Lufthansa has begun charging a fee of 16 euros (about $18) on any ticket purchased anyplace besides Lufthansa's website, the sites of its subsidiaries (Swiss, Austrian and Brussels), or the sites of its alliance partners like United.
Among the people this Distribution Cost Charge has upset is Joe Brancatelli, who has run JoeSentMe, a member's site for business travelers, for 14 years, and who is the author of the Seat 2B business-travel column for BizJournals.com (American City Business Journals).
Brancatelli has called on his readers to boycott Lufthansa. His explanation is behind a paywall, but here are some memorable parts:
"We have no choice here: Shut 'em down. Don't fly Lufthansa or its subsidiaries until they back off this egregious fee. We can't let them dictate where we can purchase our tickets and how we manage our travel....
Lufthansa's fight with the GDS operators, whose computers power most bricks-and-mortar travel agencies, third-party travel Web sites and virtually all corporate travel departments, is as mind-numbingly complex as today's world.
Lufthansa has some legitimate beefs, too, including the fees that the GDS companies charge and how their computers display (or don't) airline ancillary products such as paid seat assignments, upgrades or whatever.
But make no mistake about it. Lufthansa has made us collateral damage in their war with the GDS players.... We simply can't permit Lufthansa to make us pay for the privilege of booking via a channel of our choosing....
If Lufthansa gets away with this fee, other airlines will follow. And they'll follow en masse as soon as they can. In fact, they'd have matched already if they could, but their own contracts with the GDS operators prohibit it. Lufthansa was able to pull this stunt only because its contracts with GDS operators expired earlier this year....
I carry no water for the big GDS operators, Travelport, Sabre and Amadeus. They're hardly the friend of the working man, if you know what I mean. GDS operators tend to be as rapacious and arrogant as the airlines, which is no surprise since they were created by the airlines decades ago and there's an underground railroad of executives who bounce back and forth between the two.
But right now we have common cause with the GDS operators against Lufthansa. We need the GDS computers and their capabilities a lot more than we need the Lufthansa Group of airlines. Right now the immediate threat is Lufthansa....
The choice, fellow flyers, is pretty stark: Book Lufthansa or any of its subsidiaries while this fee exists and we're selling ourselves down the river. The airlines want a world where they control the product, the pricing, how we access and use the product and even our ability to look and compare before we book....
We can't stand for that. We've got to shut this down. Fast. And the only way that is going to happen is if you book away. Lufthansa needs to be slapped down and slapped down hard."
I caught up with Brancatelli via email to try to understand his position better. My questions are one-sidedly oppositional to his point of view, to draw him out. I'm personally undecided on the issue.
On behalf of all the cynics out there: Why should a corporate traveler suffer the inconvenience of boycotting Lufthansa to help some middlemen he or she has never heard of haggle a better contract with the airline? Suppliers (like airlines) and middlemen (like ticket distributors) squabble all the time. During these squabbles, each side may invoke "consumer interests", but they may do so cynically -- purely as a way to get a better negotiating position. Why be a pawn?
"As I said in my column, I carry no water for either side. I know that neither has the best interest of business travelers at heart. Both will do what they think is best for them. Which is why business travelers must do what is best for them.
Corporate travelers need to resist the Lufthansa move because, if it holds, it'll raise our prices. If LH gets away with it, you know every other airline will do the same thing when their GDS contracts expire. To require corporate travelers to pay more to have a level playing field and have the opportunity to book with outlets that offer them other services is not in OUR best interests. And I always advocate for what is in the best interest of business travelers like myself.
As for the "inconvenience" of avoiding Lufthansa, well, it's actually not that inconvenient. There are precious few routes that LH flies from the United States and onward from their German hubs that can't be easily duplicated by other carriers."
Many corporate travelers are fans of classic economic theory. Classic economic theory says that markets work at their most efficient when costs are well matched. Toll highways put the cost of the road on the people who both get the most value out of, and who put the most wear-and-tear, on that road specifically, which is fairer to non-drivers and which encourages only the most useful roads to get built. So why shouldn't corporate travelers -- who usually require the highest level of duty of care and often travel on complex itineraries or tickets -- not pay a fee? They're getting more service out of, and putting more demand on, the airfare booking system, on average, than the typical leisure traveler buying a quickie budget flight. Is it so bad that they pay a little more?
"As I said in my column, the airlines are the only people who believe middlemen, distributors, GDS, travel agents, etc should work for them for free. When you go to a store, be it Walmart or Bloomingdales, you know Walmart or Bloomingdales gets a cut of the retail price. So do all the people between the manufacturer of the product and the retail. Only the airlines believe everyone should be in service to them for free.
So if you believe in classic economic theory, you'd resist the airlines attempt to force everyone in the supply chain work for them for free and then shift the cost of distribution onto the buyer on top of the retail price."
Isn't it in the interest of corporate travelers to have a healthy, thriving global airline network? And if that's true, shouldn't they be cheering on Lufthansa in its effort to improve its margins, given that improved margins can translate into a better class of product and a more reliable type of service?
"Here we are in absolute agreement and I've been writing it for years. I want my airlines healthy and profitable. Just like I want my stapler supplier, my chairmaker and my computer maker to be healthy and profitable.
But that doesn't mean I accept any time a supplier raises his end price to me. And that's why I called for a boycott. There are alternatives to Lufthansa and they don't--for competitive or contractual reasons--don't charge the booking fee. I suggest using them.
Lufthansa has the right to charge the fee. I have the right to not pay it by shopping elsewhere."
Last question: Practical one here: Are partner codeshares an acceptable loophole here? Is it okay for your readers to buy on United's site the codeshare, knowing that Lufthansa will operate the flight, let's say? Does that stay faithful to the boycott -- by refusing to pay the fee?
"Apparently, if you book a flight on LH metal but do it as a United code-share or on the United.com website, you are exempt from the fee.
And what does that say about the logic of the fee: If you book it via a GDS with the letters LH attached, you pay an $18 fee. If you book the same flight with a GDS with the letters UA attached, apparently you don't. Book it on the United.com site, you don't pay. Book it on Expedia or via a bricks-and-mortar travel agent, where you can comparison-shop, you pay a fee. On that lunatic basis alone, I'd refuse to do it because the airlines run such idiotic businesses.
As for advice I'd give to business travelers, the advice I gave to JoeSentMe members is to avoid LH and its subsidiaries for two reasons: The fee is bad for business travelers and Lufthansa, specifically, is an unreliable airline right now. It's had 12 work stoppages in 18 months and another is going on now (Tuesday, September 8) even as we are having this conversation.
So why book an airline that can't run its schedule reliably AND wants you to pay an $18 surcharge for the privilege of booking them?"
LUFTHANSA'S SIDE OF THE STORY: The travel industry must accept freedom in distribution
NB: Image courtesy of uggboy/Flickr via a Creative Commons license.