Travelport, Air Berlin Renew Partnership As Preferred Fares Ire Provides Opportunity

German low-fare carrier Air Berlin and global distribution system provider Travelport announced the renewal of their full-content distribution agreement earlier this week. A couple of years ago, this would have been of little interest to corporate travel buyers because Air Berlin was predominantly a leisure airline and Travelport had minuscule marketshare in Germany. However, the situation has since changed significantly, with both parties picking up corporate business. Air Berlin head of corporate sales Susanne Hoehenberger said her airline has increased its corporate contracts from 493 in 2007 to 900 today, while Travelport, although still small, claims its marketshare has broken into double digits for the first time.

In large part, both parties can attribute this success to adverse reaction to Lufthansa's Preferred Fares Programme for the German marketplace, which effectively causes travel management companies to impose a surcharge of €4.90 per sector every time they book the country's flag carrier through Amadeus, the dominant GDS in Germany. "Because of the PFP, a lot of travel managers have made deals with Air Berlin," one German travel industry insider told EuroBTN. "They are looking for chances to switch to Air Berlin wherever possible."

A travel manager for a major German company that has a corporate contract with Air Berlin confirmed that some travel managers are looking for short-haul alternatives to Lufthansa because of the PFP. However, he added that Air Berlin also is gaining business on account of its own strengths. "We are using Air Berlin more in many markets," said the travel manager. "It has extremely attractive prices and is providing genuine competition for Lufthansa."

Air Berlin operates one-class service, but although its fares are low, it offers some extras for both travel managers and travelers. For travel managers, it has International Air Transport Association membership and full content distribution through all the major GDSs, making it easy to book and collect data. "This has benefited us in the recession," said U.K. country manager Titus Johnson. "Visibility through the GDSs means we are gaining from companies which have set lowest logical fare policies."

For the traveler, benefits include complimentary newspapers, drinks and luggage checkin for up to 20 kg. Air Berlin also seems to have gained from reaching out to business travelers, who accounted for €610 million of business in 2008. Yield in June was up from the same month last year by 14 percent, thanks to business travelers buying more expensive fares—many of them through corporate deals—than leisure travelers.

Air Berlin serves several cities in Germany, including its hubs in Berlin and Düsseldorf, and other business destinations throughout Europe. Its biggest challenge is severely restricted access to Germany's largest airport, Frankfurt, which it only serves three to four times daily from Berlin. However, the airline will expand its network considerably if it completes a deal, currently awaiting clearance by competition authorities, to buy the city routes of another German low-cost carrier, TUIfly.

"If this deal goes through, it will bring Air Berlin a lot closer to Lufthansa and put it in a strong position," said the industry source.

Meanwhile, rivals of Amadeus believe that the PFP row offers their best chance yet to break Amadeus' stranglehold in Germany. Last month, Otto Schweisgut, a member of the recently formed business travel committee of German travel agents' association DRV, advised all German-based travel management companies to sign up with multiple GDSs instead of relying solely on Amadeus for distribution. Schweisgut runs a Munich-based branch of the TMC franchise Lufthansa City Center, which announced a distribution deal with Sabre in April. Travelport president and managing director for Europe and Brazil Olaf Gueldner said that his company also is in talks with Lufthansa City Center.

"There is a lot of sentiment in the German market that it is good for Amadeus to have serious competition," said Gueldner. "This used to be an Amadeus stronghold that we thought we would never get into. It's like the Trojan horse—we now have something inside the castle, and there is significantly more interest, with Air Berlin growing as well. On both the airline and GDS side, there is much more choice."