The exact reasons for wanting to terminate the content deal aren’t clear, but Lufthansa’s direct-selling drive might have something to do with it.
Lufthansa Group on Tuesday informed its travel agency partners that its fares would soon be removed from the global distribution system Sabre.
The cancellation of the distribution deal, which takes effect from June 30, also includes Austrian Airlines, Swiss and Brussels Airlines content.
In an email to its partners, Lufthansa said it wanted to inform them “in good time and transparently about current developments” that Sabre had terminated the distribution agreement with its airlines.
The termination also affects Abacus, Sabre’s Asia-Pacific booking system.
There’s been no real explanation as to why the contract won’t be renewed, which raises several questions. There are likely commercial considerations but — in the middle of a crisis — why has no extension been sought? And what happens to unused tickets booked on Sabre after the termination date?
Lost in the System?
This dispute won’t go down well with those corporate travel agencies, or their clients, holding thousands of unused tickets, potentially worth tens of millions of dollars.
Travel technology platform Duffel notes: “It isn’t clear whether or how Sabre users will be able to cancel, refund and change their existing bookings after 30 June.”
A Sabre spokesperson said: “The Sabre team has been working diligently with Lufthansa Group to renew their distribution agreement.
“We are committed to advocating the needs of the value chain to create opportunities that drive revenue for both airlines and buyers. At this point, Sabre and Lufthansa are actively discussing the airline group’s participation in Sabre. We remain committed to reaching an agreement with Lufthansa that fairly balances the needs of all members of the travel ecosystem.”
Skift approached Sabre for further comment.
The absence of a renewal reflects Lufthansa’s push towards selling directly — although Lufthansa told Skift it wanted to reiterate Sabre cancelled the agreement, not the airline group.
Lufthansa Group is the leader of the pack in Europe when it comes to New Distribution Capability — the technology standard developed to allow airlines to sell rich content and ancillaries.
Where it goes, others follow. From charging global distribution system fees to removing certain fare types, it has been one of the most aggressive carriers in its shift towards direct sales, whether through the technology standard or via SPRK, its browser-based agency tool.
“This is a big move by Lufthansa — but not a surprising one given how they’ve positioned themselves on the new distribution standard in the last few years,”said Tim Rogers, Duffel’s head of airline partnerships.
“As a new player in the distribution space, we’re excited to see how travel sellers will respond.”
In a statement, the airline said: “Lufthansa Group confirms the cancellation of its distribution agreement by Sabre effective as of July 1, 2020. We continue to hold open, constructive and solution-oriented talks with Sabre in favor of our joint customers and sales partners. Nevertheless, we will be taking this opportunity to assess options to accelerate modern airline retailing.”
With the contract due to end soon, one industry observer believes the distribution deadlock is simply a negotiating tactic.
“Neither can afford to not work together, especially in the current climate,” said Gavin Smith, director of travel technology consultancy Element.
“Lufthansa is heavily invested in New Distribution Capability, which is a distribution channel for them, like all the other airlines. They want a percentage sold through that channel.
“Removing their content from the U.S., I don’t see happening. A deal will be done and things will carry on as before,” Smith added.
Many airlines have had time to weigh up distribution strategies over the past few months, but with the no real end to the crisis in sight, it would make little sense to limit their options.
In some cases, carriers are moving in the opposite direction. Southwest, for example, recently placed its full family of fares on Travelport’s Apollo and Worldspan global distribution systems.
Sabre in particular is having a hard time, with net airline bookings falling 111 percent in March. Lufthansa, meanwhile, is still thrashing out the details of a state aid rescue package worth up to $10.8 billion.
There may be no real winners if the pair do decide to go their own ways.
CORRECTION: This story originally said Lufthansa content would be removed from Concur in Gavin’s Smith quote. SAP Concur said Lufthansa content could continue to be accessed via Concur TripLink and/or a “select access feature that can be used to enable the full content of Lufthansa Group via TravelFusion”.
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Photo Credit: Lufthansa, Austrian Airlines, Swiss and Brussels Airlines fares will not be bookable on Sabre as of June 30, 2020. Bloomberg