25 June 2009

United Credit Card Move - Smart or Dumb?


By now the debate is ranging far and wide about the wisdom of United Airlines decision to push credit card fees down to the agent in certain circumstances. The airline has been vilified on the subject by the Travel Agent press. No one seems to be springing to their defense - and at this stage neither am I - however I do think the issue needs a little deeper evaluation.

My take on this is simple. Now was not the time to do it.

UAL like many airlines is trying to change the model from supplier paid to user paid. Good if you can make it happen. For now however when you need all the distribution channels you can get - particularly if they result in higher yields then you would not want to be pushing them away. There is no doubt that there are instances where the agent may be using UA's merchant agreement in a not so direct and useful way to UA. For example plating on UA in order to get an unusual ticket issued. However the selective imposition would not be a good idea in my humble opinion today. I just think that United should not have chosen now to have this fight.

Longer term this situation does however represent a skirmish in a bigger set of battles - perhaps even a war of Tolkien proportions. That is the issue of the cost of financial fulfillment.

There is a very clear move on behalf of the credit card companies to shore up their business models. With near banks exiting the financial services market and the big banks getting very much bigger - the number and amount of fees on all transactions is rising and rising rapidly. UA is clearly being mindful of the long term trend of this and are trying to do something about it. They should be commended for starting to bring attention to the subject.

So chaps - this is one issue I am going to be following in the coming months. We are definitely going to see this issue stay near the front burner. I do believe we are going to see a strong focus by the supplier community - particularly airlines - on credit card fees.


1 comment:

Jeff said...

What are the "certain circumstances" that United uses to determine which travel agents pay and which don't?

I've read a bunch on this topic but nobody seems to mention it. Any idea?