Lufthansa and Amadeus are expanding their partnership to modernise further the travel distribution and retailing industry, which includes New Distribution Capability.
From the fourth quarter of this year, travel agencies that use Amadeus no longer need to use third-party tech providers, or Lufthansa’s own platform, to offer the fares, which often are cheaper than those available on the global distribution systems (GDS) to their clients.
New booking scheme for Lufthansa
The Amadeus partnership with Lufthansa is part of a new airline movement to increase bookings for the courier group. Still, in this case, it’s particularly relevant to corporate travel agencies as they make three out of four of these New Distribution Capability bookings.
This technology also allows dynamic as well as continuous pricing. This is said to boost revenue for airlines and agencies alike, as they can offer more price points, exclusively via agencies that book with the new distribution capability. “There were workarounds,” Valmorbida said, “but not reacting to the millisecond speeds that new modern, digital times require.”
“It’s unique for Amadeus. The most important thing is we can offer an end-to-end solution.… enabling the full range of price points that Lufthansa has is important.”-Decius Valmorbida, president of Travel at Amadeus
As aviation is nothing like the hospitality industry, there is somewhat a need to slowly introduce and test out a ‘Pay as You Fly’ model, however, it will definitely be more expensive when it comes to interest rates with different retail providers. An important note of Lufthansa’s payment service is how quick it is to receive refunds, where a claimed 85% of its tickets are instantly refunded.
“We believe changing the cash rationale isn’t helping the industry. If you put more tickets into that last-moment bracket, it would make it more expensive, it came from a political drive that we strongly oppose.”- Tamur Goudarzi Pour, chief commercial officer and member of the management board of Swiss
Why does Germany want a pay-as-you-fly model?
In August, the German state of Lower Saxony called for the abolishment of advance payment for flight bookings — and the implementation of a “pay as you fly” model. The state’s transport minister Bernd Althusmann made a request to introduce a ‘pay as you fly’ (PAYF) model, where payment for plane tickets is processed upon check-in.
The main issue with the pay-as-you-fly scenario is that airlines have to manage crews, agreements with airports, and network planning as flights may be under-booked as well as expensive to compensate for and not entirely efficient. However, post-pandemic; all Fin-Tech schemes have been relatively successful and are promising in the near future once airlines finally settle down.
“To enter a market or route, it would take years. The pandemic has changed that. As traffic wasn’t predictable, that time has changed to three months. But as always, the traveller is king. With the end of the pandemic, we’ll see exactly where this new balance will be.”- Tamur Goudarzi Pour
The main introduction for this payment model is to tackle the need for refunds, as they won’t be necessary if a passenger books directly at the airport, as they would with a bus or train ticket. The issue with this is people often need time to plan ahead as the cost of air travel and that of rail transportation is not the same.
The Lufthansa and Amadeus partnership is set to tackle these barriers as the idea would then cater more to a wealthier demographic, which isn’t the airline’s desire.
“You don’t pay for your hotel until you check out. Ditto with your car rental. There’s certainly some elegance in having the same setup with the other major part of travel—flights.”- Scott Keyes, founder of Scott’s Cheap Flights
Do you think the ‘pay as you fly model’ will increase the current cost of fare tickets? Would you be eager to pay at the airport? Comment below.