September 1 - Lufthansa Group’s Surcharge Could Cost The Airline Industry Billions of Euros


INDUSTRY ANALYSIS


Years ago there was a breed of airline executives who always spoke passionately about the need for industry-mindedness in decisions that affect other participants in the travel value chain, including the end customer. They were equally passionate about the value of travel agents, especially with respect to supporting complex corporate travel requirements. Importantly, successful companies and industries treat customers as the "North Star" when it comes to strategies and policies.

Sadly, most airlines' record profits have zero to do with customer-centric approaches to the business. Instead, due to market power conferred by our governments through major consolidation of the U.S. airline industry and antitrust immunized global alliances, many U.S. and European airlines today move in lockstep on all manner of strategic initiatives.

As the U.S. Department of Justice recently observed, seat capacity is now easily coordinated to maximize fares and fees. Moreover, consumer protections are aggressively undermined and commercial protectionism has become a central airline strategy in, for example, accusing the Gulf carriers of violating Open Skies agreements with a demand for a freeze of their expansion, or in frustrating Norwegian Air International's right to serve the U.S. Taken together, this pattern of anti-competitive and anti-customer behavior has enabled soaring airline profits versus a more sustainable strategy of treating the customer as the "North Star."

Indeed, the most appalling example of this shameful strategy, and abuse of dominant market position, is the Lufthansa Group's (LHG) program to surcharge 16 Euros for tickets purchased anywhere other than through the LHG websites, service centers and airport ticket counters beginning today,
1 September 2015.

Front-line travel industry participants forcefully reject LHG’s attempt to abuse its dominant market position in seeking to channel-discriminate, decrease comparison-shopping and diminish intra and inter distribution channel competition. Also of deep and increasing concern to industry participants and government regulators is evidence of substantial public communication at industry gatherings and in the press among horizontal airline competitors necessary to introduce such a far-reaching and anti-competitive surcharge program.

If LHG put its customers' needs first, that program would never have progressed beyond some misguided executive's idea. However, LHG apparently does not embrace either industry-mindedness or treating the customer as the "North Star," or they would have listened to the concerns of German travel buyers - their best customers - and all manner of concerned travel industry stakeholders from around the world.

AirChannelChoice.travel recently transmitted a letter to LHG Chairman and CEO Mr. Carsten Spohr rejecting his organization’s surcharge. The letter, signed by a group of 135 travel buyers, consumer groups, industry associations, travel agencies and other stakeholders, with operations in some 155 countries, was shared with antitrust officials in Brussels, Bonn and Washington (http://btcnews.co/1DQLNMX).

If not challenged by regulators, the damage to the competitive structure of the global travel industry, and harm to customers, will be irreversible. It is for that reason alone that the travel industry will continue to petition their governments until this and similar initiatives are disallowed.

The risk for airlines in this unbridled indifference toward the customer, for which the over-the-top LHG initiative is “Exhibit A,” is that the surcharge has become a prism through which legislators and regulators can view and connect the many dots of recent anti-competitive and anti-consumer behavior, which will no doubt require a revisiting of the efficacy of antitrust immunized alliances and other protectionist government policies costing the airline industry billions of Euros. 

...  

©2001 to 2017 Business Travel Coalition, Inc..