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Lufthansa Sues Sabre Over GDS SurchargeMarch 15, 2016 By: Adam Leposa
Lufthansa Group (LHG) is suing Sabre over whether or not the airline group is in breach of its contracts over the EUR 16 Distribution Cost Charge (DCC) on bookings outside of its direct channels, such as through GDSs like Sabre, Amadeus and Travelport, tnooz reports. Sabre has argued that because two of LHG's distribution channels -- its direct connection and its agent.com Internet portal -- are operated by technology providers Farelogix and Travelfusion, they effectively act as GDSs and should also be subject to the surcharge. LHG denies that position, and has asked a Texas judge to determine its contract rights.
Lufthansa announced the new "Distribution Cost Charge" (DCC) of EUR 16 back in June of last year as part of an overall strategy shift by the Lufthansa Group airlines -- Lufthansa, Austrian Airlines, Brussels Airlines and Swiss International Air Lines (SWISS) -- that focuses on earning a greater portion of revenue from flight operations, as opposed to ticket sales. Presently, the costs for using GDS are several times higher than for other booking methods, such as Lufthansa's online portal, LHG said in a statement announcing the decision.
The move drew wide criticism from travel agents and travel industry groups.
At the time of LHG's announcement Brian R. Chapin, senior director air and travel solutions at Ensemble Travel Group, said, "We are disappointed by the direction that Lufthansa is heading since we think this direction is very counter-productive to the overall agent-airline relationship. With a fee assessed for booking via the GDS, agents wishing to avoid the fee will be forced to use an alternate booking source. This is a disruption to the overall agent workflow and partnership that agents have with airlines."
"Their move effectively places them at a competitive disadvantage on airfare pricing," Barry Liben, who was then CEO of Travel Leaders Group, said at the time. "Simply put, consumers who comparatively shop on price will pay more to fly on Lufthansa. For the vast majority of our clients, the economics will dictate that we book them either on other carriers that serve those routes or through codeshare partners."
Later studies by the Global Business Travel Association (GBTA) did show a decrease in bookings on LHG airlines from corporate travel buyers after the surcharge was implemented. The most recent study, conducted between October 14 and 19, 2015, showed a 42 percent decrease in bookings since the surcharge began that September. Additionally, 93 percent of those surveyed said they were not considering the option to book directly on Lufthansa’s site and 39 percent were seeking alternative carriers. 2 percent of travel buyers surveyed said that they would book directly with Lufthansa to avoid the €16 fee.
Keep visiting www.travelagentcentral.com for further updates to this developing story.