On Monday (27 July) Concur revealed that it had partnered with Lufthansa so that its TripLink customers would be able to book Lufthansa without incurring the € 16 DCC levy. (It also shows United, Etihad, Avis and Marriott on its list of other suppliers who will do the same soon). For its part Lufthansa announced a new fare structure for European flights which industry aficionados might recognise as the Germanwings model.
Lufthansa's announcement on 2 June that it was going to introduce a DCC (Distribution Cost Charge) of €16 to all bookings made through a GDS has caused no end of opprobrium in corporate travel management circles. However, we were all expecting one of the technology tools to announce a way for corporate customers to maintain easy and lower cost access to Lufthansa so the Concur announcement was not unexpected. As part of the announcement, Lufthansa Group chief commercial officer Jens Bischoff said the group was in the process of developing a new booking method to enable sales partners to connect to their IT systems directly based on the new IATA data standard NDC (New Distribution Capability). It is currently being tested at Swiss and should begin at Lufthansa this year.
It is Ryanair CEO Michael O'Leary's words, however — timed to coincide with the carrier's Q1 results showing profits up 25% — which tell us where the true battle lines might be. O'Leary says Ryanair plans to display competitor's fares alongside its own and has allegedly contacted Air France KLM, Lufthansa, BA, Iberia and easyJet to suggest that they do as well. In other words, he has clearly pointed out that airlines' real enemies are online travel agents and content aggregrators, ie third party sites. And it's not just an airline issue — hoteliers literally foam at the mouth when they talk about their profit margins in relation to those of Expedia and Booking.com.
Content aggregators and online travel agents rely on site traffic. High web traffic volumes mean massive advertising revenues. However, as a fair number of visitors to OTAs also then book at the same time, it also means lower yields for the airlines.
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Airlines want control, but see the benefit in other channels too ©keport/iStockSo what's stopping O'Leary's plan? Well, although businesses are happy to parade their wares alongside competitors in what are perceived to be neutral environments, they don't normally promote competitors within their own domains.
O'Leary can say this in the confidence that his airline will always look attractive in any context in which price is the key differentiator. The others don't enjoy this competitive advantage and differences in quality may not be so apparent.
It is not completely new ground for Ryanair, however. For many years, the airline ran Google AdSense ads on its site which frequently showed links to other airline and OTA sites.
But things are a'changing. This week also saw Travelport announcing that Lufthansa had signed up to its Rich Content and Branding Solution, ie its platform which allows carriers to display their products more fully including ancillaries and thus enable those ancillaries to be sold. This shows that although it is dissatisfied with the cost of the GDS channel, it still wants to encourage bookings that way.
So O'Leary wants to be partners with traditional airlines and Lufthansa is joining forces with a GDS to promote its wares.
Sometimes business relationships aren't as obvious as you might think.