At the FVW Kongress in Cologne last month, Amadeus offered a hint in a speech that they would be reconsidering the issue of the 4.90 Euros fee that Lufthansa has been leveraging for segments booked on Amadeus for the PFP program.
A quick recap. Last year LH introduced the Private Fares Program which essentially raised all fares 15 Euros each way if the fares were booked without a contract. With a special contract between LH and the agency - the agents could get the lower negotiated rate provided it was booked via a channel that LH designated. Travelport and Sabre signed up for the program and therefore there is no charge for agents from LH for PNRs booked via these GDSs on the PFP fares. The largest GDS in Germany is Amadeus. For the first 6 months or so they picked up the 4.90 fee until they realized how much it would cost them to do so. This "pick up the tab" program ended at the start of February this year. Thus agents who book a PFP fare now pay 4.90 per segment for every ticket issued via Amadeus. Interestingly it is collected via an agent debit memo!
Fast forward to yesterday Amadeus has announced that it will again pick up the tab for the fee - well now its only SOME of the fee. They are offering to pay 3.40 Euros for the LH PFP segments. Leaving just 1.50 to still be funded by the agent.
Battle lines drawn again - clearly there must have been an impact in the German market for Amadeus by defections to the airline direct, to other GDSs and to third party technology solutions such as offered by AER Ticket (the largest consolidator) via the LUTE platform.
One has to ask why? and why now?
The offer by Amadeus states that it will be effective from January 1 2010 for the whole year or until Amadeus and its part owner Lufthansa come to some agreement. This could be very expensive for Amadeus even at the lower fee. So free money for the agents.
Interestingly one has to ask if Lufthansa has become successful at this why don't other airlines propose to do the same? Indeed is this a model for airlines outside of the German market? AF/KL have already tried this with Travelport earlier in 2009 which brought a new level of agreement between the two. So it seems that airlines have found a tool with which to leverage a different contract arrangement between the players.
With the GDSs unbundling their services and appearing (if one can judge from the Travelport financials) to be able to increase their yields from the airlines, it seems only natural that the airlines need to push back. This might be the answer. I leave you all to work out the mathematics on this one.
In our discussions with agencies on the current status of the market for GDS products, my team and I have noticed a trend that (according to multiple agents) in different markets the GDSs are not in fact cutting back the incentives but offering even more in some cases greater incentives than before.
There will be tears....someone is bound not to be happy.
Cheers
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