Airline lands card fees on some travel agents

Jul 03, 2009 (The Record - McClatchy-Tribune Information Services via COMTEX) -- UAUA | Quote | Chart | News | PowerRating -- Travel agents like Rick Ardis are up in arms about United Airlines' plan to put some of his colleagues on the hook for merchant credit-card fees.

United, the nation's third-largest carrier, notified some travel agencies last month -- maybe as few as a dozen -- that as of July 20 they no longer can submit payments through the airlines' card payment system when booking flights for clients. Instead, they must book at united.com or use their own merchant services accounts to process card payments and pay the airline in cash.

This is a big deal for travel agents, said the owner of Ardis Travel in East Rutherford, who is also president of the 242-member New Jersey chapter of the American Society of Travel Agents. Local agents are angry and "feeling persecuted," he said, even though he knows of no agency in New Jersey that has been targeted.

Agents expect the airline will expand the reach of the new policy, and shift responsibility for paying card fees on ticket purchases from the airline to the agents, ultimately saddling agents with $171 million a year in card fees, according to the travel agent group's estimate.

Ardis said the added cost would be about $20 on a typical reservation, which would have to be passed on to the consumer. That would almost double the service fees Ardis charges for arranging trips.

"They are not paying us to sell their tickets and now they want us to bear their operating expenses," he said.

United and other major carriers have been trying to lower their ticket-distribution costs for years and travel agents have often borne the brunt of the shift. First commissions were cut and then eliminated altogether, so agents had to move to a fee-for-service model, charging their clients directly.

United spokeswoman Robin Urbanski on Thursday declined to comment on the agents' concerns. She said the company will not disclose how many agencies were notified or if it plans to expand the policy. "We identified certain accounts where we see potential cost savings," she said. "Credit-card processing costs are escalating at a high rate, and we need to explore ways to reduce expenses."

Agents see the action as a "trial balloon" sent up by the company to gauge the level of support agents can muster in the halls of Congress as they try to squash the policy.

The agents also are describing it as a "smoke signal" inviting other airlines to follow suit, a scenario that could raise antitrust issues. The American Society of Travel Agents urged officials at the Department of Justice this week to watch for possible collusion among airlines, Paul Ruden, the trade group's lawyer, said on Wednesday. Ruden said he knows of "approximately a dozen" travel agencies that received letters from United over the past two weeks.

"It is clearly a test," he said, saying the targeted travel agencies do little business with United, so the airline would see no meaningful savings in card fees.

Agents also are concerned that such a policy change would put them on the hook for credit-card chargebacks, which occur when customers get their card companies to stop payment when things go wrong, whether it's a lost bag or an airline bankruptcy that leaves travelers stranded.

Ardis said that if other airlines follow United's lead, it may drive some New Jersey travel agencies out of the business, or prompt a wave of mergers of small agencies that may not meet merchant banks' criteria for establishing their own card payment accounts to handle larger transactions.

"Most agencies do not have a merchant account to charge a $700 ticket," Ardis said. "They would have to find a new merchant account that would allow them to charge that much." And some lack the financial wherewithal to qualify for such an account.

Making reservations through united.com is not an attractive option for agents because they would lose some of their ability to provide custom service, which is their main appeal, Ardis said.

For example, it would be harder to arrange inter-line flights, which are flights with connections on different airlines that do not have code-sharing agreements, and agents would lose flexibility to make last-minute changes in itineraries without the customer incurring airline penalty fees, Ardis said.

Chicago-based United flies between Newark and four U.S. cities: Chicago; San Francisco; Washington, D.C.; and Denver.

Meanwhile, some agents have been talking privately and in blogs about punishing United by steering customers to other carriers. Ardis said a boycott of United by travel agents would be illegal and may hurt the agents' cause. Certain group boycotts are deemed anti-competitive and in violation of the Sherman Antitrust Act.

Patricia Corcoran, owner of Robert's Travel Service in Paramus, said if United expands the policy change to other agencies and if other carriers follow suit, "the consumer will be the one who suffers -- consumers and the smaller agencies that always live on the edge."

E-mail: newman@northjersey.com

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