British Airways and American Express have settled a longstanding legal dispute that started in the summer of 2002 over BA ceasing to absorb credit card merchant fees for corporate net fares.
Amex had claimed the move by BA was in breach of the agreement between the two companies but the settlement of the dispute has left both parties at status quo: BA will continue not to accept the fees, meaning they have to be picked up instead by corporate clients. BA does not accept the merchant fee for corporate net fares from any cards other than its jointly branded program with AirPlus
(BTN, Oct. 7, 2002).
The dropping of the legal action, as forecast in
BTN(BTN, March 29), therefore looks like a victory for BA, especially as it is understood no compensation is being paid to Amex. However, it is a victory that comes at a price. Both sides confirmed the airline will remain as a nonpreferred supplier to Amex's business and leisure travel agency divisions. BA lost its status of preferred supplier when the dispute over net fares began.
A statement issued jointly by both parties read: "Rather than continuing to pursue litigation, both companies have agreed it is in their best interest to pursue a mutually acceptable resolution outside the legal process. British Airways will continue to accept the American Express card but will maintain its policy of non-acceptance of any credit cards for 'corporate net fares' in the U.K."
The settlement raises the question of whether other airlines will follow the lead set by BA and start to pass on merchant fees for corporate net fares. Many in the corporate travel industry had regarded it as a test case. At last week's Corporate Travel World conference and exhibition in New York, Management Alternatives president Carol Ann Salcito presciently advised
BTN's Top 100 travel buyers to seek clarification from preferred airline vendors on this issue. "It is not certain how much this will cost you, but it can certainly be a negotiating point," she said. "It creates 1.5 percent to 2 percent of added cost on average. When you go out to bid, ask carriers their intentions on merchant fees. If they say they are not going to pass on the fees, make them put that in writing."
Another question raised by the settlement is whether BA will refuse to absorb merchant fees for more fare types. Tiffany Hall, BA head of sales for the U.K. & Ireland, said there were "no plans" to do so.