Amadeus, Sabre Tumble as Lufthansa Levy Squeezes Booking Margins

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Flight-bookings provider Amadeus IT Holding SA fell the most since it was listed in 2010 after Deutsche Lufthansa AG imposed a 16-euro ($17.80) charge on external reservations, targeting the Spanish company’s main business.

Shares of Madrid-based Amadeus dropped as much as 12 percent, the sharpest decline since an April 2010 initial public offering, while U.K. rival Travelport Worldwide Ltd. slumped 10 percent and U.S.-based Sabre Corp. fell 5.8 percent.

Lufthansa’s move means outside bookers must pass on the charge, making their systems less competitive, or absorb it, cutting into margins. Europe’s second-biggest airline says flights sold via so-called global distribution systems cost it at least 100 million euros a year.

“The question will be whether other airlines follow,” UBS analyst Michael Briest said in an investor note. Amadeus has had a “difficult” relationship with Lufthansa and chose to absorb a 4.90-euro GDS charge from the German carrier in the past, before reaching a deal in 2010 that has now expired, he said.

Amadeus, which gets about 6 percent of its revenue from Lufthansa, was trading down 3.90 pence, or 9.4 percent, at 37.49 euros as of 4:05 p.m. in Madrid, paring its market value to 16.7 billion euros. Travelport, which is listed in the U.S., was priced 6.8 percent lower at $14.76, and Sabre, based in South Lake, Texas, had lost 3.6 percent to trade at $25.11.

Airline Founders

Lufthansa was one of Amadeus’s founders in 1987 alongside Air France, Spain’s Iberia and tri-national Nordic carrier SAS.

All airline holdings have now been exited, other than a 1 percent stake held by Lufthansa’s pension fund, according to Amadeus, which said that the Lufthansa policy will make comparison and transparency more difficult for travelers. The company gets about 29 percent from just seven large airline groups, supply-chain data compiled by Bloomberg show.

The new levy will be added from Sept. 1, Lufthansa Chief Commercial Officer Jens Bischof said in a statement Tuesday, adding that the step is one of a number aimed at boosting margins from flights and halting the continuous decline in the percentage of revenue generated from ticket sales.

The Distribution Cost Charge won’t be applied to flights purchased via the websites of Lufthansa group airlines, or at airport ticket counters. Travel agents and corporate customers will also be able to avoid the fee by using online portals.

People “will now be forced to go to multiple channels for the best fares,” and will pay more for the same service, Holger Taubmann, Amadeus’s senior vice president for distribution, said on its website. The cost of information technology provided by the company could also increase, he said.

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