<B>Amex Exports Tiered Fees</B>
By Amon Cohen
American Express starting Jan. 1 will charge U.K. clients one of five transaction fees, three months ahead of the introduction of zero commission by British Airways in its home market.
The five different levels of reservations service American Express will offer, each at a different price point, are: Interactive (online bookings), Travel Center (call center service), Customized (an American Express team dedicated to one account) and Onsite, and Premium Priority and VIP service operated around the clock.
The largest agency in the United States, now thought to rank number three in the United Kingdom behind BTI UK and Carlson Wagonlit Travel, has not yet revealed its full menu of transaction prices. However, strategic products manager George Hayes said an air ticket would cost around $49 if booked through the customized service and $39 if booked through the Travel Center.
There will be discounts for circumstances that lower the cost of delivery, such as e-ticketing, but conversely a surcharge for added costs, such as issuing tickets on departure. The charges also are based on the assumption that the client pays by card, which does not have to be an American Express product. If the client insists on end-of-month invoicing instead, which increases accruals and post-sales administration, the price goes up. Large-volume clients also will earn a reduction because of the economies of scale they generate.
The new transaction fees will be offset by any commission American Express earns on the sale of the ticket, all of which will be passed on to the client. This will include the booking payment British Airways is going to award agents as a replacement for commissions starting April 1. The BA booking payment will vary between $9 and $29, according to the class of seat and whether the flight is domestic, European or long haul.
Hayes said the new fee system will make the pricing of agency services more transparent for customers and will also make it easier to pass agency fees on internally to cost centers. This will be vital once the British Airways commission cut transforms many corporate travel departments from profit centers to cost centers themselves and funding will need to be found from elsewhere within the organization.
Hayes also predicted that the appearance in black and white of the first set of published transaction fees will galvanize British travel managers into action over the British Airways move. Numerous senior industry figures have expressed concern about the depths of ignorance and intransigence among both travel agents and clients, especially smaller ones, over the impending changes.
"What everyone is waiting for is someone to put a framework in place as a basis for discussion," said Hayes. "Our hope is that the general state of readiness will change dramatically."
What also remains to be seen is whether the prices set by American Express are adopted by other agencies as an industrywide tariff and whether they too will change on Jan. 1 or wait until British Airways' cut on April 1.
When Swedish travel agents moved en masse to fees in January 1999, they charged identical fees but Hayes is less sure that the United Kingdom will prove as homogeneous. "The U.K. market is much more competitive in terms of airlines than Scandinavia, where SAS dominates," he said.
American Express still has some smaller clients on an old-fashioned commission arrangement while its larger clients are on bundled management fees or a pseudo-transaction fee, calculated by dividing the management fee by the number of transactions. Hayes said clients would not be forced to move from management fees.
American Express is considering extending transaction fees to other European countries, where the norm for commission is now 7 percent. KLM and Aer Lingus shortly will announce further cuts in their home markets and Swissair has been telling key agents and clients privately that it will move to zero commission in 2002.