June 2, 2009 - Deutsche Lufthansa AG Regarding Preferred Fares Program


2 June 2009


Mr Wolfgang Mayrhuber

Chairman and Chief Executive Officer

Deutsche Lufthansa AG

Von-Gablenz-Straße 2-6

D-50679 Cologne, 21, Germany

 

Dear Mr Mayrhuber,

We the undersigned write to urge you to abandon your Preferred Fares Program (PFP) that is harming your very best corporate customers. We have worked with airlines, travel management companies and technology providers over time to develop highly efficient travel procurement and consumption processes and procedures. As explained to you in a 17 December 2008 letter, PFP completely undermines our efforts.

Many industry observers believe that your airline was able to impose its will in the marketplace for ticket distribution services because of its dominant position in the German marketplace for commercial airline services. In advance of several upcoming decisions and judgments in the EU and U.S. regarding issues of far greater strategic importance to Lufthansa than PFP, a prudent decision would be to listen to your distribution partners and customers now, and abandon PFP.

The rapid consolidation to a few dominant global airline alliances seeking antitrust immunity for joint ventures, and your own airline’s acquisition spree, has made marketplace dominance and the use of that position of great concern to courts, lawmakers and regulators on both sides of the Atlantic. Indeed, a group representing our interests and led by the Business Travel Coalition will be meeting with the European Commission on this very subject in June.

We urge you to consider the following important public-policy questions, issues and decisions facing Lufthansa in which market dominance and its potential abuse are central to favorable outcomes for Lufthansa:

1. Will the U.S. Department of Transportation and European Commission go along with an expanded Star Alliance strengthened by antitrust immunity for new member Continental Airlines?

2. Will the U.S. Senate follow the lead of the House of Representatives in requiring renewal for alliance antitrust immunity every three years?

3. Will regulators be ultimately comfortable with your airline’s potential acquisition of BMI’s Heathrow slots and your corporate strategy of competitor acquisitions in Europe, now possibly including LOT?

4. Does Lufthansa want the German court in the Royal Bank of Scotland case to see Lufthansa, already proven dominant in the German marketplace for commercial airline services, leverage that dominance in the marketplace for distribution services, via PFP, with attendant harm to distribution system participants and airline consumers?

5. Does Lufthansa really want to risk the damaging outcome of the German court - deciding in the PFP case - following guidance from the court deciding the Royal Bank of Scotland case should that court determine your airline abused its dominance in an adjacent market, i.e. the marketplace for charge card services?

We advise you to visibly put your distribution system partners and corporate customers first and foremost among your strategic initiatives and quell the rising storm of protest against your airline and its most important strategic interests.

Sincerely,

Business Travel Coalition

Institute of Travel & Meetings (ITM) UK & Ireland

Association of Retail Travel Agents

Travel Management Alliance

FlyersRights.org

Dubai Travel and Tour Agents Group (DTTAG)            

Travel Agents Federation of India

Nike

SCHOTT AG

SEB AG

GenRe Kölnische Rückversicherung

Ingersoll-Rand

Inter IKEA Group

Endress+Hauser AG

Reckitt Benckiser

HealthCare California

Gartner

NetApp

Liberty Global Europe  

Redfern Travel  

LDSC Church    

The Executive Training Group,Inc       

TDR    

LXR Travel LLC            

The DND Group          

Sanmina-SCI  

Sapient           

Cushman & Wakefield 

Air Products and Chemicals   

The Travel Team, Inc.

Advanced Travel Partners UK Ltd

Brown Brothers Harriman & Co.

Illinois Tool Works, Inc.

Cresta World Travel Ltd

Austin Travel

Worldways

Corporate Travel Partners Limited

Anthony Travel, Inc.

PAR Travel Tech, Inc.

International Travel Management

Uniglobe Normark Travel Inc.

Caldwell Travel

MT&T Business Travel Systems

CI Travel

Discount Travel Brokerage Services/BCD Travel

 

ADDENDUM

Representative Comments from Signatories

  • “We feel Lufthansa is seeking world domination and this is clearly not in anyone's interest other than Lufthansa.”
  • “PFP is a classic case of Lufthansa exerting its dominant market share position in those countries. If PFP is such a wonderful and “Fare Program" why not implement it worldwide?”
  • “Other ‘cost distribution plans’ will follow by Lufthansa and other airlines. Lufthansa is setting an example here - a bad one - and is more and more acting like a monopolist.”
  • “Lufthansa's only taking advantage of its monopolist position and ignoring customers’ needs.”
  • “The programme is an objectionable abuse of the dominant position of Lufthansa in its market and discriminates against both travel agents and managed travel programmes.”
  • “PFP is generating unacceptable additional costs for my company.”
  • “Not a good Lufthansa decision from a strategic business point of view.”
  • “I vehemently disagree with Lufthansa's cost shifting and not consulting or working with its travel distribution partners and alienating its best customers.”
  • “We advise Lufthansa to put its corporate customers first.”
  • “I cannot support an airline that is offering fares that are not available in the 
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