Lufthansa to charge extra for using other websites

Gigi Douban Jun 8, 2015
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Lufthansa to charge extra for using other websites

Gigi Douban Jun 8, 2015
HTML EMBED:
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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.

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