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BA and Iberia plan third-party booking surcharge, Amadeus shares fell

written by Bella Palmer
airlines British Airways

IAG-owned (ICAG.L) airlines British Airways and Iberia are to follow Lufthansa (LHAG.DE) by charging a fee for bookings via third parties, using new technology to take more control of their own bookings.

The move will be a blow to global distribution systems (GDS) providers such as Amadeus IT Group (AMA.MC), Travelport (TVPT.N) and Sabre (SABR.O), the share prices of which all fell on Friday. Amadeus and Travelport both dropped 4 per cent while Sabre lost 1.7 per cent.

Lufthansa caused a stir in the industry when it introduced its own GDS surcharge in 2015 and CEO Carsten Spohr has repeatedly said he expects rival carriers to follow suit.

"From what we hear in the industry, and with the visible success of Lufthansa, I'd be very surprised if others would not follow," he said in March.

Airlines often have a tense relationship with GDS providers, which typically achieve much higher profit margins than the airlines themselves.

British Airways and Iberia said that, from Nov. 1, fees of 8 pounds or 9.50 euros will be levied on bookings not made via the airlines' own websites or direct sales channels.

"We will continue to work with the GDS providers to distribute our content to valued agency partners via existing solutions. However, these systems and their traditional technology solutions currently carry significantly greater costs to BA and IB," the airlines said in a statement.

Previous attempts to break away from the system cost airlines market share, prompting a return to the GDS providers, but new technology means airlines can now offer corporate customers similar booking tools themselves.

Siemens (SIEGn.DE) is one corporate customer that has signed up to Lufthansa's system rather than using third parties.

IAG Chief Executive Willie Walsh said this month that talks with Amadeus were ongoing, adding that the existing relationship between airlines and GDS providers was unsustainable.

"We're prepared to take some short-term pain to get some long-term structural change in that relationship," he said after the group reported first-quarter results.

Amadeus said it believed that a surcharge was not in the best interest of travellers and that indirect distribution remained cost-efficient.

"We continue to be engaged with IAG to find a sustainable, long-term agreement that suits all parties," a spokesman said in a statement.

BA and Iberia said the surcharge would not apply if the GDS used content created using NDC technology that gives airlines greater control of how fares and products are displayed. Amadeus said it was working to find a deal to integrate such content.


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