The €16 distribution cost charge that Lufthansa will impose on all
tickets not purchased via a direct Lufthansa Group website will take effect in
the United States—and in most other countries—on Sept. 1. In preparation for
that change, the Association of Corporate Travel Executives in a Friday webinar
hosted Lufthansa Group director of marketing, distribution and sales programs
for the Americas Larry Ryan to review operational implications for travel
managers and agencies.
While there has been no substantive change to the
Lufthansa’s DCC strategy as the carrier moved through the implementation
process, Ryan outlined a handful of technical changes that have occurred since
Lufthansa's original DCC announcement.
First, the DCC originally was envisioned as an OB fee to increase its
transparency as an add-on cost to the base fare. Due to one provider that was
unable to implement the fee as an OB, Lufthansa temporarily has defaulted to a
YR-type fee, which in practical terms means that the DCC will be “lumped into”
the base fare and neither broken out as a separate charge within the booking
environment nor appear as a separate fee on a credit card bill. It will,
however, be part of the line-item breakdown on the flight coupon itself, along
with other government taxes, fuel surcharges and the like. When the outlying
provider is able to accommodate the OB fee, Lufthansa plans to revert to that
fee type.
Second, the fee types—and the change in fee type—have had regulatory
impact in certain countries. “The normal procedure would be to make a filing
application to [travel] authorities, and they make a determination about
whether they feel the fee is permissible,” said Ryan. “When filed as an OB, we
had certain countries that objected [to the fee in terms of applying it] to
travel originating in those countries.” That list: China, Hong Kong, Iran and
Libya. With the change to the YR code, additional objectors emerged: Brazil and
New Zealand.
The DCC will not be imposed in these countries, at least not on travel
that originates in these markets, said Ryan. That does not translate, however,
to all travel sold in these markets. Tickets sold in Brazil, China, Hong Kong,
Iran, Libya and New Zealand for travel that originates outside those markets still
will be subject to the DCC.
Dodging The DCC
As Lufthansa alluded when the carrier announced the DCC in June,
booking through codeshare partners may offer some fee relief. On Lufthansa
flights that are marketed and sold through joint venture partners United or Air
Canada the DCC will not apply.
Ryan warned this this alternative was not a catch-all solution, stating
that certain products, like Premium Economy Seating, and certain services, like
special meals or transporting pets, might not be offered via the codeshare
partner. He admitted, however, that for business travelers working within
policy controls that either allow or forbid business class, these types of
product and service nuances might not be substantive enough to matter.
Furthermore, “The ticketing experts within our TMC partners are fully
aware of those [nuances] and should be able to determine whether those would be
an issue for [their customers],” said Ryan, who added that the same basic
scenario would apply to codeshare partners within Europe, but he declined to go
into detail, citing the complexity and number of those relationships.
No Refunds. End Of Story
If travelers cannot avoid the DCC though codeshare channels, the €16
fee is never coming back to them. While Ryan was peppered with what-if
scenarios by the audience, his response was the same: Once the ticket is
purchased and reported in ARC, that fee is lost. If the ticket is changed,
exchanged, reissued—that money is not coming back.
“The GDS fee is generated at the time the ticket issued. [After that,]
there is no refund or reconciliation of the applicable GDS fee paid at the time
the ticket was issued,” said Ryan. “The GDS fee is money that has been paid out
and will not be refunded to anyone. … It always has been nonrefundable to [Lufthansa].
Asked about TMCs that use automated refund tools that might not
recognize the YR fee as nonrefundable—lumped in, as it will be, with other fees
in the base fare—Ryan responded that “it could require some manual
intervention.” That spells more time and money for TMCs.
DCC Is €16 But Will Fluctuate In
Local Markets
For major markets, Lufthansa has filed the DCC fees in local
currencies: U.S. dollars (USD), Canadian dollars (CAD), Swiss francs (CHF),
euros (EUR), British pounds (GBP) and Japanese yen (JPY). For those markets the
DCC has been locked in last week's exchange rate; in U.S. dollars, it will
total $17.50. In other markets, the exchange rate on the date the ticket is
purchased will determine the amount of the DCC.