IT IS 17 MONTHS SINCE LUFTHANSA GROUP CONTROVERSIALLY ANNOUNCED it would create new channels to sell seats to corporate clients, travel agents and booking tools while levying a €16 Distribution Cost Charge (DCC) on those continuing to book via global distribution systems (GDSs).
What has happened since? Well, to date, the sky has not fallen in. There have been claims of around a 10 per cent drop in indirect bookings, and its (no longer discounted) GDS fees have risen, but Lufthansa says these hits have been compensated by direct booking growth.
Certainly, the airline group has given no public indication of abandoning its strategy. What annoyed many people when Lufthansa announced the DCC was that it had no viable alternative connections to its corporate clients. That shortcoming is finally being addressed. Lufthansa claims it now has a ‘direct connect’ to more than 1,500 IATA agencies globally.
Even more importantly, it has announced apparently truly direct connections to two corporate clients, Siemens and Volkswagen – and this is where travel managers should sit up and take notice. I haven’t spoken to VW about its work with Lufthansa, but I have talked to Siemens, and it is truly groundbreaking stuff, which may revolutionise managed travel.
Together, airline and client have created a direct link from Lufthansa’s reservations system into Siemens’ booking tool, where Lufthansa content sits alongside GDS-sourced fares. Most excitingly, Siemens has developed the capability to take similar feeds from other carriers, and is in talks to do exactly that.
Siemens says its intention is not to avoid the DCC, although that will save a six-figure fee annually. Instead, it is going direct to achieve corporate recognition through customised distribution. For example, Siemens could potentially negotiate inclusion of checked baggage or lounge access with every fare it buys. That means airline/client negotiations may work very differently in future. Discounts could form only one part of the conversation. What is included in the price beyond a seat would also be subject to negotiation, and so would the channel through which the client books.
Another game-changing aspect of the agreement is how it will realign the client’s relationship with service providers. Siemens says its opinion about what it wants from its travel management company (TMC) has changed drastically in six months, and is still evolving. Provisionally, it concludes that key TMC roles in future will be disruption management and data aggregation.
Now, it is true that Siemens belongs to an elite group of businesses whose annual travel spend runs into ten figures. But just like what we see on the catwalk eventually filters down in less extreme form to the high street, I believe its pioneering work will soon be influencing smaller buyers too.
CONFUSING WORDS
But whether Lufthansa will work with more corporate clients in this genuinely direct way remains to be seen. Lufthansa and others repeatedly use the phrase ‘direct connect’ for their new distribution strategies, but these words are confusing because although a handful of retailers have built what Lufthansa terms a ‘full direct connect’, most are using the alternative distribution platform provider Farelogix, often overlaid with technology from 17 other certified providers. When I looked at that list, I only recognised three of the names, which suggests that if Lufthansa’s intention is to introduce more competition into the distribution market, it is succeeding. Yet, paradoxically, I hear repeated criticism that Lufthansa makes it far less straightforward for third parties to connect to it than do pioneers such as Easyjet.
What airlines really mean by ‘direct connect’ is that they avoid the GDS. As I have written before though, don’t write off the GDSs – or rather, the tech giants which own them. For example, Siemens takes a direct feed from Lufthansa’s passenger sales system, Altéa, into Siemens’ online booking tool, Cytric. Who owns both Altéa and Cytric? Amadeus.
I AM BEGINNING TO NOTICE ON MY TRAVELS a trend for self-contradicting signs and labels. One example was outside the White House in Washington DC, where men toting machine guns and mirror shades also sported vests saying ‘Secret Service’. Not so secret now, eh?
Then, motoring through Italy recently, I observed a sign displayed electronically above the autostrada. I very nearly crashed the car while concentrating on reading the pixilated words and then working out the translation. It said: ‘Don’t let yourself be distracted while driving’...