Airlines Surcharge Corporate Cards in Europe

Many airlines have introduced, or opted to retain, surcharges on corporate card payments in Europe. The European Union's Revised Payment Services Directive, or PSD2, which took effect on Jan 13., outlawed surcharging of Visa and Mastercard consumer credit and debit cards.

The picture is highly fragmented, varying not only from airline to airline but market to market, depending partly on how each country in the European Economic Area—the EU plus Iceland, Liechtenstein and Norway—has interpreted the directive. For example, British Airways is surcharging corporate cards in the U.K. at 1 percent, up to 20 British pounds, but is not surcharging any cards in most other countries. Air France-KLM is surcharging corporate cards at 2 percent and Norwegian Air at 3 percent.

Lufthansa announced late last year that it would surcharge at 1.65 percent to a maximum of 25 euros for all cards not regulated by the Interchange Fee Regulation of 2015, which effectively covers Visa and Mastercard consumer cards only; American Express and Diners Club consumer cards are generally nonregulated and also continue to be surcharged by some airlines. However, German newspaper Die Welt reported that Lufthansa has postponed surcharging until mid-March, owing to "technical challenges." A well-placed travel source told BTN that Lufthansa's systems cannot yet identify with confidence whether cards presented for payment are consumer or corporate. Lufthansa did not respond to a request for comment.

Some airlines are not surcharging at all, a position some payment experts had expected all airlines to take, owing to the complexities of discriminating between different card types. Carriers that have eliminated all surcharges include Ryanair and EasyJet, though EasyJet has charged since 2012 an "administration fee" of 15 British pounds for all bookings.

The surcharging of corporate cards means that many companies in Europe effectively face some kind of additional fee no matter which card type they choose. The Interchange Fee Regulation treated individual pay corporate cards—meaning the card is billed to the cardholder, not the employer—as "consumer cards." Therefore, airlines no longer can surcharge them under PSD2. However, issuers now earn very little from individual pay cards and consequently have scrapped them or introduced transaction fees for corporate clients that continue to use them.

Could the difficulty of avoiding additional fees of one stripe or another lead businesses to shun corporate travel payments in favor of other methods, such as asking travelers to use personal cards? Carlson Wagonlit Travel senior director of global card products Clive Cornelius thinks not. "Corporates are used to seeing a surcharge," he said, "and it is usually offset to some extent by the rebate they receive from the issuer." Because commercial cards give customers improved cash flow, the ability to control spend by restricting merchant category codes and the ability to upload costs directly into expense tools, he said, "the benefits still outweigh a surcharge."

Correction: Jan. 24, 2018, 9:35 a.m. Eastern: This story has been updated to clarify that EasyJet did not introduce its administration fee in response to PSD2 but has had the fee in place since 2012.