Business Travel Coalition: Travel Industry Rejects Lufthansa Group €16 Surcharge

AirChannelChoice.travel, a Business Travel Coalition (BTC) initiative, earlier this month sent a stern letter, including 10 pages of industry comments, to Lufthansa (LHG) Chairman and CEO Carsten Spohr, rejecting his organization’s Distribution Cost Charge (DCC) — a 16 euros surcharge for tickets purchased anywhere other than through LHG websites, service centers and airport ticket counters beginning on September 1.

The letter, signed by a group of 135 diverse travel buyers, consumer groups, industry associations, travel agencies and other stakeholders, with operations in some 155 countries, was shared with the LHG Supervisory Board and antitrust officials in Brussels, Bonn and Washington. (The letter and comments can be found here.)

“The clear message to LHG and regulators is that front-line industry participants forcefully reject LHG’s attempt to abuse its dominant market position in seeking to increase revenue, decrease comparison-shopping and diminish intra and inter distribution channel competition”, AirChannelChoice.travel said in an announcement.

AirChannelChoice.travel is urging travel professionals in each country to formally request that their antitrust authorities weigh in on their behalf with DG COMP, the Bundeskartellamt and the U.S. Department of Justice.

According to AirChannelChoice.travel, signatories communicated that the surcharge would not just shift the cost of distributing LHG products to consumers and the managed-travel community, but would also create substantial new costs within the industry.

As pointed out by AirChannelChoice.travel, other airlines are poised to follow the example of the Lufthansa Group.

“Consequently, the managed travel community may soon be forced to deal with hundreds of airlines’ one-off direct-connects undermining existing highly efficient corporate travel procurement processes by requiring new infrastructure and workaround procedures”, AirChannelChoice.travel underlined.

Critical question

BTC and AirChannelChoice founder Kevin Mitchell noted that in the marketplace for airline distribution services, airlines (direct channel) and travel agencies of all stripes (indirect channel) are direct competitors.

“By forcing the 16 euros surcharge on indirect channel participants, is LHG using its dominant market position in both the marketplaces for commercial air services and airline distribution services to drive up the costs of its travel agency competitors harming them and forcing many to exit the market? Antitrust enforcers need to examine this question”, Mr.  Mitchell said.

The Lufthansa Group announced in early June that a 16-euro surcharge will apply for all tickets booked via global distribution systems (GDSs) on Lufthansa, Brussels Airlines, Austrian Airlines and Swiss flights as from 1 September 2015.

According to Lufthansa, the new charge will not be added to flight tickets purchased using own booking channels. This predominately includes the airlines’ websites, as well as, the service center and ticket counter at the airports. Travel agencies will also be able to book tickets without the DCC, using the online portal at www.LHGroup-agent.com.

Founded in 1994, the mission of Business Travel Coalition is to interpret industry and government policies and practices and provide a platform so that the managed travel community can influence issues of strategic importance to their organizations. The mission of AirChannelChoice is to elevate the public-policy discourse regarding airline industry distribution issues and to promote travel distribution system choice for travel agencies and their customers.