s battle with ever-increasing OTA commissions, Lufthansa is fighting to reduce their distribution costs and to regain control of the sale of their own services.

Travel agents can avoid this surcharge by booking on a special agent portal directly on Lufthansa’s website instead of using the GDS.

Lufthansa will begin applying the surcharge on 01 September, 2015.

Lufthansa Group’s Chief Commercial Officer, Jens Bischof, explained the change in strategy. They are taking this route…

…to ensure, in future, a greater portion of revenue will be from flight operations; the actual area of service to the customer.

Until now, the percentage of revenue generated from the sale of flight tickets by our airlines has continuously decreased.

While other service and system partners in the value chain are recording increasing margins and returns, our airline’s earnings have been compromised over time, even though they are the actual providers of flight services.

That sounds pretty reasonable to me.

The major GDS companies and travel agents are, understandably, quite upset.

Sabre, in a strongly response issued today, says it is ready to “work with airlines globally that wish to sell and retail their products through Sabre” and the Lufthansa shift “disadvantages consumers and travel agencies”.

An official adds:

“The GDS is the most preferred and efficient channel for consumers and travel agents to shop, book and manage travel, and provides consumers with transparency, choice and the ability to comparison shop.

GDS companies and travel agents alike claim that Lufthansa is “penalizing customers” for booking through them.

Of course, this isn’t penalizing the customers though. It’s simply minimizing their own expenses. In fact, this action gives customers the freedom of choice. They can save money by booking on the airline’s own website or they can take the “convenient” route of having a travel agent make their arrangements and pay for that convenience.

If anything, this surcharge helps to underline the value of the travel agent. They piece together flights from multiple airlines and combine them with hotel bookings in order to make one complete travel package for which they take responsibility from the beginning until the end of the trip. Customers who choose to pay for this service will understand that they pay for this service.

If there is one extra step for the travel agent to save their customers 16€, then by taking that step they have earned their money and given their customer a good reason to work with them again. Or perhaps the agent will take the extra step and then keep the 16€ that the customer would have paid as part of their own commission. That choice is up to the agent to make.

This whole situation is very similar to the conflict between the hostel industry and OTAs, where the cost of distribution is already high and rising. Many hostels have taken a similar approach by including the commissions in the price that we sell through the OTAs in order to recover those costs and to encourage travelers to book directly with us.

What do you think? Is it a good decision for Lufthansa to implement the DCC surcharge?