Lufthansa Accelerates Managed Travel 2.0

Lufthansa Group announced it will charge 16 Euros for each booking made in the GDS channel.

This is a seismic event for the corporate travel industry for these reasons:

• Channel steering becomes a differentiator for legacy carriers
• GDS/TMC  and GDS/airline economics will need re-shaping
• TMC/Corporate deals and service levels will need re-engineering
• The value proposition for TMCs gets murkier while their need for adding non-booking value becomes crucial
• Closing the data loop for corporate direct bookings becomes imperative

My best guess about the steady-state result?  Managed Travel 2.0 will be widely enabled, if not adopted.  (Kindly recall that MT 2.0 is not the same as Open Booking.  The former closes the data loop between supplier-direct bookings and the corporate buyer; the latter does not – that’s called unmanaged travel.)

But much depends over the next few years on the success of NDC-related initiatives, and Sabre’s ability to defend itself from similar demands from American, Delta and United.

Lufthansa Group has been under serious financial strain of late, so this move may be borne from backs-against-the-wall desperation.  Still, Amadeus and Sabre agreed, so there must be some compelling economics in play.  Compelling, as in no good choices to be made in the face of stark economic threats.

The other critical factor will be the reaction by corporate buyers over the next 12 months or so.  If buyers present a strong front against this initiative, Lufthansa will have no choice but to relent.

But should buyers strike against this move?  Consider the pros and cons:

One advantage to buyers is a 16 Euro cost avoidance per ticket.  In today’s procurement-focused world, that’s like getting a 5% discount, if you’re in the camp that counts cost avoidances.

Another advantage may be access to cheaper published fares than what may be found in the GDS channel.

The cons may offset those “savings”.  Buyers may well have to pay higher TMC fees to make up for any lost agent productivity, and buyers may have a harder time being sure that the Lufthansa fares are on par with, or are better than those from other airlines via the GDSs.

So the future may still be unclear, but what is clear is the crack in the GDS business foundation.

More coverage from Tnooz and The Company Dime and The Beat.

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