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The Business Travel Coalition in April will co-host a "customer hearing" with the German Business Travel Association (VDR) regarding the Lufthansa Preferred Fares Program"and the future of airline distribution in Europe." The event is designed to "provide customers and other stakeholders with an opportunity to hear Lufthansa's justification for PFP, and for Lufthansa to hear firsthand the concerns of its most important customers and distribution partners," according to BTC.
Plans for the summit come a time of stalemate in the European global distribution system market, where the largest travel management company in Germany--BCD Travel--is out of options and hoping the current negotiations between Sabre Travel Network and Lufthansa can spark change. At the moment, the dominant GDS, Amadeus, and the dominant airline, Lufthansa, have no "full content" deal--meaning the airline is paying the full price for segments booked in Amadeus and levying on Austrian and German bookers a hefty €4.90 per-segment fee for "preferred fares" that are available through direct channels without the fee. Distributors not participating in the program can access non-"preferred" fares at €15 higher in Austria and Germany. Fees and higher fares for nonparticipants also apply to bookings on flights originating in Switzerland and on Swiss International Airlines.
Lufthansa and Swiss announced the program early last year, and it took effect last summer. Since then, Amadeus "tried to limit the impact" by reimbursing travel agencies in those markets for the surcharges. "Reimbursement was always intended to be a temporary, interim measure to protect our customers as discussions continued with Lufthansa," according to Amadeus. "When announced, this measure was intended to apply until 31 December 2008. However, we later announced we would extend the program in Germany and Austria until 31 January 2009 and until 31 March 2009 in Switzerland. That remains our current intention. Amadeus continues to exert every effort to achieve a long-term solution with Lufthansa, and we are confident that one can be found. We will update our agency customers and the marketplace at the earliest opportunity of any major developments in this situation."
"Earlier this year, a court in Hamburg ruled against Amadeus' request to ban our PFP," according to a Lufthansa statement published by Travel Agent. "More recently, the International Trade Court in Paris also ruled in Lufthansa's favor in this matter."
According to BTC chairman Kevin Mitchell, the BTC-VDR meeting will produce a "referendum" to be sent to regulatory and competition authorities in the United States and European Union, as well as to airlines. BTC in December had sent to Lufthansa a letter--signed by nearly 150 corporations, travel management companies and associations--opposing the program.
BCD Travel wasn't a signatory, but it has more at stake than almost anyone. According to senior vice president for global supplier relations Rose Stratford, the company is "very impacted" by Amadeus' decision to stop absorbing the fee. "As of 1 February in Germany, we had to start passing the fee back to customers. We'll have to start in Switzerland beginning 1 April." She said clients are concerned not only with the price increase, but also the administrative headache. "It's difficult to manage because the process is based on Lufthansa sending out agency debit memos, which we have to reconcile. And if a customer refunds their ticket, then we need to refund the fees associated with it. From an administrative perspective, it's a lot more work than, say, the GDS opt-in, in place in the United States.
"In some cases, we have customers who have asked us not to offer them Preferred Fares just because of the complexity tied to it," continued Stratford. "We're having to recover some of our administrative costs."
Eyes On Lufthansa-Sabre
While converting to another GDS is no easy task, since agents tend to be familiar with only the cryptic commandsthat are proprietary to the GDS on which they trained, Stratford noted that the costly fees make Sabre and Travelport a more attractive alternative than they once were in markets dominated by Amadeus. There are no other means of connectivity to Lufthansa, Stratford noted. As the provider of Lufthansa's core reservations system, it is Amadeus that would have to help the airline build an alternative pipe, such as the connections between airlines and the Orbitz site or between hoteliers and Expedia.
As a result, Stratford said, "We think a lot will depend on what happens with Sabre. Travelport agreed several months ago with Lufthansa, but Sabre is still pending and it has a bit more market share in Germany than Travelport, so they may have some impact on what happens in the market. We're still unsure of what that ends up looking like, but we're hoping that's a next step that paves the way and Amadeus at that point will have to make a decision: Do they continue to hold strong on what they have offered Lufthansa, or do they go with the same model?"
As Sabre's current deal with Lufthansaexpires in June, the GDS is "not a long-term option until we know what they agree upon beyond June," said Stratford.
Sabre Travel Network senior vice president for Europe, the Middle East and Africa Martin Cowley on 6 February told The Transnational, "We're engaged with Lufthansa on where we go from here. Both sides would say they are good conversations, but we continue to talk. Right now, we're focused on getting the best possible result with Lufthansa for both of us."
Regarding the potential precedent set by the airlines' added fees, Cowley said, "This is almost old news, isn't it? We maintain a fairly conventional view of all this--that any kind of fragmentation is a bad thing, and the surcharge model is not a model we like or that we feel is the right model for the industry. That's kind of our advocacy position, but at the same time we try to accommodate our customers and delivering full content to them is our principal obligation and commitment to them. There's no set path for any of this, so I don't think we have changed much in our view. It's sad to say the surcharge issue has incited or caused people to consider alternatives [to Amadeus], and we're anxious to be out there as a leading alternative. We've had excellent conversations with a number of parties around us being an alternative."
Asked this week whether Travelport has enjoyed increased business amid the Amadeus-Lufthansa dispute, president and CEO Jeff Clarke said, "Indeed we have."
Nevertheless, Sabre one week later announced a distribution deal with easyJet that "is consistent with those made with other GDSs," implying the inclusion of that airline's point-of-sale surcharges for GDS users. "A technical solution is underway," Sabre said. "Details of this and timings will be communicated once they are finalized." After reducing its initial fees, easyJet charges €4 per segment for GDS bookings.
Meanwhile, the European Parliament and European Council recently finalized 29 March as the effective date for the new Computerized Reservations System Code of Conduct, which liberalizes some aspects of the relationships between airlines and GDS providers.
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