Lufthansa Argues Surcharge Does Not Violate Antitrust Laws

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Photo by Freeimages.com/Oden Jaeger

Following a letter from three U.S. Senators 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 airline group’s new Distribution Cost Charge (DCC), the airline group has released a statement arguing that the comments do not violate U.S. antitrust laws.

In a statement provided to tnooz, an official from Lufthansa Group (LHG) said that the remarks came as part of a panel with an industry moderator from CNN. 

“Humorous remarks were made by the moderator and general comments were made by the panelists and a known banter was exchanged among them,” the statement to tnooz read. 

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Additionally, the airline group told tnooz that the new charge was announced publicly one week prior to the International Air Transport Association (IATA) meeting, which took place June 8, 2015, and that the U.S. Department of Transportation had already reviewed the events at the meeting, concluding that no antitrust violation occurred. 

The Business Travel Coalition (BTC) and AirChannelChoice.travel, a coalition of travel groups formed to fight the surcharge, have released a joint statement supporting an antitrust investigation. 

“BTC and AirChannelChoice.travel members urge Secretary Foxx and Attorney General Lynch to investigate this matter thoroughly and to put LHG’s competitors on fresh notice that collusion is an illegal business practice,” the two organizations said in a written release. 

The IATA has criticized the call for an investigation, arguing the airline industry is highly competitive. 

“Globally, the average return fare (before surcharges and tax) of $366 in 2016 is forecast to be 62% lower than 21 years earlier, after adjusting for inflation,” the IATA said in a statement provided to tnooz. 

LHG announced the new charge back in June 2015 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.

In March 2015 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 denied that position, and asked a Texas judge to determine its contract rights.

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.

Keep visiting www.travelagentcentral.com for the latest air travel news, trends and updates. 

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