United Airlines on July 20 will discontinue an undisclosed number of travel agencies' access to its credit card merchant agreements, including those with Visa, MasterCard, American Express, Discover, Diners Club and JCB, essentially shifting payment card merchant fees from the airline to those agencies.
Agencies that have been notified by United will have to process card transactions under their own merchant agreements and provide cash settlement through ARC, according to a letter dated June 19 from United vice president of sales for the Americas David Myrick. If those agencies fail to comply, United will assess a $75 debit memo per ticket.
United did not disclose the names of the agencies it has notified. In the several cases brought to the attention of the American Society of Travel Agents, the agencies have been small, with relatively small United volumes, said ASTA senior vice president of industry and legal affairs Paul Ruden.
ASTA estimates that if United underwent these measures industrywide, it would represent a $171 million cost shift.
In an e-mail to
BTN, a United spokesperson said, "We have identified certain accounts where we see potential cost savings. We have not disclosed the number of agencies for competitive reasons. Credit card processing costs are escalating at a high rate and represent several hundred million dollars of cost each year. We are continuing to explore ways in the current economic environment to reduce our distribution costs and run an efficient airline."
Accompanying the letter, United suggested agencies work with merchant acquirers like Pinnacle Payment Solutions, FirstData or Instabill to garner their own merchant agreements. ARC and global distribution systems also can provide merchant acquirer services.
For many smaller agencies, securing their own merchant agreements could prove difficult. Ruden said 63 percent of agents with their own merchant services use ARC's travel agent service fee program, which has limits on the sales volume that can be processed.
"In order to do this, you have to have an agreement that covers all the available credit instruments," Ruden said. "You can't be out in the marketplace saying we only take Visa or Diners Club. You've got to have it all to be competitive."
United in the past year has targeted agencies as an area to aggressively trim distribution costs. Last summer, the airline pulled its preferred agreements with mega travel management company Carlson Wagonlit Travel and other agencies as part of an effort to reduce its agency incentive programs by $80 million
(BTNonline, Aug. 11, 2008). Within months, CWT and United reconciled.
Several airline executives in recent months publicly have discussed potential changes to the distribution model, including shifting GDS fees and other costs to travel agencies and customers
(BTNonline, April 22).