<B>Amex Cuts Counselors</B>
By Megan Hjermstad
American Express earlier this month said it will cut up to 5,000 more jobs companywide in addition to the 1,600 announced earlier this year. The combination of the job cuts represents a reduction of about 7 percent of American Express' worldwide workforce of 88,850 employees at the end of 2000. The job cuts are among several major companywide initiatives planned for 2002 that were accelerated due to a falling economy that does not appear to be leveling off. The news comes in conjunction with an announcement of poor second-quarter earnings that also reflect the sluggish economy.
The reengineering effort, which began last year, resulted in "hundreds of job cuts" in corporate travel earlier this year, according to vice president of corporate communications Chris Levite. The number included some executive positions, but the bulk of the employee base affected was travel counselors. "We started the process of trimming staff in business travel centers earlier this year when we saw the downturn was not going to level out," Levite said. "We did a top-level assessment in January, and have been planning and replanning this year. We will continue the effort, client by client."
Levite said the major reengineering within corporate travel already has taken place, but as part of the latest announcement, American Express will make further job cuts between now and next September--though how many will depend upon further monitoring of transaction volumes. Levite stressed that the percent reduction in staff levels is still lower than the percent dip in transaction volume. "We have been seeing a decline in business travel that will accelerate through 2001. Due to the decline in travel volume, the harsh reality is we have had to trim staff," Levite said. "We're being encouraged, if not pushed, by clients now to diminish staffing levels."
The restructuring also correlates with the introduction of new service options through different channels, such as its online fulfillment centers, in which American Express is seeing an accelerated interest. That would necessitate job cuts for those clients shifting the servicing burden to online centers and away from counselors. American Express also is increasingly applying technology tools to improve the back office to allow for further reduction of its workforce.
The restructuring, which is expected to produce expense savings companywide of $275 million to $300 million in 2002, within its Travel Related Services division is estimated to bring in cost savings of $175 million to $200 million in 2002 and of $200 million to $225 million in 2003.
Meanwhile, American Express last week reported second-quarter net income of $178 million, down 76 percent from $740 million in the same period a year ago. Diluted earnings per share were $.13, compared with $.54 for the same period last year. American Express said net income for its Travel Related Services division, which includes travel sales and the credit card business, was $519 million in the second quarter, up 3 percent from $505 million during the same period in 2000. TRS net revenues increased 6 percent, compared with 17 percent growth last year, as a result of modest growth in loans, billed business and cards in force. The growth in billed business, which was substantially slower than in recent periods, reflected the continued slowdown in corporate T&E spending.
Meanwhile, Navigant International, the only other publicly traded travel management company, said it expects its earnings per share to be approximately $.38, compared with $.45 for the same period last year. Chairman and CEO Ed Adams attributed the reduction to the softness of the economy and the reduction in transactions, which were down approximately 12 percent in the second quarter over the same period a year ago. Navigant will issue 2Q results July 31.