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10 months ago
 

Lufthansa takes GDS booking tumble with new surcharge, rival carriers benefit

German carrier Lufthansa is beginning to see the impact of its decision to impose a levy on all bookings made through Global Distribution Systems.

A highly confidential document obtained by Tnooz from a third party, which is supposed to be circulated only for the eyes of senior figures at Sabre Travel Network, includes a wide selection of booking data covering the weeks since the carrier introduced its controversial Euro 16 fee on all GDS bookings on September 1.

The top-line summary outlined in the document (titled “Lufthansa Group Bookings Report – September Week 2 – Sept 8-Sept 14 2015”) includes the following:

  • Lufthansa Group bookings in Europe via the GDS (Sabre, Travelport and Amadeus) in the first two weeks of September are down 16.1% versus a flat year-to-date up to August. The main beneficiaries of this change are Air France, British Airways, SAS, Alitalia and United – “all are experiencing significantly higher bookings growth than YTD”.
  • In segments where Lufthansa has a market of 30%-60%, share drops of up to 30% were experienced in the first week of September. Competitor carriers British Airways, Air Berlin and Air France are stated as gaining from the declines.
  • Sabre’s billable bookings for the Lufthansa Group are down 15.6% in the first two weeks of September compared 10.7% growth in the year-to-date to August. Sabre has adjusted this figure to 11.5% to account for the US Labor Day break.

There is no data or analysis provided to suggest if Sabre (or other)-connected agencies are using the “direct-connect” platform created by Lufthansa to make bookings that then bypass the surcharge.

The table below outlines total European GDS bookings on leading legacy carriers for the year-to-date and first two weeks of September.

sabre1

The document also outlines the impact on agency bookings, with the vast majority of Sabre’s top 25 intermediary customers seeing declines on volumes in the first two weeks of September.

Sabre’s biggest OTA customer [whose name Tnooz is leaving anonymous] had 680,000 segments booked on Lufthansa in the year-to-date. March was its biggest month of 2015 with 99,500 bookings, but the first two weeks of September have seen just 12,600 bookings made (down 55% Y/Y).

Two well-known corporate travel agencies [whose names we’re redacting] appear to be absorbing the Euro 16 far easier than their leisure counterparts with booking volumes up 34% and down 5% year-on-year for the first two weeks of September.

The document also discloses a number of routes that it believes have experienced changes in booking volumes, in particular on the competitive Frankfurt-NYC leg.

sabre2

On a country-by-country basis, Lufthansa GDS booking volumes Y/Y on Sabre in the first two weeks of September have fallen dramatically from agencies in Greece (33.8%), Sweden (47.1%) and Switzerland (41.6%).

Lufthansa’s domestic Sabre agency customers have seen volumes drop by 19.9% over the same period, with Sabre’s biggest agency base of the US falling by 24.8%.

Overall, Sabre is forecasting a 11% year-on-year decline in its Lufthansa bookings for the rest of 2015.

Travelport and Amadeus both declined to comment on the figures.

Lufthansa and Sabre were invited to respond to the figures but have yet to reply to our requests.

NB: Lufthansa image via Shutterstock.

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Kevin May

About the Writer :: Kevin May

Kevin May is a senior editor and one of the co-founders at Tnooz. He was previously editor of UK-based magazine Travolution and web editor of Media Week UK from 2003 to 2005.

He has worked in regional newspapers (Essex Enquirer) and started his career in journalism at the Police Gazette at New Scotland Yard in London. He has a degree in criminology, a postgraduate diploma in magazine journalism and will be publishing his first book - a biography about electronic band, Depeche Mode - soon.

 

Comments

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  1. David Friderici

    I am wondering, what the discussion would be, if LH would not have introduced the 16 EUR and instead would put different content into both channels. When I mention content, I am not necessarily referring to the fares, I am talking about dynamically bundled content that simply doesn’t fit into the traditional channels. Apart from the fact that I am convinced that this will happen, I am also convinced that our discussion here would have a completely different taste.

     
  2. Devinder Ohri

    No surprises with the outcome thus far? Eventually even the largest & most powerful must succumb to the will of free & choice-driven market forces & the folly of having made a mistake. The sooner a bad choice is accepted & rectified, the less costly & painful the consequences. Recognizing that everyone in the value chain has a role to play & be fairly compensated for it, is only in the natural order of sustainable commercial transactions. Conversely, the arrogance of disregarding the above will elicit a largely unnecessary & avoidable price! Interestingly, the timely exposure of the VW folly of tampering with fuel emission test results reminds us that trying to “keep a lid” on a bad decision only serves to delay & exponentially escalate the costs of doing so.

     
  3. Kevin Trill

    The GTMC in the UK has advised 67% of members of the UK’s top TMCs have declared they won’t register while a further 27% have registered but say it is purely to look at the capability of the agency portal, not to use it for bookings. LH bookings will be down for UK TMC’s irrespective of the channel, I don’t have a % though.

    With respect to the comment about ability to book direct misses an important point, the fact it is possible does not equate to practical nor efficient for an agency. Whilst you could argue this is an agency problem / GDS problem which I empathise with does not take away the fact it is there are many complex workflows but up over many years that outside of the agency community there is little understanding of. For those that argue the world is or has changed this may well and maybe it is time for agencies to look to alternatives but this does not happen overnight nor at zero cost.

    Agencies need to deal with “today” which is a fragmented but neverthless GDS dominated landscape and whilst this has been changing for many years it ebbs and flows from carriers coming out the GDS to returning to content being removed to returning.

    For agents, a low margin business, there is not the money to speculatively invest in alternative technologies whilst there is significant doubt about the direction the technology should take.

    On one hand I applaud LH for taking a stand but on the other appalled about the lack of thought and implementation. I am sure LH expected a drop in bookings, the question is is, for how many, for how long?

     
    • Paul Byrne

      So 94% of UK TMCs are not booking through the LHG portal? Assuming they are not using the GDS and passing on the increased booking fee to their clients either, I would think this represents a significant drop in LHG booking revenue.

       
      • Kevin Trill

        Exactly, the other 6% have reported they will only book direct on the LH portal if requested to do so by a customer. This can be read a few ways but even if all of the 6% did all of their bookings direct unless they are the mega TMC’s its still a very small number.

         
  4. Tracey Shaw

    This story is not really complete without any insight into the direct channel numbers. The comment that rival carriers benefit is not really accurate either, as the numbers only reflects GDS bookings and not direct channel bookings.

     
  5. Paul Byrne

    Is it a major surprise that a Sabre ‘secret’ document backing the GDS position and counter the LHG actions made it’s way into the public domain?

     
    • David Friderici

      @Paul, still searching for the like button.

       
    • Kevin May

      Kevin May

      @paul – let’s just say there was a lot of shock in every quarter yesterday when we revealed we had the document… But yes, a perfectly valid point to make.

       
      • Kevin Trill

        Given that BA indicated lets say interest in maybe undertaking a similar model next year I am sure they will very interested in the anslysis of this report. Of course they will have thier own stats to work from and in time IATA PAXis reports will be available to a whole host of airlines and some agents with limited access to delve into what real impact this has had.

         
  6. David Friderici

    Correct me if I am wrong, but wasn’t the drop of bookings through GDSs the actual intention?

     
    • Kevin May

      Kevin May

      @david – but at the apparent expense of fuelling a rise in bookings on other carriers?

       
      • David Friderici

        @Kevin, certainly true, however 2 things:
        1. As long as we do not have any exact numbers of their direct channel it is hard to proof anything.
        2. I do not think that anyone doubted (including LH) that they would have a drop. I think the question is how high is this drop and this is something that we do not know.

        I was surprised, when I heard how many tech vendors have solutions ready to connect directly and integrate that content in to their agency or aggregation platforms. There is indeed a significant amount of vendors.

         
  7. Martin Cowley

    You reap what you sow. A major own goal for the Mannschaft!!

     
  8. Glenn Wallace

    One wonders what the revenue impact of such a drop is (most likely similar drops across other GDSs)…… I am sure LH will claim that the recapture via direct is going well and this is all in line with their plan.

     
  9. James

    Not sure what I am missing here.
    Firstly by LH’s action, GDS bookings were expected to be down. The really telling story would be the commensurate increases in direct bookings, or not.
    However from the O&D table you are showing above, you really need to show the equivalent for last year.
    Comparing Aug growth through to Sep shows an increase anyway. If that is what you expected to show?
    Interesting all the same and no doubt, more to come from the anonymous sources!

     
    • BB

      The indirect bookings of other airlines are growing, so LH must be loosing here some higher yield customers to competition.

       
 
 

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