Today an article that goes a bit deeper into a specific area of travel bookings; the GDS surcharge. In this article, I’d like to shine my light on a development I am definitely not a fan of.
What is a GDS?
GDS stands for “Global Distribution System“; its a system that airlines, travel agencies, ticketing offices and other travel affiliated companies use to book travel-related services; including flights, hotels, cars and more. It often shows real-time inventory and provides many tools to automate and integrate on partner websites.
The GDS systems were traditionally required for travel agencies to book tickets on airlines as no other means were possible. As time progressed, many airlines (including low-cost and legacy) have adopted a strategy of “direct selling“.
Airlines are the ones that pay the GDS for every booking made. This is one of the reasons that real low-cost airlines have refused to be included as this fee did not fit in the business model.
In 2016, Lufthansa announced the introduction of a so-called GDS surcharge; €16 on top of every booking not made directly in their own systems (meaning all secondary partners, OTA’s and others). And in 2017, Air France/KLM and IAG (BA & Iberia) followed the example with the introduction of respectively €11 and €19 surcharge on GDS made bookings.
Based on multiple sources; these GDS surcharges have been said to complement the ancillary revenue for the airlines pretty well but also increased the direct bookings on their own websites. In my opinion, this gives the airlines more power, a negative development for the consumer (and business traveller alike) because this new model requires them to visit and compare multip channels to find the best fares.
Is it here to stay?
At first, my expectation was that Lufthansa would be severely hurt and would reverse the introduction of this surcharge as soon as they had evaluated results. But since both AF/KLM and IAG have joined ship I think the surcharge is here to stay.
Its now only a matter of time before other big airlines follow; the USA3 (Delta, American, United) and the ME3 (Emirates, Etihad & Qatar) would be the first that come to mind. Let’s see how to coming years will develop in that sense. Unfortunately, none of the directions is in the direct benefit to the consumer.