Future airline distribution by the example of Lufthansa Group

19 September 2018

Are you ready to benefit?

Andreas Koster-240An exclusive viewpoint article by Andreas Koster, senior director sales UK, Ireland & Iceland at Lufthansa Group [sponsored]

Three years ago the Lufthansa Group introduced its distribution cost charge and triggered an intensive discussion about NDC. What happens to be overlooked in many discussions is that this move was not only about costs, but to pave the way to a more powerful distribution landscape than today. Such as in many other industries we have to take advantage of new technology and tech providers also in the area of airline content distribution. This is of utmost importance as the travellers of tomorrow, the Generation Z, will expect to receive airline content in the same easy, digital and transparent way they are buying already in other parts of their life, be it Amazon, Netflix or Uber.

Actually, this is already happening in the airline world; however, due to technical limitations only through the airlines’ own websites. An enhanced distribution landscape in connection with NDC will enable TMCs and corporates to participate and receive the same innovative and dynamic offerings. Our objective is to ensure that our customers experience Lufthansa Group’s premium airline promise at any own and third party purchase point. And corporate buyers will benefit of more attractive, customized content in their managed travel programs, resulting in increased programme compliance.

What is Lufthansa Group's value proposition on NDC?

How can we as an airline support this vision? Lufthansa Group has majorly invested in new technology, partnered up with more than 40 tech providers and built up a central team of more than 60 distribution specialists. They, in cooperation with our team of 15 Key Account Managers in the UK, make sure that agencies are properly consulted and taken care of before and during engaging in an NDC API project with us. We know that each agency works differently and that there is no one-size-fits-all solution. While some TMCs might decide to invest in an own NDC API, others prefer to connect through one of our certified Tech providers. In the UK we are currently engaged in more than 50 API NDC projects with agencies, and a couple of them are already in the position to receive preferred content. And there is also a solution for smaller agencies with limited resources: they can easily use the free of charge Lufthansa Group NDC interface SPRK to receive our NDC content, all it requires is a fast easy web based sign up.

Our newly launched Lufthansa Group NDC Partner Program offers an attractive package consisting of commercial offerings, content access, service support and technology offers. As part of this program we already introduced our most favourable fares through NDC channels only. These fares feature a consistent price reduction of £17 roundtrip on top of the saved £11.30 Distribution Cost Charge, adding up to £30 cheaper fares than in traditional distribution channels. This results in significant savings on routes like London-Frankfurt, Manchester-Munich or Dublin-Zurich.

Along the road, the NDC Partner Program will continuously be enhanced. Since beginning of 2018, Lufthansa Group offers its Light and Business Saver fares exclusively via NDC and direct sales channels in selected European markets and this trend now continues in one of Lufthansa Group’s home market Germany. Also we in the UK are evaluating opportunities to enhance the exclusivity of content available through our NDC API.

The future is here already, are you part of it?

Our efforts to drive innovation further moves to a next level with Continuous Pricing. The airline’s current pricing structures, originating from the pre-internet era, only allows 26 price points. As a result our business class, for example, only has five price points, - too little to effectively match capacity and demand at any time. With Continuous Pricing, the Lufthansa Group is able to offer prices between two classical price points, more likely to match the “willingness to pay” of our customers. As part of our NDC Partner Program we are testing this concept at the moment and will start rolling it out in 2019 in our EU pricing structure through our NDC channels.

Looking back and ahead I am happy to see that not only other major airlines, but also the tech providers and the big majority of the UK trade are investing in distribution technology. The Lufthansa Group and also other airlines will more and more use their regained freedom to assign content to specific channels, and the ability to aggregate content from multiple sources will be a key asset for a travel agency. Corporate travelers will increasingly expect individualized offers and we see more UK corporate buyers to recognise the importance of this topic by incorporating it in their RfPs.

The Lufthansa Group has been a pioneer in enhancing the distribution landscape and we will continue to do so. We will keep up the close dialogue with our trade partners and do the best to support them on their journey into the future of airline distribution.

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