Amex To Trim 5,400 Jobs Amid Changing Business Travel Economics - Business Travel News

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Amex To Trim 5,400 Jobs Amid Changing Business Travel Economics

January 11, 2013 - 10:50 AM ET

By Mary Ann McNulty

American Express Co. chairman and CEO Ken Chenault on Thursday said global business travel operations would bear "the largest impact" of 5,400 job cuts planned for this year. Job cuts would occur in "global business travel, where we are reengineering the business model to reduce its cost structure and invest in capabilities that will help us better align with the shift of customer volumes to online channels and automated servicing areas," Chenault said during a conference call with investors.

"The economics of business travel have changed more dramatically over the years than any other part of our business, but we've moved more things online and that will continue," Chenault added. "We've been ahead of the curve over the last several years. Our intent by this restructuring is to continue to be ahead of the curve."

American Express on at least three previous occasions during the past eight years announced job reductions as part of restructuring, at least partly related to the shift to online from offline channels: in 2004, in 2008 and in 2011.

The newly announced job cuts will occur throughout the year and be "spread proportionally between U.S. and international markets and occur primarily with positions that do not directly generate revenues," CFO Dan Henry told investors. Company officials said other job cuts would be made in "cardmember servicing and collections and staff groups."

The job cuts will result in a net overall workforce reduction of 4 percent to 6 percent from the current 63,500 total, and prompted Amex to announce it would take a $400 million restructuring charge.

Despite the restructuring announcement, Amex executives said cardmember spending, revenue growth and credit quality during the December quarter remained strong "despite an uneven economy." Company officials plan to formally announce quarter and year-end performance next week. Amex for the three previous quarters reported deepening declines in global corporate travel sales.

"Prior to the fourth quarter, the single highest authorizations volume day in our history occurred in December 2011," Chenault said. "This year, we surpassed that approval volume level, not just once but on each of 12 separate days during the December holiday period." Even so, he added that the "environment continues to be challenging."

Amex officials in a prepared release said December financial results also would include a $342 million expense for future redemptions of its Membership Rewards points by U.S. cardmembers and $153 million charge to cover both cardmember reimbursements for various types of transactions during the past several years and additional expenses related to the October regulatory consent issues. When accounting for the expenses, Amex said it would report $637 million in net income for the December quarter.

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