The latest cost-cutting move by United Airlines may end up disappearing like many other ill-fated airline trial balloons. Or it may radically change the travel industry.
United has informed some unknown number of travel agents that they will not be able to use credit cards to purchase United tickets starting July 20. That’s right, <em>any</em> United ticket. If a customer wants to use their credit card, the agency would have to use their own merchant account to bill the customer, and remit cash to the airline. And only about two-thirds of agencies currently use such accounts.
Besides the additional 2 to 5 percent cost of using a merchant account, a cost that would almost certainly have to be passed on to the customer, this move would open up a Pandora’s box for agencies and their clients.
For starters, this puts the liability for undelivered service squarely on the agent. In the worst case, if United were to go out of business, instead of disputing the charge with the credit card company, clients would have to go back to the agency.
Even with regular refunds, an agency would have to get the money back from the airline first, before crediting the client. (Which could be particularly difficult if the airline refunded a ticket at the airport due to a delayed or canceled flight, because such refunds can take over a month.)
The situation is also a potential major headache for both agencies and corporate accounting offices, and in fact, personal accounting. Charges on an agency merchant account do not give ticket number or service details, so it will be harder to reconcile statements, and at tax time, keep track of expenses.
In addition, United’s new policy also puts the liability for chargebacks and credit card fraud squarely onto travel agencies. And while “brick and mortar” agencies might choose to accept the risk of accepting checks, online agencies will have no such option.
No doubt United sees this as a potential way to save credit card fees, and drive business to their own site. It also could help the ailing airline’s cash flow, as credit card companies hold back money before sending it to the airlines, and agencies have to remit payment within 10 days.
Because there are few details yet as to how many agencies received the letter, it is hard to know how potentially huge this situation could be in the near future. Travel agent organizations are already mobilizing to check the legality of the move, and others are already talking about booking away from United.
In an ironic twist, this move could even keep clients from using their United Mileage Plus Visa cards, from booking travel on United.
Stay tuned. I’s going to be an interesting summer.
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The next thing you know. United will ban agents from charging added fees to cover their added costs.
Just an extention of the airlines desire to get travel agents out of the airline ticketing business.
Headline in six months: “United does not understand why bookings from travel agents are down.”
The Travel Agent Community will have a great laugh at this one! First, United has already built into their fare structure the merchant fees that are assessed for credit card usage. Second, agents will simply plate away from United or purchase tickets directly from the website. I am very tired of having to bow to the whims of the airlines-that’s why I am thrilled to be a Non-ARC Travel Advisor who only sells profitable travel and provides service to our clients.
Good Luck United!
If this goes through, we’ll look seriously at renegotiating our air contracts away from United.
And I can just imagine that United will NOT be lowering it’s prices to reflect the amount
of the ticket now not needed to pay for the cc fee. so in essence…they are raising
the price of a ticket.
and if the agent is able to increase their commission to cover the cost they now must
incur, they will surely pass this on to their customer.
result: TWO prices increases for the customer.
As a consumer, I find this move by United very troubling. I don’t care for the way that impacts my relationship with the service provider. Currently if there is an issue and United won’t work with me, I have the ability to go to my credit card provider and dispute the charge or if United were to cease operations, I would be able to dispute the charge. If they go through with this, the protections offered by making my purchase on a credit card will be gone.
We as travel agents need to band together and sell away from United Airlines. If United gets away with this, it’s a sure bet that other airlines will join them. Effective immediately, our agency airline business goes to anyone EXCEPT United and we encourage other travel agencies to do the same!
I agree with John M. As a consumer, this move by United is very troubling as third party billing to your credit card cuts the protections you normally get when using a credit card.
I use a travel agent for my extensive business travel and I guess this is the end of my travel with UAL. Goodbye United, hello other airlines!
On June 26th, 2009 at 12:48 pm Peggy said We as travel agents need to band together and sell away from United Airlines. If United gets away with this, it’s a sure bet that other airlines will join them. Effective immediately, our agency airline business goes to anyone EXCEPT United and we encourage other travel agencies to do the same!
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You “travel professionals” should of done this years ago when DELTA took away the commissions for your services. Now you know why there is labor disputes in the industry.
Why didnt you all ban together back when the commissions disappeared? At least airline employees have organized labor, negotiations, arbitration, mediation and strikes.
While I have no problem with agents passing on the additional costs to their customers, they should not be boycotting United entirely. The travel agent is supposed to work for the customer. Just because an agent is pissed off (rightfully so) with United, does not give them permission to book the customer on another airline that would impose greater total cost. Certainly, if the additional cost would put a United ticket over one on another airline, fine, but otherwise, the agent should book the customer on United, with an explanation for the additional fees that are involved.
SirWired
Yet another mess.
I wonder how screwed up travel will be in five years!
SirWired said “The travel agent is supposed to work for the customer. Just because an agent is pissed off (rightfully so) with United, does not give them permission to book the customer on another airline that would impose greater total cost. Certainly, if the additional cost would put a United ticket over one on another airline, fine, but otherwise, the agent should book the customer on United, with an explanation for the additional fees that are involved.”
As I understand it, United’s move will result in a significantly higher cost, assuming that the travel agency doesn’t absorb this cost. The agency that I deal with has a range of fees that start at $29.00 for a domestic ticket and go up. If I buy a complex domestic ticket and the price is $1000.00, the merchant fee of 3% to 5% will add on another $30.00 to $50.00 to the cost, so my cost will now be somewhere around $1059.00 to $1079.00 just to buy the ticket. And on international tickets where one can easily be spending $5000.00, that merchant fee suddenly balloons to $150.00 to $250.00.
I completely undestand why travel agencies would want to stop selling United, this is nothing more than an attempt to drive a wedge between travel agencies and their customers. United thinks that the customer is more loyal to the airline than their agency and that in order to save paying the merchant fee, the customers will buy online, directly from United, thereby eliminating travel agencies that give options and offer multiple choices.
To follow up on John M.:
Not only are there vary real costs (cc fees) that the agency will have to pay but there’s also a lot of risk associated with this from the agency side. If anything goes wrong and the client protests the charge (Chargeback in credit card lingo), the agency not the airline is on the hook for the money. There is a vary real possiblity that the agency might get stuck for a few tickets. These are costs that the agency will have to build in.
From the client, there are also a ton of risk involved there. How many stories has Chris Elliot written where a Travel Agency goes out of business between the time they charge a client for the trip and they pay their supplier.? Suddenly, booking your ticket on United means your making a bet on your travel agency’s fiscal health and paying more for the honor of flying United. No thank you.
@Sir Wired: If your agency is working for you, why would they ever book you with a supplier that puts you at a higher risk and higher costs. Just doesn’t make sense.
Thanks for all the comments, if this does happen there seems no way it will benefit consumers or travel agents. Another issue is what about people who do not use the internet. Also if it happens, and say, 20 percent more people book on United.com, that’s a 20 percent extra burden of people at the airport and on the phones dealing with problems…the lines are already long as are the hold times…
Here’s an interesting window into United’s potential motivation, from a travel agent newsletter.
In a regulatory filing last Friday the airline said it would raise an additional $175 million backed by aircraft parts. The airline has raised more than $1 billion over the past year by mortgaging aircraft, engines, parts and future frequent-flyer miles, but the amount of assets it has left to sell has dropped from about $3 billion to $1.7 billion. United and other airlines have been scrambling in recent months to raise additional cash amid expected losses this year from continued weak travel demand and higher oil prices. This highlights United’s need for cash and could be one of the reasons United is trying to get out of paying some of the credit card fees.