First Free Story (1 of 3)

More travel executives get their mission-critical industry news from Skift than any other source on the planet.

Already a member?

Lufthansa Group and Sabre said on Wednesday they had agreed on high-level principles for a new airline distribution agreement. The public announcement offered few details, but the existence of a deal itself signaled the end of long-running commercial and legal battles between the largest airline group in Germany and the largest travel distribution company in the U.S.

The agreement said that agencies in 2021 would be able to access, book, pay for, and edit such offers via Sabre, the first of the global distribution systems to access Lufthansa Group’s next-generation content, including so-called continuous pricing.

Until now, Lufthansa made its next-generation offers available only to selected partners, such as Concur and Egencia, that agreed to use its preferred technical methods. Agencies saw some different fares and saw those offers displayed differently when connecting via Lufthansa’s agency-direct systems instead of through the classic reservation systems of Sabre and its distribution rivals Amadeus and Travelport.

“After the planned launch next year, the diversified NDC program will give Sabre-connected travel agencies globally the ability to access Lufthansa Group airlines’ content through the Sabre marketplace and by signing up to one of the two available commercial models for NDC,” Sabre said in a statement.

The pact ends months-long haggling. In May Sabre had ended a distribution deal with the airline group, which includes Austrian Airlines, Swiss and Brussels Airlines. Sabre continued to distribute Lufthansa content uninterrupted, but the contract talks were often heated.

“Our agreement with Sabre is a landmark deal for airline distribution. I am very excited to shape our joint path towards modern airline retailing and innovate by introducing a diversified NDC program with associated commercial models, — enabling agencies to agree bilaterally on NDC with Lufthansa Group airlines,” said Tamur Goudarzi Pour, senior vice president revenue management and distribution at Lufthansa Group and chief commercial officer of Swiss, in a statement.

The status of surcharges under the agreement wasn’t clear. Sabre signed distribution contract renewals and extensions this year with United, Emirates, Copa, Air New Zealand, and Finnair without private channels being part of those deals.

The Lufthansa deal is a symbolic win for Sabre as its management attempts to modernize its offerings and adapt to new realities.

Sabre has said before that Lufthansa Group represents only about 2 percent of its global volume. But Sabre has unified two sides of its business, one dealing with indirect distribution between airlines and agencies, and another operation that creates the engine for an airline to make bookings through its direct channels. Lufthansa may have been won over by the prospect of a broader package of tech offerings from Sabre as part of a multi-year plan for tech development.

All of the distribution giants have been seeking new commercial terms and modern technological solutions that appeal to the airlines. This week Amadeus announced that Singapore Airlines will distribute its next-generation content via its platform, for instance.

But the Lufthansa deal with Sabre suggests similar agreements with peer companies Amadeus and Travelport, which have larger market shares in Europe, will follow.

Yet progress may not follow immediately. The cost of distribution in the European marketplace is higher than in the U.S., and European carriers like Lufthansa are trying to find ways of reducing this distribution cost by pressuring technology intermediaries.

However, a commercial resolution between Lufthansa and Amadeus and Travelport is possible. In September, Air France-KLM and Amadeus agreed on commercial terms to make the airline group’s plane tickets available for travel agents to book through the Amadeus travel platform via newer, more modern forms of selling.

Airline surcharges and tech investments appeared to have changed the dynamic in the case of a couple of large airline groups.

A Historic Airline Distribution Feud

The spat between Lufthansa and Sabre was one of the most heated in recent years between any large airline and Amadeus, Sabre, or Travelport. The latter tech companies help airlines distribute tickets to travel agencies that serve both corporate travel management companies and online travel agencies.

The fight between the companies began in 2015 when Lufthansa imposed surcharges on tickets booked through Sabre and its peer companies Amadeus and Travelport to drive the sector to adopt the new distribution capability (NDC), the airline sector’s preferred data format.

The airline group argued modern messaging standards would lead to more sophisticated ways of selling, boosting revenue with dynamic pricing and richer content. But some agencies balked at having to add either a separate workflow or another layer of fare aggregation to see Lufthansa Group fares side-by-side with ones that appear in the reservation systems of Sabre, Amadeus, and Travelport.

Over time, surcharges and better technology won over some agencies. A case in point: On Tuesday, British Airways said it had surpassed a target of processing at least 20 percent of its bookings via the new distribution capability this year. It added that U.K. agencies now process nearly one in two bookings through new distribution capability technology, thanks in part to the November decision by Reed & Mackay, the U.K.’s largest travel management company, to make a direct connection with British Airways’ modern data feed (or application programming interface, or API).

An End to Litigation?

Wednesday’s announcement between Sabre and Lufthansa didn’t mention litigation between the two companies. But it seemed logical that a commercial agreement should bring to an end this litigation shortly. In 2016, Lufthansa asked a court in Sabre’s home state of Texas to clarify its ticket distribution contract with the company in a lawsuit. A commercial agreement between the companies likely means the end to that litigation, which has remained live if not active.

Lufthansa Group sought a declaratory judgment that its surcharge did not violate the terms of its contract with Sabre, along with damages related to the allegations of breach of contract and tortious interference with agency contracts. Sabre filed a counterclaim that asserted the Lufthansa Group’s surcharge was a violation of its agreement. It sought an order requiring the Lufthansa Group to perform what it said were its obligations under the contract.

Less clear is any impact the recent wave of agreements between airlines and global distribution systems may have on a European Commission antitrust investigation of the contracts the tech companies have with airlines. Sources said that the Commission had sent out a second wave of questionnaires to airline executives to answer their questions more fully.

Perhaps coincidentally, American Airlines and Sabre have scheduled on January 6 for mediation to settle the old U.S. Airways antitrust litigation dispute that American Airlines inherited and pursued when it acquired the carrier in a deal that closed in 2014.

If nothing else, Lufthansa Group will see Wednesday’s announcement as a further vindication of its pioneering distribution strategy.

Photo Credit: A Lufthansa Airbus A330-300 aircraft on a runway in Frankfurt in March 2020. Oliver Roesler / Lufthansa