“Frustration and resignation” are the prevailing sentiments expressed by business travel managers three weeks after Lufthansa’s announcement to peg a €16 fee to GDS bookings, according to Greeley Koch, Executive Director for the Association of Corporate Travel Executives. Koch’s findings are based on responses to an association inquiry, and to verbal statements presented to him at recent ACTE forums in Beijing and Boston, also attended by representatives from travel management companies and other suppliers.
“The initial response to the Lufthansa announcement was disbelief and shock, particularly over the abruptness of the announcement,” said Koch. “It is apparent, especially from the findings of the travel management roundtables of our recent Boston forum, that travel managers regard distribution costs as the price of a carrier doing business with a corporate client and providing a desired channel for that business.”
Koch added that while most regard the €16 fee as a fare increase, two of the biggest travel manager concerns are that other carriers will adopt this stance, and that every future cost will be passed onto corporate clients as a surcharge. “The question was asked, ‘will future labor increases also appear as a surcharge or extra fee,’” he said.
While the €16 fee may have been the flashpoint for some, many stated Lufthansa’s direct channel restricted comparison shopping, raised duty of care issues through traveler tracking, and precluded some online booking tools. Questions as to how the fee will come up in a fare search and how it appears in the final calculation still remain.
Travel managers are concerned that other carriers will adopt a similar policy. “One of our members pointed out that the GDS fees on a Lufthansa spend spanning millions will come to about $600,000 (USD). Multiply that by 9 or ten airlines, and sooner or later, you’re talking about reduced travel in a fiscal year,” said Koch. “There is just so much a corporate travel budget can absorb.”
Considering that airlines have been attempting to reduce or shift distribution costs for the past ten years, Koch thinks that no one should have been surprised by Lufthansa’s action. “This is only the first move the industry has seen regarding distribution costs. It is the opening move that will either be matched or canceled. It could also initiate industry-wide discussion.” Koch is betting on a new round of industry discussion and is positioning ACTE for a role in its resolution. He is scheduled to present ACTE’s findings to Lufthansa next week.