Direct Connect: No Relevant News From Brussels

Published September 2017

By: Dirk Rogl, Research Analyst and Content Specialist, Europe, Phocuswright Inc.

There are only six weeks until International Airlines Group (IAG) – the the holding company of Aer Lingus, British Airways, Iberia and Vueling – joins Lufthansa in charging a fee to travel partners that book tickets as they usually do: via a GDS. A short answer given by EU Commissioner Violeta Bulc in the European Parliament sounds like good news for most parts of the retail sector. Bulc confirmed investigations against Lufthansa's direct cost charge (DCC) of about €16 per ticket.

Despite some recent headlines, there is, in fact, no new news. In September 2015, the European Technology and Travel Services Association (ETTSA) rolled up all of the issues from OTA and GDS companies into a formal complaint against the German carrier. ETTSA charged Lufthansa with discriminatory practices: The only way for travel agents to avoid DCC is to switch from a traditional GDS to Lufthansa Group's B2B platform agent.com.

As shown in a recent Phocuswright analysis, Direct Connect in Europe, technological options for direct connectivity into Lufthansa's passenger service system still remain rather limited even in 2017. The ongoing (and absolutely not new) investigation by the European Commission into whether Lufthansa Group's agent.com should be defined as a GDS is important both for the travel trade and for airlines. If the answer to that question is yes, then Lufthansa would be defined as a so-called parent carrier, just as the German airline had been on Amadeus for decades. And unlike other global markets within the European Union, a parent carrier is not allowed to discriminate in favor of their own CRS according to the European Code of Conduct.

The European Union has not announced a timeline for the ongoing review of the Code of Conduct for GDSs. And Violeta Bulc remains rather silent about another complaint driven by 23 travel associations in June 2017 against GDS surcharges in general. This time, the trade representatives proclaim a violation of the common rules for the operation of air services.

If Violeta Bulc announced any news in her short answer to the European Parliament this month, it might be only in her final sentence: "The Commission is aware of the decision taken by International Airlines Group to introduce a surcharge for tickets booked for British Airways and Iberia flights through a computerised reservation system." But it might take months or even years before the European Commission comes to a conclusion in both cases. In the meantime, IAG's direct technology charge of about €9.50 per segment kicks in on November 1.

Video: 2016 Phocuswright Conference Interview With Jens Bischof, Former Chief Commercial Officer, Lufthansa

Direct Connect in Europe: Airline Retail on the Edge takes you beyond the thin headlines with in-depth analysis of the major shifts underway in airline distribution in Europe. This report provides on-the-ground assessment of the state of change today; explores how real is the new direct connect technology and how widely is it implemented by agencies, TMCs and technology vendors; and assesses the risks and opportunities across the air travel distribution chain. This analysis is available exclusively to Phocuswright's research subscribers.

Go deeper on distribution at The Phocuswright Conference, with online travel's biggest companies taking the stage to debate the themes shaping digital and travel tomorrow. The Phocuswright Conference takes place November 7-9, 2017 in Ft. Lauderdale/Hollywood, Florida.

Watch Lufthansa's former chief commercial officer Jens Bischof lay out Lufthansa's direct distribution case and then watch the debate with airline and GDS industry insiders.

Video: 2016 Phocuswright Conference Keynote Session With Jens Bischof, Former Chief Commercial Officer, Lufthansa