The Lufthansa $18 Online Booking Fee: Will You Pay It?

NEW YORK (MainStreet) -- Hold onto your wallet. Giant German carrier Lufthansa - a top ten global airline by any measure - recently announced it will whack fliers who use online channels other than Lufthansa’s to book a flight with a 16 euro fee (approximately $18). 

In a statement, Lufthansa said the fee will kick in on September 1, and it explained the fee as its way to recoup costs it incurred in allowing third parties to book through its digital channels. Lufthansa accordingly calls the surcharge DCC, which it explained means Distribution Cost Charge.

The big questions: Will you pay it? Are there ways around it? Will other carriers follow?

For starters: breathe easy. Industry sources indicated that so far there are no indications that Lufthansa flights booked via the United Airlines (UAL) site will be assessed the fee, and, for North American travelers, that is where many Lufthansa flights (code-shared with United) are in fact booked.

Lufthansa, in its statement, itemized where else consumers can book tickets without incurring fees: “This predominately [sic] includes the airlines’ websites (www.LH.com, www.swiss.com, www.austrian.com, www.brusselsairlines.com), as well as the service center and ticket counter at the airports.”

In at least some cases, tickets booked via travel agents, as well as Lufthansa corporate customers, will not incur the surcharge.

U.S. travel agents and corporate travel managers are nonetheless not happy.

“I think [Lufthansa] has it wrong," said David LeCompte, president of Short's Travel Management, a corporate travel management company. "All the non-travel channels that I can think of don’t penalize the user for where they purchase their product/service. Instead, the manufacturer/service provider makes more money on direct sales and less on non-direct sales -- maybe [Lufthansa] can’t attract more travelers to its site, so it is trying to push people there with this fee for booking elsewhere.”

So, why is Lufthansa doing this? William Frye, an associate professor at Niagara University’s College of Hospitality and Tourism Management, offered his take on how the airline is taking a firm stand to protect its bottom-line and potentially enhance the customer experience.

"In my opinion, this is a strategy by Lufthansa to re-direct travelers to book their own reservations directly with the air carrier so Lufthansa can avoid paying commission to travel agents, online travel agencies, wholesalers and intermediaries," he said.  "By dealing directly with the passenger, Lufthansa can potentially leverage the relationship to exert greater control over the consumer, seek out additional ancillary revenue opportunities, and streamlined their distribution channel process.”

A key, added Frye, is that in the last few years airlines have vaulted into substantial profitability not so much by selling seats as by collecting what they call “ancillary fees.” That’s everything from seat upgrades to checked baggage and also onboard snacks and WiFi - most of which airlines also now aggressively sell through their own online booking channels, typically at some discount from inflight prices to induce passengers to buy now, when they book. Third parties typically do not offer that same array of upgrades for sale when booking a flight. Airlines, suggested Frye, want to keep that cashflow coming in and if that means redirecting bookings to their own channels, so be it.

Which makes the real question: Can Lufthansa make this stick? Frye pointed out that a few years ago European discount carrier Ryanair announced a possible fee for lavatory usage - then backtracked because of public outrage. Another factor: absolutely no other carrier followed suit.

“If others follow Lufthansa, yes, they can make this stick,” said business travel expert Joe Brancatelli, who blogs at JoeSentMe.com.

Delta Air Lines (DAL), which has declared its own war on online travel agencies, last week at a Deutsche Bank conference in Chicago, indicated that it had its booking fees under control and, apparently, had no intent to follow Lufthansa.

Several other carriers - notably Air France-KLM - told news agency Reuters the company is at least considering following Lufthansa. But know this: If airlines think they can collect the fee from docile fliers, they will. That’s what Lufthansa is betting on.

They just may win this bet.  

"There always has to be one carrier that tests the waters," said Frye. "Other carriers may be watching this, to see the fall-out."


This article is commentary by an independent contributor. At the time of publication, the author held TK positions in the stocks mentioned.

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