Wednesday, June 24, 2009

United to (some) Travel Agents: Credit Card Fees are Your Problem

It appears United has taken the next step in the airline industry's never-ending quest to lower distribution costs or at least get others to shoulder the burden for them... As first reported in the Beat, United today informed a currently unknown number of travel agents that they would no longer be able to use the industry reconciliation system, ARC, to process tickets which were paid for with a credit card.

United is asking these travel agents to process credit card transactions themselves and then report the sale as a cash transaction. Until now, when a travel agency (or OTA) has sold a published ticket on United (or any other carrier) the credit card is actually processed by the airline. As such, the airline is responsible for paying the 2-3% (in rough numbers) that Amex, Visa, Mastercard and Discover charge for using their cards. In the new world proposed by United, agents will process the credit cards themselves (presumably along with an additional consumer fee) and then remit the full amount of the ticket back to United. This would obviously save a considerable amount of money for United if widely adopted.

Still too early to tell what this means for consumers but if the airline industry adopts United's moves broadly, consumers may be forced to pay one more fee if they are not willing or cannot visit an airline's website directly. Given the usual herd mentality in the industry starting way back when commissions were reduced and carrying forward to today's myriad of baggage, mileage redemption and call center fees, it would not be surprising to see this play out in a broader way.

If adopted even more broadly and applied to the Online Travel Agencies, they would be forced to reinstate some sort of booking fee in order to cover the costs of paying credit card merchant fees. This would return a pricing advantage to the websites that has recently been removed by all of the major players in an attempt (which we have heard has been successful) to drive growth.

It is unclear, in a typical airline conundrum, if the agency would be allowed to use traditional ARC processing if a consumer attempted to pay for their ticket using their Chase Mileage Plus Visa card.....


  1. Have you heard or read about any feedback by Travel Agents by this move? Are any simply boycotting United I wonder?

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