STATEMENT

STATEMENT
For Immediate Release
Business Travelers Worldwide Reject Lufthansa’s Preferred Fares
Program
The German carrier is abusing its dominant position by unilaterally forcing its
undesirable program on consumers
Brussels, Belgium, 17 December 2008--Business Travel Coalition (BTC) today transmitted a stern Signatory
Letter to Lufthansa (LH) Chairman and CEO Wolfgang Mayrhuber rejecting his airline’s Preferred Fares Program
(PFP). The clear message is that consumers forcefully reject LH’s attempt to abuse its dominant market position,
a charge that will be shared in January in Brussels with DG COMP, DG TREN and DG SANCO, and in
Washington with the U.S. Departments of Transportation and Justice.
The letter was signed by one hundred and forty-seven (147) corporate travel managers, travel industry
associations and key stakeholders from Germany, United Kingdom, South Africa, Canada, El Salvador, United
States, Netherlands, Switzerland, Scotland and France; ninety-nine are headquartered or have operations in
Germany. The Signatory Letter, and scores of signatories’ pointed comments, can be downloaded at
http://businesstravelcoalition.com/campaigns/lh_signatory_letter.pdf
According to these signatories, LH is (1) shifting its entire distribution cost to the customer, representing a hidden,
indirect fare increase, (2) increasing travel management company, VAT and credit card costs for the customer, (3)
introducing substantial new inefficiencies to the managed travel process, (4) undermining the TMC-corporate
managed travel model and (5) ultimately forcing other global network airlines to follow as LH would have both cost
and yield advantages as it drives unsuspecting consumers to lufthansa.de where without comparison shopping
and travel agency expertise, consumers will pay substantially more for tickets.
The letter to Mr Mayrhuber states, “Lufthansa is attempting to substitute its judgment for our clearly articulated
preferences. Without collaboration, you are forcing a choice between a highly inefficient process for us and our
TMCs, or paying significantly higher fares. This is a bad choice and we do not welcome your unilateral approach.
Corporate travel managers, in close collaboration with their TMCs and technology partners, have developed a
professional and productive travel procurement environment that must not be poisoned.”
“This Signatory Letter and comments by leading travel managers tell a story of Lufthansa’s abuse of its dominant
market position. If large customers can be bullied, what does that portend for the 3.6 million small and mid-size
enterprises (SMEs) in Germany, and the other 15.4 million SMEs throughout Europe?,” asked BTC chairman
Kevin Mitchell. “This is a problem that goes well beyond the borders of Germany. We are sharing our concerns
with officials in Brussels and Washington because this highly discriminatory behavior is only going to get worse as
airline industry consolidation increases, led by LH and the Star Alliance, which has an additional request before
the U.S. government for antitrust immunity for one of its new members.”
In the letter, travel managers told Mr Mayrhuber, “We urge you to promptly forge distribution agreements that are
equitable for all distribution system participants, including the corporate buyer, and that preserve the efficiency of
the present TMC channel. We hereby ask you to eliminate the PFP program and rededicate Lufthansa to
achieving our mutual success.”
###
1
CONTACT BTC || Kevin Mitchell | 610-341-1850 | [email protected]
About BTC
Founded in 1994, the mission of the Business Travel Coalition is to bring transparency to industry and
government policies and practices so that customers can influence issues of strategic importance to them.
2
17 December 2008
Mr Wolfgang Mayrhuber
Chairman and Chief Executive Officer
Deutsche Lufthansa AG
Airportring
60546 Frankfurt
Dear Mr Mayrhuber,
As major Lufthansa customers headquartered in Germany and around the world, we are
writing to express our anger over your airline's imposition of an indirect fare increase of
tens of millions of Euros through your Preferred Fares Program (PFP), which will
include increased VAT and credit card costs as well as travel management company
(TMC) handling fees.
Worse, your PFP surcharge will undermine our existing highly efficient corporate travel
procurement processes by requiring customers to create new infrastructure and
workaround procedures. We will be forced into an expensive and inefficient case-bycase analysis of which fare is more economical to purchase -- either a PFP fare with a
surcharge and a TMC handling fee, or a standard fare offering.
Lufthansa is attempting to substitute its judgment for our clearly articulated preferences.
Without collaboration, you are forcing a choice between a highly inefficient process for
us and our TMCs, or paying significantly higher fares. This is a bad choice and we do
not welcome your unilateral approach. Corporate travel managers, in close collaboration
with their TMCs and technology partners, have developed a professional and productive
travel procurement environment that must not be poisoned.
The marketplace for commercial air transportation services is now highly transparent as
a result of this longstanding and mutually beneficial collaboration. Complete fare
information and point of sale functionality are now on one screen for both TMC agents
and travelers utilizing automated booking tools. Now, travel managers can use this
advanced purchasing process to drive business to preferred airline partners down to the
city-pair level.
Your initiative to damage the existing TMC channel and its supporting technology
partners; undo our progress in developing efficient, best-practice processes; and once
again endeavor to dominate the point of sale is a flawed strategy strongly rejected by
your very best customers. We need to find ways to strengthen our preferred channel,
not weaken it.
Such negative actions on your part will make it more difficult and expensive for our
companies to continue purchasing your product. Our companies, with air travel needs in
markets where you are strong, and in markets where you seek to grow, will direct future
business to airlines that build their distribution programs around our preferences. As the
1
attached comments from many of us directly to you reinforce, and you are no doubt
aware, we do have a choice in air travel.
We urge you to promptly forge distribution agreements that are equitable for all
distribution system participants, including the corporate buyer, and that preserve the
efficiency of the present TMC channel. We hereby ask you to eliminate the PFP
program and rededicate Lufthansa to achieving our mutual success.
Sincerely,
German Business Travel Association (VDR)
Institute of Travel Management (ITM)
Scottish Passenger Agents Association
(SPAA)
Business Travel Coalition (BTC)
Merck KGaA
SAP AG
Deutsche Bank AG
BMW AG
ABB Ltd
Philips
Ingersoll Rand
Munich Reinsurance Company
German Armed Forces - g.e.b.b.
Carl Zeiss AG
Panasonic Electric Works Europe AG
AMB Generali Group Germany
HRG Worldwide
TUI 4U
OTTO (GmbH&Co. KG)
Honeywell
ConocoPhillips Germany GmbH
Roche Pharma AG Deutchland
Baxter Beutschland GmbH
Johnson & Johnson
Dow Europe
Toyota Motorsport GmbH
NetJets Europe
Novartis Pharma GmbH
Olympus Europa Holding GmbH
Otto Bock Holding GmbH & Co KG
Telefónica o2 Germany GmbH & Co. OHG
SAS Autosystemtechnik Verwaltungs GmbH
TravelBoard GmbH Bayer AG
Schaeffler KG
SCHOTT AG
SAS Institute GmbH
Perot Systems Corporation
Assurant
AT Kearney, Inc.
Ball Packaging Europe Holding GmbH & Co.
KG
Bavaria-Lloyd Reisebüro GmbH/BMW AG
Atos Origin
August Storck KG
Beiersdorf AG
Berlin-Chemie AG
Sanofi Pasteur MSD GmbH
Hannover Rückversicherung AG
SIG Combibloc GmbH
Logwin Logistics
Vattenfall Europe AG
Roche Diagnostics GmbH
Linde
Maschinenfabrik Gustav Eirich GmbH & Co
KG
Medis Medical Imaging Systems bv
Travelagency M45
eBAECO NV
BEUMER Maschinenfabrik GmbH & Co. KG
Business Traveller Africa
DC
Francotyp-Postalia GmbH
ProSiebenSat1. Media AG
Wieland-Werke AG
Yale University
ZDF
AAA Allied Group, Inc.
Adolf Würth GmbH & Co.Kg
Agencia de Viajes Escamilla
All About Travel, Inc.
Alstom Deutsche Gruppe
Amway Travel
Anthony Travel, Inc.
Arcandor AG
Derpart Reisebüro Koch Übersee GmbH
Diehl Stiftung & Co. KG
DMR Touristik
2
ECE Projektmanagement G.m.b.H. & Co.
KG
EnBW Energie Baden-Württemberg AG
DMR Touristik
ECE Projektmanagement G.m.b.H. & Co.
KG
EnBW Energie Baden-Württemberg AG
Alstom Deutsche Gruppe
Amway Travel
Anthony Travel, Inc.
Arcandor AG
Derpart Reisebüro Koch Übersee GmbH
Diehl Stiftung & Co. KG
DMR Touristik
ECE Projektmanagement G.m.b.H. & Co.
KG
EnBW Energie Baden-Württemberg AG
Endress+Hauser AG
Medis Medical Imaging Systems, BV
Ingenics AG
Innovative Business Concepts
J. Eberspächer GmbH & Co. KGjetamel
Loos International GmbH
Novelis AG
Oerlikon Textile GmbH & Co. KG
BJI, Inc.
Boscov's Business Travel
Boyd Consulting
Bucyrus International
Cadence Design Systems, Inc.
Caldwell Travel, Inc.
Casto Travel
Center for Creative Leadership
Cereal Chillers Inc.
CHAMELEON GLOBAL
CI Travel
CorpTrav
Country Functions / Shared Services
Cox Enterprises, Inc.
Cresta World Travel
Eton Travel
Eton Travel Agency Limited
Graphic Packaging International, Inc.
HealthCare California
International Brotherhood of Teamsters
Just Travel Inc
Kendle International Inc.
Liberty Global Europe
LIMRA International
Lubrizol Limited
LVMH Travel/Linden Travel Bureau
LXR Travel LLC
Matrix Travel Management
NetApp
Norseman Travel
Corporate Travel Partners Limited
P&P Associates Ltd
International Travel Management
Pearson
Precision Power Labs
Procurement
Sapient Corporation
SEB AG
SICPA SA
SMS GmbH
Software Solutions
Sony Europe GmbH
Tanger Factory Outlet Centers, Inc.
Teplis Travel Service
The Arvai Group, Inc.
The Corporate Travel Partnership
The University of Texas at Austin
Thermo Fisher Scientific
TMD Friction Services GmbH
Town & Country Travel
Travel Management Alliance and Austin
Travel, Inc.
Alexander Anolik, A Professional Law
Corp
Travel Time Travel Agency, Inc.
Uniglobe Normark Travel Inc.
Travel Leaders
Warner Bros. Entertainment Inc.
QA Business Travel
Red Lion Hotel on the River
Ricoh Americas Corporation
RMIC Corporation
Sanmina-SCI
3
Attachment
Comments From Signatories to the Lufthansa Letter
In A Word!
•
“It's a nightmare!”
•
“This is a divide and rule strategy.”
•
“Wrong!!!”
•
“This is pure bull**** without any service or customer relations.”
•
“This idea should be abolished.”
•
“Why is Lufthansa not honest?”
•
“We totally support BTC's position.”
Immediate Harm
•
“This is a hidden price increase.”
•
“This is an indirect increase of rates - additional costs for corporates.”
•
“This is a big increase of process costs and loss of transparency.”
•
“LH is again raising fares with this means and the companies have no real option but
to pay.”
•
“Additional costs - no actual cost overview by LH (hidden cost-transfer strategy).”
•
“We will see a decrease in business travel to our area if the airfares continue to
climb for any reason.”
•
“PFP is negative for corporate clients.”
•
“It is another hidden rate increase and makes administration processes unnecessary
complicated.”
•
“The new model is not acceptable, it will lead to an increase of both direct and
indirect costs.”
4
•
“I can´t understand why Lufthansa makes a price rise that difficult. These new
processes make much more work for all of us. It costs a lot of time and money.
Bull****!”
•
"Hidden cost increase and (much more important) PFP is damaging our processes."
•
"This is a way to increase prices and keeping the structure of how a ticket is build up
non-transparent."
•
"That we lose our "level playing field" on the GDS. It's already become more difficult.
The cost we see and quote is not the cost to passengers anymore."
Abuse of Dominant Position
•
“It will massively increase the costs to the travel industry, create more work and
produce less transparency on fare costings. The industry is being bullied into
submission.”
•
“It is a de facto fare increase on the consumer, driver of inefficiencies in the travel
industry and there is no value add to the consumer. This is solely the work of an
airline taking advantage of (or abusing) its dominant market power.”
•
“As the model is highly inefficient for all but one market participant, and creates no
additional value besides cost for the final customer, I see it as an inadequate
measure to change existing market rules. Process costs will be driven up in addition
to the primary cost in this model. There are certainly more intelligent solutions on the
table also taking into consideration GDS incentive payments to TMCs. The fact that
this model is launched in the home markets of LH/LX is obviously driven by the
opportunity to play with pure market power in an oligopolistic situation.”
•
“This is yet another airline scheme to defragment a consolidated travel program. We
will be forced to pay higher fares, higher fees or lose visibility and reporting if
booking online at LH.”
•
“By implementing this programme, Lufthansa forces the market to increase prices.
We are the loser!!!”
•
“Fare increase and unfair treatment of customers and several distribution channels.
Unilateral approach of LH to force this idea on the customers and GDS providers.”
•
“Open channel for fares is critical to any organisation. No supplier can be allowed to
establish a quasi monopoly position at the expense of the consumer.”
5
•
"Market power misuse of home carrier. Adds complexity and costs to travel agents.
Creates price disadvantage to LH.com."
•
“Lufthansa forces the Business Travel Centers to only use the airline's sales
channel. No price transparency given GDS like Amadeus (most important and
biggest within Germany and Europe) must pay, others - like Sabre and Travelport must not pay. Discriminatory! Combination of an official and hidden price increase.”
Setting A Dangerous Global Precedent
•
“It is a precedent that should not be set.”
•
“The effect this would have on the bigger picture with other carriers following suit is
frightening.”
•
“If LH is successful, the rest will follow suit and, God forbid what air prices and fare
options would ultimately look like. The carriers have been yearning for the past 30
years to get back to their halcyon days when 70% of their business were direct
purchases. Can you imagine First Class and Full Coach fares as the only options
for the business traveler, or, at minimum, a situation where the GDS fares were
higher than what the carriers sold themselves? It wouldn't take too long for them to
start squeezing their best customers. The carriers cannot serve the general public
much less corporate travel programs that offer all the conveniences of 1-stop
shopping, negotiated discounts, and preferred supplier relationships. They're not
intent to build a better mouse trap but rather destroy the only one that works!”
•
“My concern is the precedent this change would put in place.”
•
“It will instigate further backdoor increases across the airline network.”
Brave Resistance
•
“Again Lufthansa is behaving in a monopolist's manner. We will certainly take more
efforts to avoid flying them.”
•
“I do not agree with this strategy and am not willing to accept it.”
•
“The processing costs for me and my travel agency will explode and LH tickets will
be far too expensive. The solution for me is to actuate my flight volume to alternative
carriers like Air Berlin, Germanwings and Tuifly! My travel policy will support it
because I have to buy the cheapest fare which applies. I will not take part at the
preferred fares program so LH will be a lot more expensive than other airlines!”
6
•
“This is an indirect fare increase and this means, on top, much more work. In times
where everybody has to reduce costs this program is not bearable and it leads to
book other airlines.”
•
“It is a disguised way of pushing GDS and other fees to agents and customers.
100% unacceptable; I will sell away from LH if it moves forward with this.”
“It is a scheme which would drive me away from using Lufthansa again.”
•
Attempting To Destroy the TMC Channel & Managed Travel Programs
•
“This is not in the best interests of the corporate travel industry.”
•
“Increase in cost to work through a TMC.”
•
“It will cause confusion and dilute buying power by splitting the procurement
channels.”
•
“Lufthansa is complicating the processes and is trying to own the point of sale, after
they identified that the tools from GDSs and online technology providers can bias the
purchasing display in a way which has an impact on Lufthansa yield structure.”
•
“Short sighted and damaging to our mutual clients. Distribution costs should be built
into the fares for web and GDSs alike. Do not penalize your customers who use
TMCs.”
•
“Undermines the distribution system and raises costs.”
•
“The Lufthansa Preferred Fares Program is adding a lot of unnecessary complexity
and cost to travel programs. It is also disappointing that LH implemented this
program without having consulted any of their customers in the industry (corporates
and agencies). PPF puts a huge pressure on our managed travel program, and this
by a 'partner' of our program; totally unacceptable.”
•
“The current distribution system works very well. It is efficient, low cost, and fair to
all. Other industries understand that distribution is part of the cost of doing business
and the customer understands that it is currently included within the ticket cost.”
•
“Travel fares have been confusing enough without adding this additional level of
complexity. Eventually, our TMC will get to the least expensive option for the
customer, but the time involved in doing so will doubtless increase the costs of the
services they offer their customers.”
7
•
“This is a price increase for end users, either companies or private customers, which
are not compensated through a decrease of the airline fare. The customer end fare
goes up and the only choice for the customer is to accept the fare increase a)
30Euro plus or b) 4,90 per transaction. The customer gets sandwiched between the
interest of the GDS provider and airline.”
•
“PFP is a solution looking for a problem. When compared to nearly any other
industry the current distribution system is in actuality highly efficient, lower in cost,
and reasonably fair to all concerned parties. Many industries would benefit to
replicate--not destroy--what is already in place.”
•
“As LH does not reduce the airfares and puts the additional fees on top, it is not
appropriate. Especially in these times, it is not fair to hand over the costs to the
customers. But this is not the only sector. What about fuel and security
surcharge??? The prices become more and more intransparent and this has to be
stopped.”
•
“I don't agree with it at all and think it should be abolished. It's nonsense passing all
your costs to the customer and then charging them airfare as well, In all other
industries you pay the price for your goods full stop. You don't then pay all the costs
associated with the manufacture of those goods as well. It’s a total cop out by LH!”
•
“This PFP from Lufthansa is yet another example of how airlines simply pass on
their distribution cost as a surcharge to the end consumer. There should be equal
and fair distribution amongst all channels.”
•
“If Lufthansa has increased costs in logistics they have to calculate their prices
accordingly. We are only interested in complete price calculations and are not willing
to pay any extras for other services. Market comparison prices, which include
everything, are necessary as to our opinion.”
•
“Extremely against! Inefficient processes for TMCs and companies!! Cost increase
for GDS fee, TMC processes and company processes, communication and IT
solutions. Lack of understanding for such a difficult method.”
•
“The total process cost will negate the reduced price and add complexity that is only
for the benefit of LH and to the disadvantage of CRSs and the end customer.”
•
“Another anti-consumer, anti-agent misjudged attempt to obtain additional funding at
the expense of consumers.”
•
"The current distribution system works very well. It is efficient, low cost, and fair to
all. Other industries understand that distribution is part of the cost of doing business
and the customer understands that it is currently included within the ticket cost."
8
Inequitable Treatment
•
“I am looking for Lufthansa to be a fair business partner for all stakeholders and
consumers.”
•
“Lufthansa is penalizing their best customers, who typically pay premium fares
already.”
•
“I think in this economy, it is an insult to the integrity of our industry.”
•
“Don't make the cost of travel less attractive than it already is with more punitive
fees.”
•
“Unfair pass through to the clients.”
•
“Not fair.”
•
“Fuel costs have dropped radically. The increased costs were what prompted many
of the actions the airlines were taking. How do you justify taking this position?”
•
“It is unfair to shift distribution costs to customers especially in the business sector
given this is a great source of their income.”
•
“Intransparent pricing and double fees as GDS fees were already calculated and are
included in current prices.”
•
“We didn´t have any true understanding of this problem.”
•
“It´s a mess - unfair against all travel agencies, all sales agents.”
•
“The corporates become once more the playing field for suppliers. In the end the
corporates pay the bill! Years ago it was the commission cut; now it is the PFP...my
question is now: What comes next?”
•
“Companies as we have to pay the bill. We are not able to choose the best, as LH is
the market leader.”
…
9
Mr. Kevin Mitchell
Chairman
Business Travel Coalition
214 Grouse Lane
Radnor, PA 19087
December 15,2008
Re: Your communications regarding the Lufthansa Preferred Fares Program
Dear Mr. Mitchell:
On behalf of Lufthansa, I would first like to express our respect for the goals of the Business
Travel Coalition and an appreciation for your advocacy on its behalf. In addition, thank you for
taking time out to speak to me and establishing a platform for dialogue with respect to the
issues raised by your recent communications regarding the Lufthansa Preferred Fares Program
(PFP),
As I have related, we are very concerned about your portrayal of the PFP in your December 9,
2008 email-newsletter to members of the Business Travel Coalition and in other similar
communications. The information that you are disseminating within the travel industry
community is inaccurate in large measure and misleading. Your communications neglect to
provide the reader with a complete and accurate picture of the PFP; the business travel
community deserves better and we urge you to provide complete and accurate information to
them.
Accordingly, we want to take this opportunity to provide you with the following clarifying
explanations so as to establish a full and accurate depiction of all of the specifics and goals
regarding the PFP:
.
Contrary to your claim that the Preferred Fares Program "will increase corporate
customers'cost and undermine the highly efficient processes ..." travelagencies
booking a Lufthansa Preferred Fare for their customers through the CRS Sabre, Galileo
or Worldspan or the Lufthansa online booking platform for travel agents (www.lufthansaagent.com) will have the same fares available at no additional costs. The same applies
for customers directly booking via Lufthansa.com, any Lufthansa call center or at
Lufthansa's ticket counters at the airport. Lufthansa applies a fee only in the event costs
with a GDS are disproportionate high and this fee is collected exclusively from the travel
agency.
.
The Preferred Fare Program leads to efficient sales structures and transparency within
the trade. Travel agencies have always asked for full access and availability to
Lufthansa fares. In line with this requirement, all Lufthansa fares will be available in one
system - the CRS - and do not have to be first sought out by travel agencies in diverse
systems, like the Internet, CRS or other booking tools (such as search engines) for the
purpose of comparing prices.
This will prevent further fragmentation of market prices and travel agencies will thus
retain the advantages of issuing tickets through the CRS. This is by no means a burden
for any travel agency but a clear advantage when compared to making bookings for
carriers such as "Low Frill" carriers or any other Non-GDS carrier.
For your better understanding, the PFP was implemented in Germany, Austria,
Switzerland and Lichtenstein and onlv for those points of oriqin. Principally, GDS
subscribers in the US who are selling O&Ds originating in those European markets, will
not be assessed a Lufthansa GDS segment fee but will have access to the published
fare.
lf the CRS prices, such as in the case of Amadeus, are excessively high, free access to
Lufthansa's Preferred Fares is not possible. Correspondingly, the travel agencies - the
core users of any CRS - have to make their contribution and will be assessed a
Lufthansa GDS segment fee. Alternatively, travel agents can sell the published fare.
Again, by the agents own choice, all Preferred Fares are available without a fee through
Galileo, Worldspan or Sabre.
In general, each travel agency can decide at its own discretion, which booking channel
or CRS it wants to use and whether and in which form further charges will be carried out
to the end consumer.
You should also be aware of the fact, that the PFP is not a new idea in the travel
industry. U.S. and British carriers have already introduced similar models to counter the
growing fragmentation of fare information in various Global Distribution Systems (GDSs)
and also to reduce costs.
.
Lufthansa remains convinced of the added value and technical efficiency of GDSs for
our sales and distribution, but the commercial model of this system needs to change to
find ways to make sales via GDSs more cost-effective in the future, too. In
consequence, the PFP also ensures our efficiency in the future and will make Lufthansa
continue to be a stable and reliable partner for both, our customers and our travel
agencies.
We therefore strongly disagree with your statements and object to the misrepresentations in
your communications. Lufthansa is neither damaging nor discriminating against the existing
TMC channel or any supporting technology partner.
Accordingly, we are requesting you to reissue your communication to the business travel
community setting the record straight by providing accurate, complete and objective information
regarding the PFP and withdrawing your proposed letter-writing campaign. We feelthat the
business traveler community deserves to have all of the information before them. Your portrayal
of the PFP does not reflect well on Lufthansa and such misleading statements are not in the
best interest of your constituents and cannot be tolerated.
Rest assured that we are in constant dialogue with our customers regarding this and other
issues pertaining to their business travel needs. Lufthansa's aim has always been and shall
continue to be to provide the best possible travel experience to our clients and support the most
efficient way to distribute tickets to them.
I trust that our explanations and goals are now clear to you. Please let me know if you have any
further questions. Thank you.
Sincerely,
&4
Lufthansa German Airlines
Don Bunkenburg