Swedish Travel Buyers Angry At Air France-KLM Card Surcharge

Travel managers have reacted angrily to the news that Air France-KLM on Dec. 1 will introduce a surcharge of 75 Swedish kroner (€7.26) on card payments processed via the two airlines' merchant agreements. Electrolux corporate travel manager Jo-Achim Hamburger, in fact, told EuroBTN he intends either to stop using Air France and KLM in Sweden or to switch to an invoicing arrangement with his company's travel management company.

In a letter sent to travel agents on Oct. 1, Air France-KLM country manager for Sweden Noud Duyzings said the surcharge will apply to all transactions issued in Sweden by any IATA travel agency. Unlike the €7.50 surcharge introduced by KLM on lower fare classes in the Netherlands on Aug. 4, the Swedish surcharge will apply to all fares and booking classes. The only exceptions are corporate net fares, infant fares and miscellaneous documents.

However, around half of all fares sold by major TMCs are corporate net fares.

Duyzings wrote in the letter that "the surcharge calculation and collection process will be fully automated in the GDS." He added that no surcharge would be imposed for payments via travel agencies' own merchant agreements, the method by which corporate net fares are usually paid.

Hamburger told EuroBTN he is opposed to the surcharge because it penalizes good business practice. "A surcharge on cards is insane because it is the most efficient tool for payment," he said. "The airline does not need receivables if a card is used. It receives payment three days later."

Hamburger said the exemption for corporate net fares is of little comfort because Electrolux uses them much less than in the past. "I don't need unrestricted fares anymore," he said.

Swedish Business Travel Association chairman Peter Borg told EuroBTN, "SBTA does not yet have an official view on this specific matter. However, we are generally very concerned with fees and surcharges. The cost will always in the end be paid by the customer, and fees and surcharges make it more difficult to overview final costs when comparing prices on the market."

Air France-KLM said it is introducing the surcharge as part of a cost-efficiency program. "Credit card costs have become a major distribution cost for AF/KL due to the steep growth of card use over the past few years," said a spokeswoman. "The use of credit cards is very cost-inefficient for AF/KL because IATA has a very cost-efficient payment settlement system in place, called Bank Settlement Plan."

"AF/KL accepts the costs that are related to the payment facilities (via BSP), but all other benefits should be charged to the party which enjoys the benefits. As card companies are not willing to unbundle their product and distribute the charges in line with who receives the benefits, AF/KL has no other option than to surcharge. AF/KL continues to look for developments for a fair distribution of costs and benefits that would make the surcharge no longer necessary."

The spokeswoman added that corporate customers might consider settlement via debit card or online transfer, and that Sweden has a particularly high percentage of settlement by credit card through airline merchant agreements. This may be connected with the fact that IATA reduced BSP settlement terms for agents in Sweden from monthly to fortnightly earlier this year, and may be moving to weekly settlement starting Jan. 1, 2010. The shorter settlement terms will make TMCs extremely reluctant to move from card settlement to invoicing with corporate clients.

KLM said it has not yet decided whether to introduce the card surcharge in more countries. One TMC executive told EuroBTN that airlines may have difficulty making the surcharge Europe-wide. "It may only be possible in the Netherlands, Sweden, the U.K. and Switzerland," said the source. "These are the countries which have not prohibited discrimination between payment methods as laid down in the European Payment Services Directive."