The European Union's decision to investigate Lufthansa's surcharge represents a potential blow to the airline industry, which is attempting to wrestle back control from intermediaries. Although the transport commission confirmed an investigation, it doesn't appear that any decision is imminent.
Lufthansa’s decision to introduce a fee for bookings made outside its websites and call centers predictably angered many in the travel industry, and it looks like their displeasure has caused regulators in the European Union to take a closer look at the practice.
While the complaints against the $19 (€16) surcharge were first filed more than two years ago, it was only last week that the EU’s executive arm, the European Commission, admitted that an investigation was taking place.
In response to a question in the European Parliament, Transport Commissioner Violeta Bulc said the commission was looking to see if the surcharge breached EU regulation 80/2009, which covers the Global Distribution System (GDS) market.
“Commission services are working towards a final assessment and a decision will be taken, as appropriate, once this assessment is completed,” Bulc added.
Introduced eight years ago, the regulation at issue covers the global distribution system market, or, as the the European Union refers to them, Computerized Reservation Systems, or CRSs.
The regulation is lengthy but the ones relevant to Lufthansa’s surcharge state:
4. A parent carrier shall neither directly nor indirectly discriminate in favour of its own CRS by linking the use of any specific CRS by a subscriber with the receipt of any commission or other incentive or disincentive for the sale of its transport products.
5. A parent carrier shall neither directly nor indirectly discriminate in favour of its own CRS by requiring the use of any specific CRS by a subscriber for sale or issue of tickets for any transport products provided either directly or indirectly by itself.
A European Union source confirmed that the the Commission was currently assessing the complaints submitted by global distribution system providers and travel agents against Lufthansa’s Distribution Cost Charge, adding that the case raises complex legal questions.
Christoph Klenner, who is the secretary general of one of the complainants, the European Technology & Travel Services Association, said the extra attention garnered by the question in the European Parliament “increases the pressure on the Commission to take a decision in the case.”
At this stage it is impossible to predict whether the European Union’s initial look at the surcharge will result in any action against Lufthansa, but if regulators decide that Lufthansa’s distribution practices are anti-competitive, you would expect them to get involved, given their track record.
What is slightly confusing about the investigation is that Lufthansa claims that the surcharge is not the subject of the investigation. Instead, a spokesperson said, it was Lufthansa’s surcharge-free booking site (www.lufthansa-agent.com) that was being looked at. Agents can book Lufthansa flights on the website without being subject to the surcharge they would have to pay if they booked through their global distribution systems.
Meanwhile, the European Union has made no such distinction about the parameters of the probe, and the website and the fee are very-much linked.
Klenner’s view on the matter differs from Lufthansa’s.
“Just to be clear, it is not the existence of Lufthansa’s own system that is the problem, but the discrimination, which takes the form of the €16 surcharge per ticket and of additional punitive surcharges for services such as booking checked bags, and which might manifest itself in other ways such as making available different content to different channels.”
Why It Matters
For a long time Lufthansa was out on its own as the only airline group willing to risk the potential loss of business though the addition of a surcharge for so-called indirect bookings.
Booking- and content-facilitators such Amadeus and Travelport are still the major source of tickets for travel agents around the world, and Lufthansa’s attempt to wrestle back control prompted a big backlash.
So far Lufthansa says the impact has been negligible, something that has no doubt persuaded others to get in on the act.
Ukraine International Airlines – a relatively minor player – added a $9 fee in April and the following month International Airlines Group said that British Airways and Iberia would be levying a $10 fee starting in November.
Commissioner Bulc mentioned IAG’s decision but did not offer any comment on a possible investigation, saying simply that the Commission was “aware” of the situation.
A spokesperson for IAG confimed that its plans for a surcharge had not changed.
Photo credit: A Lufthansa Airbus A321-200. The airline group is trying to take more control over its distribution costs by adding a surcharge for certain bookings. Lufthansa