If you go out to buy a new car the dealer will tell you the cost for the basic vehicle.
Then they let you select the extras, such as sat-nav and sunroof, so you only pay for exactly what you want.
It is now time for the travel industry to provide the same choices and this is why Lufthansa is introducing its Distribution Cost Charge.
NB: This is an opinion by Christian Schindler, regional director in the UK, Ireland and Iceland for Lufthansa.
In parallel to announcing the DCC, we had numerous talks with our partners and I accept that there is still need for discussion.
There has been a wide variety of reaction worldwide, from consent and approval to criticism and outright refusal.
So it is important to stress that we want to move together with our distribution partners, not against them.
Travel agents are and will continue to be an important pillar in our channel mix. Two thirds of our tickets are sold through this channel.
We would be foolish to put this at risk so will jointly find new ways of collaboration.
We don’t want to demonize the GDSs either.
They offer a worldwide infrastructure and established sales channels but, right now they are too expensive for us and not up to date in terms of displaying our products.
Reactions from the market
We knew our announcement would not be very popular. But what we are aiming for is freedom in distribution.
We must work with all partners to establish free markets with many participants without limiting conditions such as “full content”.
This will allow us to develop a more balanced ratio between price and service. If a customer requests a service they should expect to pay for it within a source-based environment.
In recent years this environment has become out of balance. Customers who want to use a more expensive distribution channel will have to accept this higher cost – and they will see added value in this channel.
Our belief is that in the future airline distribution will be doable at lower cost in general.
Customers, travel agents and distribution partners can all benefit from such a development.
The only losers will be those who insist on stagnation and sticking to the status quo.
The Lufthansa Group carriers are going this way alone in the first place, because we are totally convinced about the benefits of more modern, liberal and efficient market structures.
The market is ready for change, for timely distribution formats and more contemporary forms of displaying content – and all this, at a lower cost!
We must respond to the call for change and much more transparency in the market through digitalization and mobility.
Consequently, we have to invest in innovative ideas and possibilities to differentiate and offer customers the individual offerings and personalised products they desire. To do this we need control over our distribution.
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