Travel agents are exploring legal options to challenge Lufthansa's decision to levy an extra 16 Euros on tickets booked on global distribution systems (GDS). The charge will come into effect from September 1.
While the move will enable the airline to save distribution costs and encourage customers to book tickets on its website, agents are up in arms. The agents fear the scheme called 'distribution cost charge.' will hurt their business and see Lufthansa's announcement as another instance of agent unfriendly decision by airlines.
“This is like killing the hen which lays the golden egg. We are in discussions with all international associations and are exploring legal options. We are also launching a save consumer campaign to highlight that the decision taken by Lufthansa is not in customer interest,” said Sunil Kumar, acting president of Travel Agents Association of India.
In the past few years the agents in India are under pressure as airline commissions are reducing and credit period for making payments to airline has reduced from a fortnight to seven days. The closure of Kingfisher Airlines also impacted agents which did not receive refunds from the airline.
Several airlines do not pay a regular commission and only give productivity bonus linked with a sales target. “There is a cash flow problem faced by agents as customers do not always pay up on time,” said a travel agent. Also some foreign airlines do not allow travel agents to use corporate credit cards to make bookings and do not pay productivity bonus on lowest priced tickets.
Agents use the GDS as it allows them to make reservations and issue tickets within 48 hours. This is also linked to the billing settlement plan which allows the agent seven day credit term.
An airline pay a certain fee to the GDS for every booking irrespective of whether a ticket is issued by an agent though the fee paid in case of cancelled bookings is lower. As such it increases airline's distribution expenses and several airlines have been working to reduce them.
In an emailed response to Business Standard queries Lufthansa said it will not be possible to share break up of bookings made through Lufthansa and other group airline websites (Swiss, Austrian) in India and expected savings as a result of the new scheme.
Lufthansa website has a booking on hold feature which allows customers to hold a booking for 2 days. There is a nominal charge which will be applicable only when the customer at the end does not purchase the ticket, the airline said.
It added that the scheme is being introduced globally in all markets from September 1.
“The new charge will not be added to flight tickets purchased using own booking channels. This predominately includes the airlines’ websites as well as, the service center and ticket counter at the airports,” the airline said adding that travel agents could book tickets on Lufthansa's agents' portal without paying the charge. Corporate customers will be able to book their individually negotiated contract rates excluding the charge on the airline website, it said.