Business down 10% in two months
Amadeus faces a potentially catastrophic loss in Germany over the controversial Lufthansa Preferred Fares Programme (PFP).
The GDS and travel IT company said it has lost 10% of flight bookings since the end of January.
Holger Taubmann, the company's general manager in Germany, told ABTN today (April 3) that if this trend continued, Amadeus share of the German market would drop from 83% in January to 20% in 12 months.
Such a loss would not make the company a viable business model in Germany.
He said the 10% loss had already pushed its share down from 83% to 73%.
Speaking of the possible drop to 20%, he said: "That would be what happens if we remain as we are today. That is why we are doing our utmost to find a solution which is a viable economic business model for the future."
But Mr Taubmann said that while he did not see the end of the road in terms of talking to Lufthansa, he stressed that "we are talking, not negotiating."
The losses began in February when Amadeus stopped re-imbursing its agents in Germany and Austria the €4.90 surcharge imposed by Lufthansa and SWISS for bookings for certain fares made through the GDS.
Mr Taubmann was earlier a "witness" in a customer hearing into the controversial PFP organised by the Business Travel Coalition (BTC) at the spring conference of the VDR, the German business travel managers' association, in Cologne.
Lufthansa and Air Berlin, Germany's second biggest carrier, were both invited to take part in the hearing but declined.
In his presentation, Mr Taubmann said he felt Amadeus had been "singled out" by Lufthansa which had signed deals with rival GDSs, Galileo, Worldspan and Sabre which exempted their agents from the surcharges.
He said the airline was demanding that Amadeus received "zero commissions" for providing airline content which pushed €90m costs onto Amadeus' agents in Germany, Austria and Switzerland.
Mr Taubmann said that this amounted to Amadeus agents in the three countries paying 50% of Lufthansa's global distribution costs.
He accused the airline of making the three countries "hostages" in its drive to cut its distribution costs.
"It has changed us (Amadeus) from a valued provider to a problem," Mr Taubmann said.
Despite many months of talks, Amadeus and Lufthansa, which has an 11.5% stake in the GDS, failed to reach an agreement.
He said that at the moment it was"absolutely impossible for us to find a solution" and that this situation was threatening the company's position.
Dirk Gerdom, global travel manager for SAP and the newly elected president of the VDR, said in his witness statement that the PFP was undermining the current, highly efficient process which had been established for many years."
"It is adding lots of unnecessary complexity, making administration unnecessarily complicated and damaging the process," he said.
Mr Gerdom said that travel managers were now having to analyse between PFP fares and non-PFP fares to see which was cheaper and this was adding to their costs.
"So we are faced with going through a highly inefficient process or paying higher fares. Everyone wants to reduce their costs but this programme is not acceptable,"he said.
He said the PFP had also "directly intervened" in the relationship between TMCs and corporates.
Mr Gerdom also criticised Lufthansa for imposing the scheme unilaterally without consultations with other parties.
Kevin Mitchell, chairman of the BTC, said the PFP was "nothing more than an anti-consumer, unilaterally dictated attempt to increase prices and undermine our preferred distribution practices."
It was better termed the Abusive Fares Programme and warned that other airlines would follow Lufthansa's example.
He said the scheme showed that Lufthansa planned to "re-engineer the managed business travel model" and it was not going to consult the buyers.
He described the approach as a "insulting slap in the face."
He called on travel organisations like the VDR, the UK and Ireland Institute of Travel and Meetings and "individual and courageous" travel managers to say "No" to the PFP.
One travel manager in the audience said she was "mad" at Lufthansa for not attending the hearing and for "abusing the market place."
She and other travel managers said they feared that credit card charges would be next on the airline's list.
Lufthansa was trying to change the model from business to business to business to travellers which would weaken the role of travel managers.
www.lufthansa.com www.amadeus.com www.businesstravelcoalition.com www.vdr-service.de