GDSs welcome Lufthansa distribution competition – but it must play by the rules

The European Commission has a “duty” to intervene in the ongoing Lufthansa GDS surcharge saga, a complaint to the regulator has charged.

The European Travel & Technology Services Association, which represents the three main global distribution systems and a number of online travel agencies, claims the decision to introduce the Euro 16 fee on all bookings running through the GDSs is a breach of the European Union’s code of conduct on computerised reservation systems.

The organisation argues that it welcomes competition (saying it “is not a problem”) in distribution, including that from Lufthansa, but says “there are rules to follow to be in this business”.

ETTSA secretary-general Christoph Klenner adds:

“Those rules do not allow the sort of discrimination that Lufthansa is using to push its competitors out of the market.”

The Commission should “step up and intervene in the interest of continued transparency and consumer choice”, Klenner says.

At the heart of the complaint is the accusation that because travel agencies will be forced to switch from booking Lufthansa fares on the GDSs to the carrier’s own platform, they are essentially being taken “hostage” and therefore forced to spend their own money to do so.

As a result, ETTSA argues, agencies will be inhibited in their ability to shop for fares in a competitive and transparent environment.

Klenner adds:

“Ultimately, this will lead to a more restricted choice and increased prices for consumers who will become increasingly captive”.

The EU Code of Conduct for CRSs has long been considered out of date by some, given the changes in the airline distribution landscape over the past decade.

When it was most recently up for a review, during 2011, ETTSA member Travelport was one of the more vocal opponents of the status quo, arguing that a change was needed to reflect the addition of new entrants into the ecosystem and create a level playing field for all.

In 2007 the EC itself said it advocated more competition in airline distribution.

The ETTSA complaint about Lufthansa has been filed with the Directorate General of Mobility and Transport at the EC in Brussels.

The Guild of Travel Management Companies said this week that two-thirds of its members have declared they will not register for the Lufthansa direct booking service on the carrier’s website.

Only 6% claim they will use the direct platform if they asked to do so by clients.

Meanwhile, ETTSA has challenged a recently introduced law in France to scrap all contracts between hotels and online travel agencies.

Known as a the “Loi Macron”, ETTSA argues the net effect of the move is that hotels can “leverage the benefits from ‘free advertising’ on OTAs and broad access to global markets”, but they have “no obligations in return in terms of offers to consumers that hotels are free to undercut the prices they offer on any OTA”.

Klenner says:

“Any initiative by an EU Member State that undermines the very principles of the Single Market could harm intra-EU competition and the benefits to consumers of transparency, choice, and comparability brought to them by independent travel distributors.”

“The law Macron is not very clear and creates a lot of uncertainty to the point where market players do not know what they can or cannot do, at the risk of facing significant fines.

“In the end it is the consumers [that] lose out.”

The law has yet to be implemented in any other member state in the EU.

NB: Lufthansa website image via Shutterstock.

Share on FacebookTweet about this on TwitterShare on LinkedInEmail to someone
 
 
Kevin May

About the Writer :: Kevin May

Kevin May was a co-founder and member of the editorial team from September 2009 to June 2017.

 

Comments

Your email address will not be published. Required fields are marked *

  1. Timothy O'Neil-Dunne

    Let me pose a clear set of questions. If one buys a product from any particular vendor in a particular channel – do I have to expect to pay the same price for that product in all other channels? Does any channel (and player within that channel) have a right to demand automatically that the price must be the same in that channel as any other? Thus logically is it right that one player (other than an approved and correctly mandated regulator) has the ability to regulate how pricing is determined within a channel? I think Mr Klenner probably has a bit of a conflict on his hands. Some of his members would like to see special pricing open into the marketplace – others clearly not. However to claim that abrogating GDS Full Content Agreements is an automatic reason of higher consumer pricing is clearly false. Rather, I would posit that it is indeed the other way round. That restrictive pricing mechanisms such as Full Content Agreements actually not just raise prices but ensure that they stay higher than they need to be and reduce competition. Where I think much of this argumentation falls down is that not all players are paying the same price for the same service. IE if this is all so fair and wonderful why don’t the GDSs actually come out and show us their rates that they are charging in public. Then perhaps we can have a fair marketplace. Try and think of a use case. Let’s say that a non-European airline who has a partnership (no names please – this is theoretical) with a European airline and offers the same seat on the same plane at the same price. However if the GDS fee charged to the not so powerful non-European airline is say 2x or 3x that of its partner – is that fair? Fortunately we live in a (mostly) free market. Let the marketplace decide if LH Group is to be punished for this effort. It is high time that we clear away these restrictive covenants/agreements and that we have a truly open and competitive distribution marketplace. For sure that does not exist at present, and thus anyone who is trying to claim otherwise is not telling the truth.

    Just my personal opinion.

    Cheers

     
  2. Gregg

    What a mess the LH group is! Their monthly work stoppages were enough, now this GDS surcharge. This Corporate Travel Agent is tired of cleaning up their messes. Moving on to other airline suppliers and the consistent products they offer.

     
 
 

Newsletter Subscription

Please subscribe now to Tnooz’s FREE daily newsletter.

This lively package of news and information from Tnooz’s web site provides a convenient digest of what’s happening in technology that drives the global travel, tourism and hospitality market.

  • Cancel