On 1 September 2015, Lufthansa became the first airline to introduce its Distribution Cost Charge (DCC) for tickets from the Lufthansa Group booked through the Global Distribution Systems (GDSs). The business travel industry was turned upside down.
According to many (business) travel agencies, this was illegal action and flights from Lufthansa would be boycotted because this really was not possible. The GDSs said that Lufthansa ‘punished’ its travelers by making price comparisons – which were available via the GDSs – impossible.
Now, just three years later, Air France-KLM and IAG (British Airways and Iberia) also use these GDS surcharges. The business travel agencies and the GDSs are now often proud to announce that they have concluded a deal with the airlines in which they ‘will investigate’ together how they can implement the new distribution technology.
New tariff model:
But do not think we are already there! Once again it is Lufthansa who calls the cat the bell and announces in 2019 with a new tariff model, the so-called continuous pricing principle. Whereas most airlines currently use about 26 booking classes (as many letters as in our alphabet), Lufthansa will launch even more dynamic price options in 2019.
This means that in addition to the existing booking classes – each with their own rates and conditions – additional rates will be introduced. Oh yes … continuous pricing will not be available in the traditional GDS systems, but only through market parties that use the Lufthansa-direct (NDC) channels as part of Lufthansa’s NDC Partner Program.
This enables travel agencies, technology companies, and corporate accounts to integrate the sale of airline tickets into their own applications and websites through so-called ‘open’ API links. Interestingly, the Lufthansa Group clearly indicates on its website lhgroupairlines.com/ndc that it wants to attract partners from outside the ‘travel tech’ industry.
Lufthansa NDC Partner Program:
The continuous pricing principle of Lufthansa will ensure that even more parties will join the Lufthansa NDC Partner Program. Because they can not afford not to offer all the available rates.
The Lufthansa Group recently announced that it will pay 1 euro to members of the NDC Partner Program with effect from 1 January 2019 for every time that a flight is booked via an NDC channel. In addition, lounge access and internet vouchers will be exclusively available through NDC channels.
In 2015, at the time of the 16 euro surcharge, I indicated that Lufthansa is not the airline to develop and market ill-considered initiatives. That this is all part of a well-thought-out strategy is evident from the fact that Lufthansa has been working behind the scenes for three years –
in addition to the model dominated by the GDSs – to set up a parallel
This model, in which tens of millions of euros have already been invested, has the simple goal of providing the airline with total freedom of distribution.