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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I’m afraid I have to disagree with you on a couple of points.
“One advantage to buyers is a16 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.”
That’s only true if the fee stands. Remember when AA decided that we all needed to book everything on their website? There’s no guarantee that this fee will be around in a few months.
“Another advantage may be access to cheaper published fares than what may be found in the GDS channel.”
This is an issue that we contend with all the time. We constantly see fares offered by carriers like Southwest where an online fare is different than what’s offered by the carrier’s website. This doesn’t change the existing dynamic at all. More than anything else, it’s annoying.
Honestly, from our point of view, we’ll just pay the fee on trips where we have no option, and move market away from Lufthansa where we can. There are a lot of other options out there and LH is not indispensable for us.
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This is an indicator of an unstoppable Uber like disruptive tsunami that will swamp the establishment business travel ecosystem of GDS, TMCs, Corporate Travel Managers and the corporate transaction platform providers.
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