Lufthansa Preferred Fare Programme

Transcription

1 Lufthansa Preferred Fare Programme Frequently Asked Questions Version 7.0 Lufthansa Passenger Airline 2 June 2008 Page 1/29

2 1. Introduction and purpose of the Q&A catalogue Definitions Principles of the Preferred Fare Programme What is the Lufthansa Preferred Fare Programme? Why is Lufthansa introducing the Preferred Fare Programme? What changes are in store with the programme? What is the CRS market? Development of other CRS models in other markets and models of competitors What is an Opt-In programme? Is the Lufthansa Preferred Fare Programme an Opt-In programme? Key facts about the Lufthansa Preferred Fare Programme Markets How great is the advantage of Lufthansa preferred fares? How high is the preferred fare fee? General information on participation in the Preferred Fares Programme Must a travel agency participate in both the Lufthansa and SWISS Preferred Fare Programme or just one of the programmes in order to access all Lufthansa and Swiss preferred fares? Can a travel agency view Lufthansa preferred fares in a CRS, if it is not a participant in the Lufthansa Preferred Fare Programme? Do Lufthansa preferred fares provide better availability than Lufthansa published fares? What must be taken into consideration when issuing Lufthansa preferred fares? With its Preferred Fare Programme, is Lufthansa intentionally putting its own direct sales at an advantage versus indirect (travel agency) sales? Will Lufthansa be better presented in the computer reservation system in the future, as the preferred fare fee is not contained in the airfare? Travel agency chains/travel agencies (IATA) Travel agencies (NON-IATA) Consolidators and online portals Tour operators and group travel ERSP Code users What happens to special fares? Will they be offered as Preferred Fares as well? Corporate customers Corporate customers using the Pay as you Fly product End customers Changes resulting from the new fares structure and the added-value of the Preferred Fare Programme For travel agencies For Corporate customers What does the Preferred Fare Programme entail for Lufthansa s own distribution channels? Time plan for implementation of the Preferred Fare Programme In Germany In Austria In Switzerland Agreement on participation in the Lufthansa Preferred Fare Programme Prerequisites for participation in the Preferred Fare Programme Are there any technical prerequisites? Are there organisational prerequisites?...16 Page 2/29

3 Are there legal prerequisites? How does a travel agency receive the agreement on participation in the Lufthansa Preferred Fare Programme? Where can a travel agency obtain further details about the agreement? Who are the parties to the agreement on participation in the Preferred Fare Programme? To whom does the travel agency send the signed agreement? Duration of agreement and termination Duration Termination Preferred Fare Fee How high is the preferred fare fee? How is the preferred fare fee derived? Is the preferred fare fee a fixed amount? Will bookings made via Online Booking engines (OBE/IBE) also be subject to the preferred fare fees? How will the travel agencies be charged the preferred fare fee? What happens if a Lufthansa preferred fare ticket is cancelled? What happens if preferred fares are not issued on a Lufthansa or SWISS document? What happens if a ticket is reissued/exchanged (rebooking/rerouting/ revalidation/reissues and exchanges)? How does a travel agency settle the preferred fare fee with its customers? Does that mean that the preferred fare fee will raise prices for the end customer Why is the preferred fare fee charged to the agency and not the end customer? Why is the preferred fare fee not printed in the ticket or receipt rather than charging the travel agency? Processes and fee settlement How will Lufthansa preferred fares be made available to the travel agency? How are preferred fares shown on the ticket? Processes in the travel agency Booking and ticketing process What flights have to be booked in order for a preferred fare to apply? Are Lufthansa preferred fares interlineable? Are Lufthansa preferred fares combinable? Are there any exceptions as regards the combinability of normal tariffs? Service Fee Manager Processes in Lufthansa distribution channels Display Support: Who supports the travel agencies with: Queries relating to the Preferred Fare Programme? Queries on handling the agreement?...29 Page 3/29

4 1. Introduction and purpose of the Q&A catalogue The development of the costs for computer reservations systems (CRS resp., GDS = global distribution system) has for years exposed airlines to increasing pressure. In order to compensate for the higher cost of sales/distribution through CRSs, Lufthansa is revising in cooperation with SWISS from 1 July 2008 the distribution of fares through CRSs, initially for flights originating in Germany and Austria. Implementation for flights starting in Switzerland is planned for 1 October Lufthansa will then increase all published fares for flights from Germany and Austria by 15 euros for a one-way ticket resp., by 30 euros for a round-trip ticket. In Switzerland, fares will be increased by 25 SFR for a one-way ticket resp., by 50 SFR for a round-trip ticket. For travel agencies in Germany, Austria (and in Switzerland from October), the lower fares available up to then will be accessible as Lufthansa preferred fares through every CRS system, provided they participate in the so-called Lufthansa Preferred Fare Programme. For the issuance of a preferred fare ticket through a CRS, Lufthansa will charge travel agency partners a preferred fare fee which is set to a specific amount depending on which CRS is used. Depending on the cost development of each CRS the fee may be lowered down to zero euros. This will prevent further fragmentation of market prices, i.e. all Lufthansa fares will continue to be available in one system the CRS and must not first be sought by travel agencies in diverse systems, like the Internet, CRS or other booking tools (such as search engines) for the purpose of comparing prices. Travel agencies will thus retain the advantages from issuing tickets through the CRS. This catalogue is designed to provide you with answers to key questions. 2. Definitions ADM stands for Agency Debit Memo, i.e. an accounting document sent electronically by airlines to travel agents through BSP to make adjustments to any payment irregularities in the issuance of tickets. Agreement on participation in the Lufthansa Preferred Fares Programme is an ancillary agreement on the distribution of fares based on the Lufthansa Preferred Fare Programme. This agreement spells out the rules and obligations of a travel agent participating in the programme. BSP (Billing and Settlement Plan) is the IATA invoicing system. Agencies send their income from ticket sales to BSP and BSP settles accounts with the airlines. Combinability allows two different fares from two different airlines to be combined. CRS is a computer reservations system providing users with information about flight schedules, fares, terms etc., and allowing them to make flight reservations or issue tickets. CRS Code of Conduct issued by the European Union, with legally binding norms for airlines, travel agencies and CRSs. Special norms apply to parent carriers (parent companies) with a share in or effective control of a CRS. Page 4/29

5 Direct Connect is a direct technical link for sales partners to the Lufthansa Inventory (Lufthansa booking inventory) without using a CRS system. ERSP Code is an abbreviation for Electronic Reservation Services Provider and marks those providers, who provide their customers access to CRS content via electronic media, such as an Internet booking engine or an online booking engine (IBE/OBE). Such providers have been called upon by IATA to identify and register themselves as an ERSP. Registered ERSPs receive an eight digit ERSP code. It is not necessary to have an IATA number in order to apply for and receive an ERSP code. Thus, non-iata agencies can register for an ERSP code as well. When a booking via an ERSP is made, the ERSP code is added onto the respective PNRs automatically by the CRS. Full Content stands for comprehensive information on fares and flight available at airlines like Lufthansa. GDS stands for Global Distribution System. Synonym for CRS. IATA (International Air Transport Association) is the worldwide airline association. Interlineability allows passengers to switch from one carrier to another but paying just one fare for the entire journey. E.g. FRA-SYD flying FRA-SIN (LH) and SIN-SYD (QF) Lufthansa-Agent.com is the Lufthansa online booking portal for travel agents in the German market. The portal allows registered travel agencies to access Lufthansa preferred fares at no charge and issue tickets to their customers. Lufthansa preferred fares are private fares, offered at a reduced price compared with generally accessible published fares. Lufthansa preferred fares are only made available via CRS to travel agencies which have signed an agreement on participation in the Lufthansa Preferred Fare Programme and returned it to Lufthansa. Lufthansa Preferred Fare Programme allows travel agencies signatory to the Lufthansa Preferred Fares System to access Lufthansa preferred fares through the CRS of their choice. Lufthansa Preferred Fare Fee is the CRS specific charge per issued coupon raised by Lufthansa on the issuance of tickets based on Lufthansa preferred fares when issued via a CRS. MCO is a Miscellaneous Charges Order resp. a Multiple Purpose Document (MPD). Office ID is a synonym for Pseudo-City Code and the identification number of a CRS terminal in a travel agency. A travel agency can have several PCCs per IATA number and CRS. PAF Pay as you Fly is a product offered currently in booking classes C, D, Y, B, G to corporate accounts within Lufthansa s PartnerPlus Progress corporate travel promotion programme. The programme allows corporate account travellers to make a PAF reservation up to an hour before take-off through their travel agent or through (corporate) online booking machines (OBE / IBE), for which Lufthansa (Lufthansa own sales) makes out an etix and which is not charged until the night following flight departure. Page 5/29

6 PCC (Pseudo-City Code) is a synonym for Office ID and the identification number of a CRS terminal at a travel agency. A travel agency can have several PCCs per IATA number and CRS. Private Fares are fares accessible through a CRS to a select group of users, e.g. corporate discounts or Lufthansa preferred fares. PTA is a Prepaid Ticked Advice. Published Fares are generally accessible fares in a CRS. TOD stands for Ticket On Departure. 3. Principles of the Preferred Fare Programme 3.1. What is the Lufthansa Preferred Fare Programme? The Lufthansa Preferred Fare Programme is a voluntary additional offer to all participating travel agents to issue Lufthansa preferred fares through a CRS of their choice against payment of a fee. Preferred fares on flights ex Germany and Austria are 30 euros (ex Switzerland 50 SFR) lower than generally accessible standard CRS fares for a round-trip ticket or 15 euros (ex Switzerland 25 SFR) below standard fares for a one-way trip. They correspond thereby to fares from and Lufthansa s own distribution channels ( Call Center, Lufthansa ticket counters at airports). For utilising these preferred fares on an issued ticket on Lufthansa or SWISS document, the travel agency pays Lufthansa a preferred fare fee, the amount of which depends on the specific CRS used. See chapter 4.3 for the actual level of the preferred fare fee. The preferred fare fee will be charged on a maximum for 6 coupons per roundtrip ticket. This fee compensates for the bulk of the costs incurred per issued coupon by Lufthansa from sales through external CRS systems. The Lufthansa Preferred Fares Programme will be launched in Germany and Austria on 1 July 2008 and in Switzerland on 1 October New fare structure from 1 July 2008 Example: DUS-NYC-FRA-DUS; LH Fare Base Code: VPRCDEW (As of 15 January 2008, travel originates as of 4 July 2008) Access via any CRS through participation in Lufthansa s or SWISS s Preferred Fare Programme or via Lufthansa-Agent.com (includes SWISS fares) Page 6/29

7 Example: Preferred Fare fee calculation for Lufthansa and SWISS preferred fares When booking a preferred fare ticket with three coupons via a CRS with a fee of 4.90 Euros Example: DUS-NYC-FRA-DUS; LH Fare Base Code: VPRCDEW (As of 15 January 2008, travel originates as of 4 July 2008) 3.2. Why is Lufthansa introducing the Preferred Fare Programme? Lufthansa is aiming to lastingly lower CRS costs in order to counteract the steadily growing cost pressures from that area. Simultaneously, Lufthansa intends to continue making all its fares accessible to all travel agency partners through CRSs. With the launch of a Preferred Fare Programme, Lufthansa is following an international trend in the travel industry. Similar models have been launched in recent years in the USA (September 2006), United Kingdom (early 2007) and by easyjet in Germany (in November 2007). In order to measure up lastingly to competition, especially in the USA, Lufthansa must also significantly reduce its CRS costs. As a network carrier, Lufthansa will always have to transact a good percentage of sales through CRS systems. Travel agencies have based their business processes largely on CRS sales. Therefore Lufthansa has no interest in isolating any of its prices from this sales channel. All travel agencies will continue to have all Lufthansa fares available in CRS systems What changes are in store with the programme? With the programme launch on 1 July 2008 in Germany and Austria (in Switzerland on 1 October 2008), Lufthansa is taking measures to contain the costs incurred from sales channels. All distribution channels will in future receive preferred fares, which will generally be 30 euros per round-trip or 15 euros per one-way ticket lower than the currently published CRS fares. Travel agencies will have the choice: Lufthansa preferred fares will still to them be available at no extra cost at With the Preferred Fare Programme, Lufthansa is additionally offering every IATA travel agency in Germany, Austria and Switzerland the opportunity of also accessing for a fee all Lufthansa preferred fares through a CRS system What is the CRS market? Computer reservations systems collate information from service providers (airlines, hotels, car rentals) and make it available electronically to agents selling those services. They additionally facilitate the functional organisation of travel itineraries. Page 7/29

8 Worldwide, following the merger of Galileo and Worldspan, there are three major CRSs, also called Global Distribution Systems (GDS): Amadeus, Sabre and Travelport (Galileo/Worldspan). The CRSs were originally set up by airlines in the 1970s/1980s. Depending on the location of the founding airline, the CRSs have so-called home markets, in which the systems enjoy (even today still) a quasi-monopoly. Amadeus, for example, is particularly strong in Germany, France, Spain and Scandinavia, as is Sabre in America and Travelport (Galileo/Worldspan) in UK, Switzerland, Portugal and the USA. In order to prevent airlines giving preference to a CRS, in which they have an interest or ownership stake, the European Commission has issued legally binding norms in a CRS Code of Conduct. A similar regulation used to be in force in the USA. That regulation was scrapped in 2004 when airlines were no longer owners of CRS in the US market. In the still regulated market in Europe, a commercial model has developed, which is unacceptable especially to airlines: Service providers, like airlines, pay booking fees to the CRSs and the CRSs pass on a good portion of the revenue from those fees in the form of incentives to travel agencies in order to secure market shares. Example: Germany, Austria und Switzerland: pays booking fee to Airline CRS forwards CRS incentive to Travel agent That way, the fight for market shares is currently financed by the airlines: With CRSs in competition with other CRSs passing increasingly higher incentives onto travel agencies. The CRS list prices for airlines have continued to rise steadily and travel agencies receive the Full Content of the airlines at no charge through CRS systems Development of other CRS models in other markets and models of competitors So-called Opt-In models, which are administered by established CRSs, have been in existence in the USA since With these models, the travel agencies waive or forgo part of their incentives ( USD per segment). In return, the airlines guarantee travel agencies their full content (i.e. all the fares of the airlines remain in the CRSs). The CRSs, for their part, reduce the airlines booking fees. Opt-Out travel agencies, which have not registered for the Opt-In model, pay a fee of 3.50 USD per segment but receive no guarantee of full content. The market acceptance of Opt-In models in the USA lies currently at well over 95% of the travel agencies. As a result, the US carriers have gained a significant cost advantage and thereby a competitive edge on European airlines. British Airways, taking a leaf out of the US Opt-In models, changed the UK market in unison with the CRSs in There too, travel agencies can opt to forgo incentives and instead pay travel agents 1 pound per segment for BA bookings in Economy booking classes and 0.50 pounds (50 pence) per segment in Business booking classes. Travel agencies, which decide against the Opt-In, pay a segment-related fee of 3 pounds to BA. Page 8/29

9 In November 2007, easyjet started a similar model in the German market. All fares can be booked through a CRS but are between 5 and 7 euros per coupon more expensive than those booked on the easyjet website What is an Opt-In programme? Is the Lufthansa Preferred Fare Programme an Opt-In programme? Under the term Opt-In programme, models have evolved in the USA and UK, in which travel agencies voluntarily forgo part or all of their CRS incentives and, in return, are guaranteed the full content of participating airlines through their CRS. The term Opt-In is derived from the word Option and underlines the fact that participation in such models is voluntary. The Opt-In programmes in the USA were set up by the CRSs and are also run under their management. The Lufthansa Preferred Fare Programme is not directly comparable to the Opt-In models in the USA and in the UK. First of all, in contrast to the Opt-In Models, Lufthansa itself administers and runs its Preferred Fare Programme, not the CRSs. Second, under the Lufthansa Preferred Fare Programme, CRS incentives to the travel agent remain untouched. 4. Key facts about the Lufthansa Preferred Fare Programme 4.1. Markets For tickets issued from 1 July 2008, Lufthansa and SWISS are adjusting the fare structure for flights ex Germany and Austria. All published fares of Lufthansa and SWISS for flights ex Germany and Austria will be increased by 30 euros for round-trip fares and by 15 euros for one-way fares. From 1 October 2008, Lufthansa and SWISS will similarly adapt the fares structure for flights ex Switzerland: The price of round-trip fares will go up by 50 SFR and of one-way fares by 25 SFR. At the same time, travel agencies in Germany, Austria and Switzerland, which participate in the Preferred Fare Programme, can begin issuing tickets at preferred fares for flights originating in Germany, Austria or Switzerland How great is the advantage of Lufthansa preferred fares? Lufthansa preferred fares become available for flights ex Germany and Austria on 1 July 2008: Those fares will be 30 euros lower than the then valid published fares for round-trip fares and 15 euros lower for one-way fares. Lufthansa preferred fares will be available for flights ex Switzerland from 1 October They will cost 50 SFR less than the then valid published round-trip fares and 25 SFR less for one-way fares. Page 9/29

10 4.3. How high is the preferred fare fee? The preferred fare fee covers a part of the CRS costs which are charged to Lufthansa. These costs vary between CRSs. Thus the preferred fare fee may vary between CRSs as well. Currently the following preferred fare fees will be applied per issued coupon on a preferred fare fee plus VAT. CRS Point of Sale DE, AT Point of Sale CH Amadeus EUR 4.90 SFR 8.00 Galileo EUR 0.00 SFR 0.00 Sabre EUR 0.00 SFR 0.00 Worldspan EUR 0.00 SFR 0.00 A preferred fare fee will be charged on a maximum of six coupons per roundtrip ticket. Lufthansa preferred fares have to be booked and ticketed in the same CRS General information on participation in the Preferred Fares Programme Participation in the Preferred Fare Programme is open to all IATA travel agencies in Germany and Austria as well as, from 1 October 2008, to all IATA travel agencies in Switzerland, which have concluded an agreement with Lufthansa on the sale of Lufthansa tickets. Those travel agencies can access Lufthansa and SWISS preferred fares through any CRS system of their choice. Registering for the Lufthansa Preferred Fares Programme is free of charge. A preferred fare fee will be charged only on issuance of coupons on an LH or LX document based on a Lufthansa preferred fare, if a preferred fare fee is applied on the CRS used (see chapter 4.3). Travel Agents participating in the Lufthansa Preferred Fare Programme, have access to Preferred Fares originating from Germany, Austria (both as of 1 July 2008) and Switzerland (as of 1 October 2008). Furthermore, Lufthansa and SWISS preferred fares will be available to all travel agencies at no extra charge, if they book tickets at (incl. SWISS flights) Must a travel agency participate in both the Lufthansa and SWISS Preferred Fare Programme or just one of the programmes in order to access all Lufthansa and Swiss preferred fares? To obtain access to all Lufthansa and SWISS preferred fares, travel agencies must conclude an agreement on participation in both the Lufthansa and SWISS Preferred Fare Programmes Can a travel agency view Lufthansa preferred fares in a CRS, if it is not a participant in the Lufthansa Preferred Fare Programme? No, only travel agencies signatory to the Lufthansa Preferred Fare Programme, can view and distribute Lufthansa preferred fares. This also applies for travel agents wishing to book and issue preferred fare tickets using a CRS for which Lufthansa has set the preferred fare fee to zero euros. Page 10/29

11 4.7. Do Lufthansa preferred fares provide better availability than Lufthansa published fares? The availability of Lufthansa preferred fares corresponds to that of Lufthansa published fares. There is no difference What must be taken into consideration when issuing Lufthansa preferred fares? Lufthansa preferred fares may only be booked and issued in the same CRS and on a Lufthansa (220) or SWISS (724) document. This also applies to any corporate rates derived from a Lufthansa preferred fare. If the document of a carrier other than Lufthansa or SWISS is used to issue a flight ticket based on a Lufthansa preferred fare or an other CRS than the booking CRS is used to issue the ticket, Lufthansa is entitled to debit the travel agency for the difference to the applicable fare at the time of the ticket issuance With its Preferred Fare Programme, is Lufthansa intentionally putting its own direct sales at an advantage versus indirect (travel agency) sales? Lufthansa s Preferred Fare Programme makes the different distribution costs of direct sales and indirect sales visible. Lufthansa s direct sales are less expensive for Lufthansa than indirect sales via CRS. With the introduction of Lufthansa s Preferred Fare Programme, Lufthansa is accommodating these different cost structures. By charging a CRS specific preferred fare fee (see Chapter 4.3) Lufthansa is effectively compensating the cost disadvantages of the indirect sales channel. No other airline in Europe has gone through the efforts of offering a Agent.com or a similar booking platform. With all travel agencies have the ability to book all Lufthansa fares without additional cost. Lufthansa has introduced this offering primarily for small leisure travel oriented agencies. Notwithstanding these issues, Lufthansa is not anticipating a significant shift of volume to direct sales in the German market, due to the structure of Lufthansa s business. 70 to 80% of Lufthansa s business in Germany is business travel. Business travel emphasizes flexibility and changes in travel plans need to be accommodated easily. However, neither nor offers rebooking functionality. In addition, corporate discount rates are not available on is thus primarily an option for low yield leisure travel. Online platforms are not an option for business travel, Lufthansa s main business. CRS are the right distribution channel for business travel, it is the commercial model behind CRS distribution which is problematic for Lufthansa Will Lufthansa be better presented in the computer reservation system in the future, as the preferred fare fee is not contained in the airfare? Lufthansa charges the preferred fare fee to the travel agency as user of the CRS. The fee is not therefore shown in the ticket price. Lufthansa has no influence on the way the CRS presents the display. This is determined by the user settings chosen by the travel agency. Page 11/29

12 4.11. Travel agency chains/travel agencies (IATA) Participation in the Preferred Fare Programme is open to all IATA travel agencies and thereby also travel agency chains which have signed an agreement on the distribution or sale of Lufthansa tickets. The programme makes no distinction between travel agency chains and independent or medium-sized travel agencies. Lufthansa mailed all IATA travel agencies, which have signed an agreement on the sale of Lufthansa tickets, an ancillary agreement on participation in the Lufthansa Preferred Fare Programme. This agreement can be concluded with Lufthansa by an individual IATA travel agency or, on request, by a travel agency chain, for all the agencies in the chain. The agreement on participation in the Preferred Fare Programme can be downloaded from (Log-in: lh, password: online) resp., All travel agencies can access the preferred fares at no charge at Travel agencies (NON-IATA) All non-iata travel agencies will also be able to access preferred fares without an ancillary agreement when booking at The ancillary agreement will be offered only to agency partners, which have signed an agreement on the distribution of Lufthansa tickets (IATA agencies) Consolidators and online portals Aside from regular IATA travel agencies, all consolidators and online portals will be able to join the Preferred Fare Programme as long as they have an IATA number. The consolidator resp., online portal will also be charged a preferred fare fee for all tickets they issue as preferred fares (maximum 6 coupons per tickets) Tour operators and group travel In addition to IATA travel agencies, all tour operators with an IATA number will be free to participate in the Preferred Fare Programme. Tour operator fares will as previously be made available separately to tour operators as private fares and are not affected by the Preferred Fare Programme. Group tariffs are not published in the CRS but depend on the size of the group and certain steering parameters. Thus group tariffs are not affected by the Preferred Fare Programme ERSP Code users An ERSP code serves as identification in order to be able to track bookings of Electronic Reservation Services Providers. Up until now, Lufthansa has provided ERSPs with certain special online prices and only ERSPs which had a separate Office ID for the fulfilment of these online transactions were eligible for these online prices. The Lufthansa Preferred Fare Programme has no impact on the handling of ERSP codes. If an ERSP Code was needed up to now it is still needed. Whether a company needs an ERSP code or not, depends on whether the company is using its own IBE/OBE for bookings, or whether it is using the IBE/OBE of a travel agency. If a company is using the IBE/OBE of a travel agency, then the travel agency is contractual Page 12/29

13 partner of Lufthansa and the travel agency then needs an ERSP code for the PCC of its IBE/OBE. If a company is using its own IBE/OBE, then it needs its own ERSP code, although this ERSP code is then not assigned to its IBE/OBE, but to the PCC instead. The company can then determine which IATA number is used to drive fulfilment. An application for an ERSP code is subject to a one-time fee of 125 SFR plus a yearly fee of an additional 125 SFR for IATA travel agencies. For non-iata agencies, both fees double. ERSP codes must be applied for with IATA. The ERSP code is then sent to the CRS and registered as part of the PCC profile. The CRS then adds ERSP code information to each booking automatically What happens to special fares? Will they be offered as Preferred Fares as well? Every Lufthansa published fare currently available via CRS (e.g. via FQD command in Amadeus) will also be available as a Preferred Fare. As an example, see the youth fare VYOUNG below: Today: In future: Most fares which today are not visible in the published fare display (such as tour operator fares or group fares) will in future not be available as preferred fares. The only exceptions are corporate discount rates, which will be available as preferred fares (see 4.17). Fares which are derived from a specific "reference fare" (x% discount from the reference fare) will be derived only from published fares as of 1 July Affected fares include: - Agent Discounts (AD75, UD) - Seaman Fares (SB25, SC40) - Other discounts (i.e. discounts for disabled people SB30) Children and infant discounts are exceptions to this rule. These discounts may be applied on preferred fares with the same discount level as published fares Corporate customers If a company s travel agency decides to participate in the Preferred Fare Programme, the corporate rates (Corporate Discounts, CDs) will be derived not from the published reference fare but from the corresponding preferred fares reduced by 15 euros for one-way fares or 30 euros for round-trip fares. This corporate rate will be displayed in addition to the standard corporate rate. Page 13/29

14 Corporate Fares when participating in Lufthansa s Preferred Fare Programme as of 1 July 2008 Example: Corporate Fare on MUC-LON referring to Published Fare of 944 (10% discount) Corporate customers using the Pay as you Fly product Pay as you Fly (PAF) Tickets will be treated separately. Since ticket fulfilment for PAF Tickets is effected in Lufthansa s own distribution channels, PAF Discounts will always be derived from the Lufthansa preferred fare, irrespective of whether the booking travel agency is party or not to the Preferred Fare Programme. Travel agencies, which currently use the PAF product, will not be charged a preferred fare fee for booking PAF Tickets End customers Lufthansa offers previous price levels as preferred fares through the Call Center and airport ticket counters. Customers in this case pay a Ticket Service Charge. The Ticket Service Charge, amounting to 10 resp., 30 euros for intra-german and European flights as well as 15 resp. 45 euros for intercontinental flight tickets remains unchanged. End customers and corporates are not directly affected by Lufthansa s preferred fare programme. However, we assume that travel agencies will pass on to customers the costs for preferred fare fees and that this will cause changes in the contracts between travel agencies and end customers. In case that all travel agencies in Germany pass on 100% of the preferred fare fees to their corporate customers, this would mean an average price increase of 1.8% for corporate customers. Since the programme will only go into effect on 1 July 2008, the resulting price increase for all of 2008 is half that, namely 0.9%. 5. Changes resulting from the new fares structure and the added-value of the Preferred Fare Programme 5.1. For travel agencies All Lufthansa and SWISS fares will remain accessible to travel agencies through the CRS or their choice, their major distribution channel. However, under the Preferred Fare Programme, Lufthansa is - by charging the fee - making sure that travel agencies pay a large share of CRS costs (unless Lufthansa has set the fee level for a specific CRS to zero euros, see Chapter 4.3). Travel agencies will still be able to book Lufthansa and SWISS preferred fares at no charge through Page 14/29

15 Lufthansa preferred fares correspond to fares on There will in future be no more distinction between online fares (e.g. ReadytoFly-Fares ) and other fares for flights orginating from Germany, Austria and Switzerland (as of 1 October 2008). This will facilitate a comparison of fares in all booking channels in these markets For Corporate customers With the Preferred Fare Programme, Lufthansa is making all Lufthansa fares available in CRS distribution channels. Travel agencies will share the costs of distributing the information. Corporates are not directly affected by Lufthansa s preferred fare programme. However, we assume that travel agencies will pass on to customers the costs for preferred fare fees and that this will cause changes in the contracts between travel agencies and end customers. In case that all travel agencies in Germany pass on 100% of the preferred fare fees of 4.90 euros to their corporate customers, this would mean an average price increase of 1.8% for corporate customers. Since the programme will only go into effect on 1 July 2008, the resulting price increase for all of 2008 is half that, namely 0.9% What does the Preferred Fare Programme entail for Lufthansa s own distribution channels? There is no difference in content between Lufthansa and third-party distribution channels. In future, there will additionally be no difference between online and other fares for flights orgininating from Germany, Austria, and Switzerland (as of 1 October 2008). Preferred fares priced at the same airfare level as in the Lufthansa distribution channels will also be available to travel agencies through the Lufthansa Preferred Fare Programme in CRS systems as well as when booking through the Lufthansa travel agency portal Preferred Fares for flights orginating in Germany, Austria and Switzerland will be available at all points of sale in Lufthansa s own distribution channels. 6. Time plan for implementation of the Preferred Fare Programme 6.1. In Germany The new fare structure for all flights ex Germany comes into force on 1 July All travel agencies in the German market, which have signed an agreement on participation in the Lufthansa Preferred Fare Programme and returned it to Lufthansa by 31 March 2008, will be able to access the additional preferred fares through their CRS from 1 July Preferred fares will be displayed in the CRS as of 24 June Corporate discounts based on preferred fares will be displayed in the CRS as of 16 June In general, preferred fares will be only applicable for departure and ticketing as of 1 July Page 15/29

16 6.2. In Austria The new fare structure for all flights ex Austria comes into force on 1 July All travel agencies in the Austrian market, which have signed an agreement on participation in the Lufthansa Preferred Fare Programme and returned it to Lufthansa by 31 March 2008, will be able to access the additional preferred fares through their CRS from 1 July Preferred fares will be displayed in the CRS as of 24 June Corporate discounts based on preferred fares will be displayed in the CRS as of 25 June In general, preferred fares will be only applicable for departure and ticketing as of 1 July In Switzerland The new fare structure for all flights ex Switzerland comes into force on 1 October All travel agencies in the Swiss market, which have signed an agreement on participation in the Lufthansa Preferred Fare Programme and returned it to Lufthansa by 16 June 2008, will be able to access the additional preferred fares through their CRS from 1 October Agreement on participation in the Lufthansa Preferred Fare Programme 7.1. Prerequisites for participation in the Preferred Fare Programme Are there any technical prerequisites? Every IATA travel agency equipped with a CRS terminal has the technical prerequisites for the Programme. The Lufthansa preferred fares will be made available as private fares on the agency s Office ID resp., PCC. After registration for participation in the Preferred Fare Programme, Lufthansa requires at least four weeks to switch on access to preferred fares to the travel agency. The preferred fare fee will be debited through BSP (See chapter 8) Are there organisational prerequisites? The travel agency must provide Lufthansa with the following information: Company name Complete address Contact partner IATA No. Office ID resp., PCC and office CRS The travel agency must have returned to Lufthansa a signed agreement on participation in the Preferred Fare Programme Are there legal prerequisites? The participatory travel agency must be accredited to IATA in Germany, Austria, resp., Switzerland and have signed an agreement on the sale of Lufthansa tickets. Page 16/29

17 7.2. How does a travel agency receive the agreement on participation in the Lufthansa Preferred Fare Programme? All travel agencies, which have already concluded an agreement with Lufthansa on the sale of Lufthansa tickets, received an agreement to participate in the Lufthansa Preferred Fare Programme in February That agreement is, moreover, available online for download at (log-in: lh, password: online) resp., at Where can a travel agency obtain further details about the agreement? On the Internet at resp., as well as from Lufthansa Service Teams and the relevant Lufthansa contact partners Who are the parties to the agreement on participation in the Preferred Fare Programme? The parties to the agreement are Deutsche Lufthansa AG and the respective IATA travel agency To whom does the travel agency send the signed agreement? To the following address: Deutsche Lufthansa AG, Frankfurt am Main 7.6. Duration of agreement and termination Duration Provided the agreement on participation in the Lufthansa Preferred Fare Programme has been signed by 31 March 2008 by the travel agency in Germany and returned to Lufthansa, it comes into force on 1 July Agreements signed after 31 March 2008 will come into force at the travel agency once it has been switched technically into the Preferred Fare Programme. Switch-on will be effected at the end of the month following the month, in which the agreement was signed by Lufthansa and the travel agency, but at the earliest on 1 August Termination Both parties to the agreement have the right to terminate the agreement, without stating the reasons, subject to four weeks notice to the end of the month. Termination of the agreement must be made in writing. The agreement can still be terminated for good cause without notice. In the event of a serious infringement against the terms of the agreement on participation in the Preferred Fare Programme, or repeated breaches by the travel agency, Lufthansa has Page 17/29

18 the right to terminate the agreement without notice. Exclusion from the Lufthansa Preferred Fare Programme then follows with immediate effect. Major reasons for Lufthansa to terminate the agreement without notice are: a) Travel agency s insolvency b) End of the agreement on the sale of Lufthansa tickets c) Loss or forfeit of the IATA accreditation The travel agency also has a special right to terminate the agreement, if Lufthansa adjusts the preferred fares fee with at least four weeks notice. In that case, the travel agency can terminate the agreement up to two weeks prior to the fee adjustment becoming effective. 8. Preferred Fare Fee 8.1. How high is the preferred fare fee? The preferred fare fee covers a part of the CRS costs which are charged to Lufthansa. These costs vary between CRSs. Thus the preferred fare fee may vary between CRSs as well. Currently the following preferred fare fees will be applied per issued coupon on a preferred fare fee plus VAT. CRS Point of Sale DE, AT Point of Sale CH Amadeus EUR 4.90 SFR 8.00 Galileo EUR 0.00 SFR 0.00 Sabre EUR 0.00 SFR 0.00 Worldspan EUR 0.00 SFR 0.00 A preferred fare fee will be charged on a maximum of six coupons per roundtrip ticket. Lufthansa preferred fares have to be booked and ticketed in the same CRS How is the preferred fare fee derived? The preferred fare fee represents an agency s share in the CRS costs incurred by Lufthansa and is derived from the GDS list prices per issued ticket which Lufthansa has to pay on a weighted average for Germany, Austria and Switzerland. List prices are the prices for booking, ticketing, cancellation and other related services as governed by the distribution agreements between Lufthansa and the CRS, the so called Participating Carrier Agreements. The additional full content agreements between Lufthansa and the CRS provider Amadeus have already expired. In calculating the preferred fare fee, Lufthansa has thus assumed that it will be paying published list prices as of 1 July 2008 by bookings of Amadeus subsribers. With the CRS providers Sabre, Galileo and Worldspan Lufthansa reached an agreement on an acceptable CRS cost level and therefore no preferred fare fee will be applied for Sabre, Galileo and Worldspan subscribers issueing preferred fare tickets. As a prerequisite Lufthansa preferred fares must be booked an issued in the same CRS. Should Amadeus offer lower prices and thus acceptable ecomomics to Lufthansa, Lufthansa will be glad to lower its preferred fare fee accordingly. It is certainly not the intention of Lufthansa, to charge travel agencies more than Lufthansa pays for CRS services. Page 18/29

19 8.3. Is the preferred fare fee a fixed amount? Lufthansa reserves the right to adjust the preferred fare fee to market requirements in accordance with contractually agreed periods of notice. The current adaptation of the preferred fare fee has been distributed to travel agents who are participating in the preferred fare programme via a new contract annex 1 by end of May Adjustments will be announced by Lufthansa within a notice period of at least four weeks. In that case, the travel agency has a special right to terminate the agreement up to two weeks prior to an adjustment becoming effective Will bookings made via Online Booking engines (OBE/IBE) also be subject to the preferred fare fees? Yes, coupons of a ticket based on a Lufthansa Preferred Fare and booked via an Online Booking Engine (e.g. Amadeus Aergo, Ifao Cytric, KDS, SAP) will be subject to a CRS specific preferred fare fee (see chapter 8.1). The reason for this is that Lufthansa is being charged the same fees by the GDS, regardless of the fact, that a booking may be an online booking How will the travel agencies be charged the preferred fare fee? By issuing a preferred fare ticket via CRS the preferred fare fee will be settled with the travel agency through the BSP process (via an ADM/ACM process without additional charges to the issuing travel agency). Issuing of preferred fare tickets may be free of preferred fees according to chapter 8.1. In this case there will be no BSP settlement. While pricing the Lufthansa or SWISS preferred fare is identified in the PNR by means of special Ticket Designators (automated display in ticket display TST ). These always comprise four characters for Lufthansa preferred fares and can be "OPFP" or OE**, OQ**, OK**, OY**, OM**, OV** oder OP** ( ** stands for two alphanumerical characters). For SWISS preferred fares the Ticket Designators always comprise three characters: OCF or OPF. A ticket at the Lufthansa or SWISS preferred fare may only be issued on a Lufthansa document (220) or a SWISS document (724). The price of the Lufthansa or SWISS preferred fare is indicated on the ticket. The preferred fare fee is charged subsequently once a month by Lufthansa or SWISS and not shown in the ticket box. For the purpose of settling the preferred fare fees the tickets for each IATA agency are identified by means of the ticket designator. At the end of each month, Lufthansa or SWISS charge a CRS specific preferred fare fee (see chapter 8.1 for details) per coupon for all tickets with a Lufthansa and SWISS preferred fare and debit this fee monthly from the issuing travel agency through the BSP process. This new process provides data free of charge which are not available electronically through the previous ADM process. A maximum of six coupons per roundtrip ticket are charged. Lufthansa and SWISS create a monthly settlement for each IATA agency and supply it in the BSP link as pdf file and as text file. Fee charges and any credits, e.g. from refunds, are displayed separately. Furthermore, this settlement includes the listing of tickets. All files (PDF or text files, ADM or ACM) available through BSP may be accessed two months only. The text export file Lufthansa and SWISS offer on a monthly basis for each IATA agency contains important details (such as ticket number, number of coupons, carrier used, journey country code, etc.) for each preferred fare Page 19/29

20 ticket. This file can be inputted into the accounting system of the travel agency and, ideally, used for automatic processing and entry into the books. Naturally, the data can also be used for individual reporting purposes. Lufthansa and SWISS will also create physical invoices including the monthly fees and separately shown VAT (possibly required for input tax deduction). No preferred fare fee will be charged on Miscellaneous Charges Orders (MCOs). However, tickets based on a preferred fare that will be exchanged against a MCO or denied boarding compensation (DBC) voucher, will be charged a preferred fare fee accordingly if a CRS is used where a preferred fee is applied (see chapter 8.1) What happens if a Lufthansa preferred fare ticket is cancelled? If the travel agency cancels an issued flight ticket based on a preferred fare in the CRS in accordance with the applicable rules, the preferred fare fee - if a CRS was used where a preferred fee is applied (see chapter 8.1) - is returned to the travel agency through the BSP. Preferred fare fees for partial refunds for flight tickets based on preferred fares are returned to the travel agency for the unused part of the flight ticket, provided that the flight ticket was issued on a Lufthansa document. Lufthansa will closely monitor the cancelation practice of travel agents and might impose a different process if bookings will not be cancelled in case of ticket refunds. A preferred fare fee for issuing a preferred fee ticket is also charged if the refunds happens within a settlement month (i.e. ticket issuance and cancellation occur in the same settlement month). Thus the travel agent receives an ACM for refunded fees and an ADM for charged fees What happens if preferred fares are not issued on a Lufthansa or SWISS document? Preferred fares must always be issued on a Lufthansa or SWISS document. If the document of a carrier other than Lufthansa or SWISS is used to issue a flight ticket based on a Lufthansa preferred fare, Lufthansa is entitled to debit the travel agency for the difference to the applicable fare at the time of the ticket issuance What happens if a ticket is reissued/exchanged (rebooking/rerouting/ revalidation/reissues and exchanges)? All the familiar existing rules regarding changes of tickets and fares continue to apply. No new rules are being introduced with the Preferred Fare Programme. In particular, it should be noted that whenever a change of carrier occurs (including a change of operating carrier), the fare must always be recalculated. Combination of published and unpublished or private fares is also not possible with half-used tickets. In general, private fares such as preferred fares are not combinable with published fares. However a combination of Lufthansa preferred fares with fares of other airlines are feasible for the following tariffs: F- and J-tariffs, most C-tariffs and some flexible economy tariffs. These combinations will be automatically calculated in the fare quote system of the CRS. Details will be soon published in an operative guideline by Lufthansa. Lufthansa preferred fares are always combinable with other preferred fares (i.e. Lufthansa and SWISS preferred fares). Page 20/29