Some airlines will be jealous of Lufthansa Group's ability to have one out of every two of its customers book directly through its brand sites or travel management channels without having to pay fees to third-party tech middlemen.
That represented the most significant share of direct sales in the company’s history, executives said.
For full-year 2018, the number of bookings made through the websites and mobile apps of Lufthansa, Swiss, and Austrian, and by corporate customers and travel management companies using its direct connection services, accounted for 45 percent of its bookings, up from only 30 percent in 2015.
Lufthansa executives said that the trend vindicated their move in 2015 to add $18 (€16) fee on bookings that go through the large booking software companies — Amadeus, Travelport, Sabre, and Travelsky — used by tens of thousands of travel agencies worldwide. Last year, Air France/KLM and International Airlines Group, the parent company of British Airways and Iberia, added similar charges.
Representatives of the tech companies maintain, however, that a bookings count misrepresents the full story. Amadeus, the largest of the players, said that many of the bookings that are moving to direct channels are for cheaper domestic trips rather than more expensive, premium-class international trips.
Lufthansa said about 20 percent of the direct share gain was driven by domestic German ticketing, but it didn’t say what share of its overall ticket and ancillary sales by euro volume go through direct channels.
On an earnings call last month, Amadeus’s CEO and president Luis Maroto assumed Western Europe might continue to see some disintermediation — or the airline effort to kick some middlemen out of its distribution chain. He said he also assumed that the trend would not accelerate elsewhere.
However, Lufthansa’s report of an increasing share of direct bookings undermines a different claim made by the distribution middlemen, namely, that Lufthansa should have stopped seeing direct distribution share gains by now.
Last month, Amadeus’s Maroto explained to an analyst that “usually you have an impact when an airline starts with the surcharges and then it stabilizes.”
Similarly, at Skift Tech Forum 2018, Sean Menke, the CEO of tech rival Sabre, similarly said that, while Lufthansa may have seen a 10 percentage point share gain in its first two years with the surcharge, it would likely see the pace of increases slow down. Menke spoke from the experience of having once worked at Air Canada as a chief commercial officer when that carrier fought to reduce the distribution share of Sabre.
On Thursday, Lufthansa forecast that the share of direct sales would increase further in 2019. Its executives said the company planned to offer more creative ways of providing airfares and upsell offers via what they called “continuous pricing” — presumably meaning fine-tuned adjustments to prices based on shifting demand and information about buyers.
Executives said they would relaunch Swiss.com sometime this year, with the sites for Austrian and Lufthansa refreshed later. A delay by Datalex, a tech vendor, contributed partly to the delay.
Lufthansa’s surcharges remain contested. An association representing the interests of the technology middlemen, the European Technology and Travel Services Association, has continued to try to rally Europe’s antitrust authorities against it. Since November, the tech companies have faced their own antitrust investigation by the European Commission. For more on Lufthansa’s financial report, see our story “Lufthansa Looks at Taking Over Thomas Cook-Owned Airline Condor.
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Photo credit: Lufthansa aircraft lined up at an airport. Some airlines will be jealous of Lufthansa Group's ability to have one out of every two of its customers in December book directly rather than through more costly middlemen. Bloomberg