BA Fires Back In Amex Tussle
The simmering controversy over British Airways no longer accepting the merchant fee on corporate net fares in the United Kingdom has boiled over into an extraordinary row between the airline and American Express. American Express last week threatened to take legal action against BA for an alleged breach of contract, including the option of terminating its business relationship with the airline. BA responded Monday, filing a lawsuit in a Manhattan federal court, asking that the American Express claim be invalidated, preventing the credit card issuer and travel agency from pulling the plug on their agreement.
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"BA does not believe it has breached its contract with American Express and has asked the District Court in New York for a declaration to that effect," said Tiffany Hall, BA general manager for sales in the U.K. & Ireland. "We are keen to resolve this issue and continue discussions with Amex."
The lawsuit follows news that Amex's travel management business has imposed a 2 percent "payment handling fee" on corporate clients wishing to book BA corporate net fares in the United Kingdom. Other agents are expected to take similar action and pass on the burden of merchant fees they have been left with following BA's action.
"Travel agents don't have the economic model to absorb these fees, so they are applying a service charge and passing it on to the customer," said an American Express spokesperson. "We say BA is in breach of its agreement with us for not accepting the card on all fares in the U.K. We think the lawsuit is frivolous and without merit."
BA in February announced it would no longer accept the merchant fee on corporate net fares as part of its Future Size and Shape strategic review. The review commits BA to making making 650 million pounds (US$950 million) in savings each year, of which 100 million pounds (US$146 million) will come from distribution.
Numerous corporate clients in the United Kingdom have protested the move because it effectively has amounted to a 2 percent price increase. At a recent Association of Corporate Travel Executives forum in London, the airline's general manager for corporate sales in the U.K. and Ireland Stephen Humphreys admitted BA had raised prices for customers. "In the first place, yes, it will be a transfer of cost to the corporation," he said, "but I would like to think that in time the transparency it brings will help the whole industry to reduce costs."
One way that transparency may work is to reveal that, as a charge card, American Express generally charges higher merchant fees than such credit cards as Visa and MasterCard. However, the spokesperson was confident Amex would not lose corporate customers as a result. "The value of an Amex card is understood by our clients," he said.
BA also has pointed out that it does not accept the merchant fee on consolidated fares it sells net to leisure agents in the United Kingdom. Nor does it accept the fee on corporate net fares in such a handful of other markets as Australia, Singapore, Mexico and Thailand.
At an unrelated press briefing Monday, American Express officials reiterated some U.K. companies have threatened to shift bookings away from BA, prompting the carrier to make exceptions.
The airline rejected such claims. "As we have been going through the process of putting companies on this program, we had one or two problems in regard to procedures, but there have not been any exceptions to the policy to my knowledge," stated Chris Barnes, BA director of business development in the United States. "And from North America, it is business as usual."
Barnes added that BA currently has no specific plans to extend the policy to other markets.