American Express today said it plans to cut $1.8 billion in costs next year through a combination of cutting operating expenses, curbing investment spending and slashing headcount by 7,000 jobs or about 10 percent of worldwide employees. Meanwhile, competitor Carlson Wagonlit Travel unveiled some staffing changes of its own this week involving movement of some transaction services to India.
American Express said, "The reductions will occur across business units, markets and staff groups, primarily focusing on management and other positions that do not interact directly with customers. The company is also suspending management level salary increases for 2009 and instituting a hiring freeze for open positions. The total benefit from these staffing and compensation-related decisions is expected to be approximately $700 million in 2009."
The announcement comes in the wake of last week's quarterly earnings report, which showed a 24 percent drop in third-quarter profit. CEO Kenneth Chenault said then that the company would be launching significant expense reduction efforts this quarter
(BTNonline, Oct. 21).
Other cost reduction measures outlined include cutting the company's own travel and entertainment budget and pulling back "spending on technology, marketing and business development, and streamlining costs associated with some rewards programs."
Moreover, "the company plans to move forward with pricing initiatives designed to generate significant additional revenue next year."
It is unclear what portion of the staff cuts will pertain to American Express Business Travel, but the travel management company will be less impacted than other business units, according to Amex Global Travel Services vice president of public affairs and communications Alicia Tillman. Affected employees have been put on notice this week and the TMC expects "to be in a cost reduction mode through the remainder of this year and throughout the first quarter of next year," she said. Layoffs are in "supporting organizations of the business" such as field effectiveness, finance, human resources, marketing and technology.
Amex Business Travel COO Priyan Fernando, told
Business Travel News today that the completion of the global operations and services standardization
(BTNonline, Sept. 24, 2007) has put the company in a favorable position to handle slipping travel demand and a worsening economic climate. "We always have to have flexibility in our expenses and one of the reasons we invested in common platforms around the world was to create that flexibility where we can flex up and down depending on volumes," he said. "Because we now have the ability to transfer volumes from one center to the other, we have been able to thus far handle the reduction in volume, taking advantage of attrition and the flexibility of our workforce."
Fernando said Amex for years has been using India for most back- and mid-office operations for the "world at large" with more than 1,000 employees.
When asked if the company planned to transfer more work to India, Fernando said, "We are constantly looking at migrating work to different parts of the world where we get the biggest benefit and that has been a continuous process we've had for many years. That's not been just for India, but to many countries to deliver the economies of scale."
Carlson Wagonlit Travel plans to alter some of its operations workforce by moving some of the centralized ticketing and refunds fulfillment department within its traveler and transactions services division to its wholly owned Indian office.
"CWT is transitioning an undisclosed number of non-client facing operational positions to CWT India," according to a company statement to
BTN. "The CWT India office is an existing location, employing a skilled service team. Approximately one-third of the employees affected are expected to be reassigned to another role in CWT Traveler and Transaction Services. The remaining affected employees have the opportunity to apply for other positions within CWT."
According to a spokesperson, the plan to migrate some fulfillment services to India "was not the plan all along. CWT is a global travel management company with offices in more than 150 countries around the world and employing more than 22,000 people. We continuously evaluate our internal processes and the balance of our workload and, when needed, make decisions that will enable us to most effectively and efficiently serve our clients worldwide in a highly price- competitive, fast-changing industry."