Beginning in September, Europe’s leading airline, Germany-based Lufthansa, will charge an additional 16 euros, or just under $18, on every ticket issued through a computerized reservation network for booking flights, hotels and other travel needs. Think Orbitz or Expedia. The surcharge aims to increase Lufthansa’s profitability. It might also cost travelers.
Price comparison sites almost always book at the lowest fare. That’s good for consumers, but bad for airlines, because the fees airlines pay to these sites are the same no matter what a ticket costs.
“They are, on a percentage-wise basis, the highest distribution costs as a percentage of revenue that an airline would ever experience,” says Robert Mann, an airline industry analyst.
Lufthansa says using the online booking system costs it in the three-digit million euro range. By imposing the 16 euro surcharge, Lufthansa could make more money if it drives customers to book directly. Paul Ruden, executive vice president for legal and industry affairs for the American Society of Travel Agents, says Lufthansa will ultimately lose bargain-minded customers.
“If their idea is that consumers will completely abandon all alternatives and book only directly with Lufthansa, then they’re dreaming,” Ruden says.
Karl Moore, who teaches at McGill University and follows the airline industry, says this is about control. By driving travelers to book through Lufthansa directly, the airline can showcase more options — that cost extra — that wouldn’t show up on a comparison booking site like Orbitz. This money-making strategy is called “unbundling.”
“So instead of getting a meal with your flight and a particular seat and this sort of thing, if you want to have a particular seat, an aisle seat or have the meal, you pay extra for it,” he says.
That’s why Ruden says this tactic might work for Lufthansa, at the expense of consumers.
If you’re a member of your local public radio station, we thank you — because your support helps those stations keep programs like Marketplace on the air. But for Marketplace to continue to grow, we need additional investment from those who care most about what we do: superfans like you.
Your donation — as little as $5 — helps us create more content that matters to you and your community, and to reach more people where they are – whether that’s radio, podcasts or online.
When you contribute directly to Marketplace, you become a partner in that mission: someone who understands that when we all get smarter, everybody wins.