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ASTA, Ensemble Travel Presidents Blast United Airlines Actions

June 29, 2009 By: George Dooley

Chris Russo, the president of ASTA, and Jack Mannix, the president and CEO of Ensemble Travel Group, both have some bold words for United Airlines' decision to terminate agents' credit card access, calling it incendiary and a threat to consumer choice.

In a letter to David Myrick, vice president sales of the Americas for United, Russo said that the new policy will increase agents' costs, disadvantage  consumers, force business to and create issues of fairness.

“Several of our members have received letters indicating that United has terminated their right to accept credit cards as agents of United," Russo said. "We ask that you rescind this policy immediately."

In his letter, Russo listed several reasons that the new policy is "both unjust and commercially unfeasible."

“While there is a fairness issue at hand, there are many technical and administrative issues that make United’s Merchant Access program impossible," he said. "First, over 63 percent of travel agents’ access to merchant services is limited to the Airlines Reporting Corporation’s (ARC) Travel Agent Service Fee (TASF) program, and this program is designed to process service fees, not airline tickets. ARC has a $500 limit on transactions processed through the TASF program.

“Second, United is requiring these agents to absorb United’s cost of doing business," Russo continued. "The travel agent is an 'agent' and is not the provider of the transportation services to the customer. By acting as the credit card merchant and identifying the agent as the provider of the service on customers’ credit card statements, you are asking agents to absorb the risk of credit card chargebacks related to United’s service performance. Agents already bear the credit costs of charging their service fees. It is not reasonable to expect them to bear your costs too.

“Third, United will save no credit costs if the result of the policy is that consumers, or agents on behalf of consumers, book on credit cards at," Russo said. "This suggests the real purpose of this policy to drive agents away from GDSs to less efficient booking processes so United can avoid GDS fees.”

“Fourth, travel agents have been given insufficient time to prepare their systems and procedures to accommodate a process change of this magnitude. Many agents have back office, mid-office, front office and consumer facing booking tools that must be reprogrammed to accommodate such a change,” Russo said. “Current online booking tools do not have automatic controls that allow an agent to refuse a certain airline’s booking based on the form of payment or to automatically charge a customer’s credit card as a merchant for an individual airline. Agents would need several months, or more, to have their systems reprogrammed and redesigned to accommodate such a change.

“Fifth, travel agents’ cost of doing business will increase well beyond the agent absorbing the credit card merchant fees that United will avoid," Russo said. "Agents’ ARC bonds will increase, as agents’ cash sales, presumably, will go up. However, I point out, and believe you know this too, that doing cash sales on a significant volume of business in today’s world is not feasible for most agencies.

“Finally, consumers will be disadvantaged as costs shifted from United to travel agents will ultimately be borne by consumers in the form of higher service fees on top of the existing fare level," Russo said. "History shows that fares will not be reduced to reflect the claimed savings in credit costs. We therefore ask that United immediately rescind this policy which is unfair and commercially unreasonable.”

Calling United Airlines' decision to terminate agents' credit card access incendiary and a threat to consumer choice, Ensemble Travel Group threw its support behind ASTA and the Association of Canadian Travel Agencies (ACTA) to oppose UAL’s move. 

In a statement, Ensemble, which has both Canadian and U.S. agents impacted by UAL’s policy change, said UAL’s decision adversely impacts travel agents and consumers. UAL’s policy would terminate some U.S. agencies’ ability to process credit card transactions using the airline’s credit card merchant account.

“This move, which could be the first in a series of steps, may eventually have widespread industry impact,” Jack Mannix, president and CEO of Ensemble said. “United Airlines’ action is an incendiary one. Members began contacting Ensemble almost immediately, stating that, although not yet impacted, they will now definitely consider other air carrier options. We encourage them to ‘vote’ with their actions to secure their own best interests and those of their clients. While there is no immediate impact on Canada, we have heard from Canadian members as well, concerned that the policy might soon be extended to them.”

A conference call, facilitated by Mannix, has been scheduled with the organization’s U.S. and Canadian owners and managers for Tuesday, June 30. Among topics to be discussed are the short- and long-term ramifications and potential options. Members are being urged to sell those airline suppliers who provide them with the best opportunities for optimizing the standard of service they offer to their clients and securing the lowest cost of sale.

Ensemble Travel Group will do everything in its power to actively support ASTA and ACTA in opposing this action, the group said. Mannix criticized the numerous ways in which the policy penalizes the agency community, saying: “In addition to the rising ARC bonds due to the likely increase in cash sales and increased risks of credit card charge-backs already noted by ASTA, we are particularly concerned with the fact that the policy forces the agency to choose between incurring a negative financial impact or compromising the quality of their service to clients – the very first priority for effectively running their businesses.”

Mannix also noted the impact on the consumer, who ultimately would be forced to bear the resulting financial burden in the form of increased agency service fees. “Essentially this action penalizes the consumer for seeking out the benefits of the agency’s expertise,” he concluded.

Agencies impacted by UAL’s change are left with the option of processing credit card transactions with their own merchant agreement number or paying United in cash, Ensemble said. A third option – booking through the United website – would leave the agency without the ability to efficiently manage the booking through the GDS. In addition to creating potential service issues with clients, this would compromise reporting and tracking for the agency. Should an agency inadvertently utilize United’s merchant account, the agency would ultimately receive a debit memo for $75 per transaction.           



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