Lufthansa’s Big Challenge

There is hardly anything in the world that some man cannot …sell a little cheaper, and the people who consider price only are this man’s lawful prey.
— John Ruskin

The big dust-up this week among travel agents is the Lufthansa Group’s announcement that in September they will begin charging 15 Euros per ticket for booking and purchasing flights on any source but their own website. This would apply to the internet shopping sites such as Travelocity, Orbitz, and Kayak as well as travel agency systems such as SABRE. Airlines have to pay to have their flights displayed and sold on all of these. Lufthansa says this is a way for them to save money on distribution costs. Their actual cost per ticket is more like two Euros per ticket, so charging 15 Euros per ticket feels like a penalty for travelers who buck the system, not just a cost recoup for the airline.

This move by Lufthansa represents more of the same unbundling which has been growing in recent years. It used to be that any traveler could expect that for the price of the ticket, s/he could have a reserved seat and check at least one bag. But now many airlines charge for checking bags, for reserving seats, and even for talking to a person at the airline in order to purchase a ticket. The additional fees are giving airlines greater profits than they have enjoyed for years, so that part is working for them.

Agencies are not happy with the new proposal, but then we have not been happy with the airlines for most of the 20 years I have been in the business. Another airline tried Lufthansa’s ploy a few years ago and the reaction was strong enough that they abandoned the attempt. But I would not be surprised if Lufthansa follows through with this. Will it cost them or help them in the long run?

Southwest and a few other domestic airlines have never participated in the internet shopping sites but they do participate in agency booking systems. Southwest claims that they do not want to be compared with all the others, and this brings up a valid point. With unbundling it has become increasingly difficult to compare equal products. A flight on one of the big domestic airlines does not compare with, say, Spirit Air. You pay less for a ticket on Spirit Air, but if you want to reserve a seat, carry a bag onto the plane, or have a drink of water during the flight you will pay extra. When will we take the “freedom” to choose our options too far?

Until now the internet allowed us to comparison shop easily. If the Lufthansa Group is successful and other airlines follow suit, shopping for the lowest fare will be chaotic and much more time consuming. What will be the unintended costs? What if people study the options on Travelocity – or ask their travel agent for the best combination – and then go to an airline’s exclusive site to make the purchase and save a few dollars? This would be equivalent to browsing at your favorite bookstore then going home to buy on Amazon the books you liked. How long will the websites, the agencies, and the bookstores keep their doors open?

Most of the discussion in the media has been around the price of the ticket. I hope people will consider service as part of a happy transaction. What is it worth to you to have someone do a rapid comparison of available prices, times, and routings? Do you see value in having a person to advise you on connecting times and airports? And if you need to make a change to your ticket, who will help you?

Certainly the airline business has many factors, some of them in constant motion. Like every other business their objective is to make money. But business models have built in implications and consequences. Do we feel appreciated or used after completing a transaction? It makes a difference!

The following video is eight years old but the jokes are still current, alas!

Boundaries divide. Travel unites.

11 June 2015

About Travel Unites

A travel agent since 1994, I want people to get together for greater understanding across boundaries.
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