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Senators Urge DOT Investigation of Lufthansa Group SurchargeJune 8, 2016 By: Adam Leposa
Three U.S. Senators are urging further investigation of Lufthansa Group’s (LHG) Distribution Cost Charge (DCC) on bookings outside of its direct channels.
Sens. Mike Lee (R-UT), Amy Klobuchar (D-MN), and Richard Blumenthal (D-CT) have sent a letter urging Transportation Department Secretary Foxx and Attorney General Loretta Lynch to investigate the potential anti-competitive implications of comments made by Lufthansa CEO Carsten Spohr on the policy.
“On June 8, 2015, at a panel of the IATA conference with more than 100 executives from competing airlines in the audience, Mr. Spohr announced that Lufthansa was planning to impose an $18 surcharge on price comparison websites,” the letter reads, according to a statement on Sen. Lee’s website. Later questioned about other airline reactions to his statement, Spohr said, “It's a first step and I believe others will follow,” according to the letter.
The letter argues the airline group’s conduct “raises the question of whether they have run afoul of the Sherman Act.” The three Senators are calling for a DOT and DOJ investigation of the matter. Lee and Klobuchar are the chairman and ranking member, respectively, of the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights.
The move is not the first legal challenge the surcharge has faced since its inception. In March LHG sued Sabre over whether or not the airline group is in breach of its contracts over the policy, which applies an extra charge to bookings outside of its direct channels, such as through GDSs like Sabre, Amadeus and Travelport. Sabre 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 asked a Texas judge to determine its contract rights.
The airline group announced the new charge back in June as part of an overall strategy shift by LHG 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.
According to a study by the Global Business Travel Association (GBTA) released last October, 42 percent of travel buyers surveyed have decreased bookings with Lufthansa since since the surcharge went into effect September 1, 2015. Additionally, 93 percent of those surveyed are currently not considering the option to book directly on Lufthansa’s site and 39 percent are seeking alternative carriers. 2 percent of travel buyers surveyed said that they would book directly with Lufthansa to avoid the €16 fee.
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