American Express and American Airlines are targeting the midmarket with a new co-branded corporate card that offers cash rebates as high as 10 percent on up to $1 million in annual AA bookings.
Introduced this month and set to be available in the third quarter, the American Express Business ExtrAA Corporate Card will provide a quarterly rebate based on all AA bookings in first, business and full economy class, as well as certain additional refundable coach tickets, regardless of point of sale. Despite a growing interest in lower-bucket, nonrefundable fares excluded from the program, "Eligible fares represent 50 percent to 65 percent of a typical midsize company's air spending," according to Anré Williams, American Express Corporate Services senior vice president and general manager for the middle market.
Although some critics said the card is an attempt to drive clients to higher fare tickets, AA vice president of global accounts Frank Morogiello, said American "understands the pressures" facing budget-minded corporate travelers and that "we are not trying to get them to buy up" from cheaper, nonrefundable fares.
Though quarterly cash rebates can run as high as 10 percent, those companies with an existing American Airlines discount program only can earn up to 5 percent in additional rebates.
The AA-Amex card is integrated with Business ExtrAA, American's small-business loyalty program. Unlike rebate eligibility, all spend on AA contributes to Business ExtrAA point accrual, which earns clients certain rewards, including free tickets, upgrades and airport lounge access. The card also entitles corporate users to pre-negotiate supplier discounts on a bevy of products and services through the Savings at Work program.
Qualifying flights for the American Express Business ExtrAA Corporate Card are limited to American, American Eagle and American Connection, excluding services offered by all AA codeshare partners.
American Express noted the co-branded card "carries the core features" of its midmarket corporate card offering. "Most airline co-branded cards are designed for individuals or small businesses," Williams said. "This is for the middle market and has rebates, which make CFOs happy." Williams added that while many larger corporations already have negotiated airline discounts, midmarket companies have trouble leveraging their smaller volumes to get strong negotiated rates.
Amex defined the target market, encompassing "hundreds of thousands of companies," with annual revenues between $10 million and $1 billion.
American defined the midmarket as companies spending up to $1 million annually on AA tickets. Any spend over $1 million in a given year will not count toward the rebate, and there is no minimum threshold. Both Amex and American Airlines dismissed any link between this new program and an earlier distribution arrangement
(BTN, Nov. 21, 2002).American contends that its new relationship with Amex would not eclipse its affiliation with corporate payment vendor UATP. "There are differences between what you get" with each payment option, Morogiello said, adding that the Amex card is "another offering beyond UATP" since Amex provides "full utility."
While UATP president and chairman Richard Crum acknowledged American's confirmation that its alliance with Amex would not replace its relationship with UATP, he told BTN, "I am dismayed that American Airlines or any airline would choose to enter into a partnership of this nature with the most expensive payment product alternative on the market at a time when they need to be focused on cost control." He added that UATP offers similar benefits to account holders through "corporate volume agreements and other negotiated terms."
Meanwhile, American Express would not comment on potential modifications to the co-branded card agreement in place with Delta Air Lines, other than describing the Delta arrangement as "consumer and small business."
In the past, MasterCard and Visa issuers have released co-branded airline cards, which primarily have targeted consumers and small-businesses. However, the networks have suggested that co-branded cards with wider applications for the corporate segment could be in works. "The airline industry remains a key growth opportunity for MasterCard," said Donna Johnson, MasterCard International vice president of North America acceptance, "as we expand our product offerings with the introduction of small-business co-branded products with American and Continental airlines."