Lufthansa continues to talk the talk around the impact of its year-old distribution cost charge (DCC), although concrete details about the impact on its bookings and bottom line remain elusive.
Last September, the German airline group added a €16 fee to any bookings made through GDSs.
Jens Bischof, EVP, Lufthansa German Airlines, kicked off a session on the opening day of the Phocuswright Conference in Los Angeles with the usual complaint against the way in which airline content is currently distributed through the GDSs, using a cryptic display screengrab to illustrate the perceived shortcomings.
He acknowledged “that things are slowly improving” and namechecked Sabre Red Workspace and Travelport’s Rich Content as examples.
But what Lufthansa really wants is the realtime dynamic pricing, rather than the “constrained and standardised” pricing options which the current full content agreements permit.
And he revealed that Swiss - a Lufthansa Group airline – will introduce dynamic realtime pricing in Q1 2017.
He insisted that DCC was about more than encouraging direct connect, repeating previous Lufthansa exec comments that it was part of the group’s strategy to shake up every aspect of distribution. His argument is that its decision has created innovation in the theory and practice of distribution which is not limited to direct connect.
NDC was referenced as part of this new approach, with Bischof drawing on one of many motoring metaphors in his presentation, “We are building a new car and NDC is just a cylinder in the engine of the new car,” he said.
So, is DCC “working” for Lufthansa? Bischof hinted that it is, but never actually said so directly. He noted that it has signed direct connect agreements with some of its biggest corporate and tour operator clients “with lots more to come”, and that DCC was never designed to be a negotiating tactic.
“The fact we are on track to deliver record results this year is a sign we are not going the wrong way,” he said, before being quickly countered by fellow panellist Sean Menke, president of Sabre Travel Network, who pointed out that having a billion dollars shaved off its annual fuel bill was probably a more material reason for the strong results.
The other question around DCC is whether other airlines will follow suit. So far, none have.
Bischof noted that it has taken Lufthansa two and a half years to get out of its existing contracts and other airlines might be bound up by existing deals, a possible reason why so far Lufthansa is standing alone.
It is determined to persevere with the DCC. “No one expected changing legacy systems which predates the internet to happen within six months…This new model will not go away."