American Express Global Business Travel to take deep cuts
Amex chief Chenault says online servicing has become ‘the preferred channel’
American Express said it will eliminate about 5,400 jobs this year, reducing overall staffing by 4% to 6%.
The deepest cuts will be felt in its Global Business Travel unit, which currently employs about 12,000 people.
“Online servicing is the preferred channel,” Kenneth I. Chenault, chairman and chief executive officer, said during a conference call with investment analysts.
“As our online capabilities improve, one outcome is that we can serve our growing customer base with lower staffing levels.”
Daniel Henry, executive vice president and chief financial officer, said the move is part of a “reengineering” of the corporate travel unit’s business model to reduce its cost structure.
That will enable the company to “invest in capabilities that will help us better align with the shift of customer volumes to online channels and automated servicing tools,” he said.
Henry said the job cuts will be divided proportionately between the U.S. and the rest of the world.
He said they will “primarily involve positions that do not directly generate revenues.”
The executives provided few additional details of the impact on the division. A spokeswoman said later that the adjustments, which will affect all seniority levels, were being made behind the scenes, and customers could expect business as usual.
“Neither our corporate clients nor their travelers should experience any changes to the high level of support they receive from American Express,” she said.
“Moreover, customers should understand that we are making many of these changes in order to be able to invest in and meaningfully advance our product and servicing offering in a way that is aligned with the way they want to do business with us.”
Chenault noted that American Express plans to report its fourth-quarter earnings on Jan. 17, but the company decided to “preannounce” the job cuts in the interest of transparency. It is the fourth job reduction since 2001.
Chenault said its other businesses are performing well.
But the company has experienced a year of declines in business travel sales, particularly in the Asia Pacific region, even as its consumer travel sales continued to grow.
In the third quarter, business travel sales were down 9% over third-quarter 2011.
Chenault said the company has been adapting to the “digital convergence” of the on- and offline worlds for five or six years.
“What’s important about travel is that it has gone through a great deal of change and continues to go through a lot of change,” Chenault said.
“The economics of business travel in particular has changed more dramatically than any other part of our business.”
Henry Harteveldt, who leads the travel and aviation practice at Hudson Crossing, said the cuts “are no different from what we’ve seen in other sectors of the industry.”
He noted that while American Express is eliminating jobs, it also is adding some. “It’s very clear that it is shifting from jobs that provide low value to those that provide more value,” he said.
“Corporate clients are doing a lot more online planning and booking, so the need for customer service staff is sharply reduced.”
He said the challenge for all travel management companies is to structure headcount to ensure adequate staffing in the event of a strike, extreme weather or other disruption.
Read about American’s agreement with Amadeus for XML connectivity in the May 21 issue of TTU.
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