Qantas Airways in April will begin to charge customers a 1 percent fee on charge card transactions when the point of sale is in the airline's native Australia. Qantas officials said the airline enacted the surcharge in an effort to pay the "significant and increasing" cost of charge card merchant fees.
A Qantas executive said the airline still would absorb "significant costs from credit card merchant fees" and that the "nominal" 1 percent fee on charge card transactions will recover about half the cost of charge card merchant fees Qantas pays each year.
The Reserve Bank of Australia in January passed a decision that allows businesses to levy up to a 10 percent surcharge for customers paying with plastic. Qantas was the first Australian business to announce adoption of the reformed policy. According to the carrier, this practice is not yet allowed when the point of sale is in the United States, and only applies to charge card purchases in Australia.
Qantas is the second international carrier in the past year to announce an initiative that passes the payment costs to the buyer. British Airways, which has a 25 percent stake in Qantas, in June stopped absorbing credit card merchant fees on U.K. corporate net fares, which has irked British travel buyers and sparked a still-pending battle with American Express. Amex in June threatened to terminate its merchant agreement with British Airways, and the two companies remain in litigation in the U.S. District Court of Southern New York.
"British Airways expects to realize significant cost savings of approximately $99 million over the next five years as a result of not having to absorb the fees imposed by any credit or charge card company for U.K. corporate nets," said Deborah Dickens, commercial manager of global distribution at British Airways in a court statement.
"With Amex's knowledge and acquiescence," the carrier stated, and "for varying lengths of time," BA has "not accepted charge cards or credit cards for certain net fares in certain countries," including Australia, Antigua, Barbados, India, Mexico and Thailand, among other locales.
Upon British Airways' cessation of paying charge card merchant fees on U.K. net fare tickets, purchases would have to be made either through BA's Basys direct payment system or via travel management companies, through which customers are allowed to use American Express' charge card if the TMC has a merchant agreement with Amex.
"It is my understanding that in the United Kingdom, unlike the situation in the United States, large travel agencies that cater to corporate customers typically have their own merchant agreement with Amex," Dickens stated in the court document.
The merchant agreement between the two travel giants, which began in 1997, was scheduled to terminate in the spring of last year. However, in response to BA's revised credit card acceptance policy and consequential rejection of charge card merchant fees, Amex gave a 30-day notice of contract termination.
"Under the terms of the agreement, American Express could have terminated the contract with 120 days notice," Wayne Cross, a British Airways attorney told BTN. "There is a provision that they can terminate the contract with 30 days notice if there is a material breach."
While Amex's attorney declined to comment on the persisting litigation, the company has been gathering evidence to show that BA has been in material breach of its merchant agreement so the 30 days notice Amex gave was sufficient for contract termination.
In a letter to British Airways last summer, Amex group president David House wrote, "If you do not cure such material breach within 30 days of the date of this notice, we reserve all of our rights and remedies under the merchant agreement, including without limitation the right to terminate the merchant agreement."
However, BA responded in a statement that its decision not to absorb the fees imposed by charge card companies "in no way discriminates against the Amex card, because all credit or charge cards are treated equally." So far, no other card issuers or payment networks have filed claims against the airline.
Pauline Seeds, BA director of national accounts in North America, filed a declaration to the court, which said that sales to British Airways' 50 largest customers in North America account for about $208 million in revenues per year, and that 29 of those customers exclusively use the American Express card for business travel. Seeds stated that those companies will be "significantly inconvenienced if British Airways cannot accept the Amex card charges against the merchant agreement and are likely to take their business elsewhere, namely, to airlines that can accept Amex cards." Yet, some of the customers have shown a willingness "to modify their internal procedures and systems and make an orderly transition to alternative payment methods." Seeds concluded that this task would take longer than the 30 days originally given by Amex.
"The only end in sight is that the judge has said that we'll have complete discovery by June 30. What happens with the trial after that goes to the judge," Cross said.
The Court has sealed the three most recent BA/Amex court documents, which were filed earlier this year. Cross said the documents are unavailable to the public since they contain terms of the merchant agreement, including "confidential contract language."