Consultant Joselyn: 'This snake has just slithered back into its hole'
United Airlines may grant some agencies more than 60 days' delay before cutting them off from access to the airline's credit card merchant accounts.
The offer to go beyond 60 days was reflected in email to some affected agencies. The carrier had previously advised the targeted agencies that they could have "up to" 60 extra days to prepare for the cut-off but that they would have to request the delay.
In responses to various agency requests for the delay, United employed language suggesting that the carrier was willing to work with the agencies as long as any resolution favored the airline's bottom line.
In one instance, United said a 60-day delay was "certainly an option" but added that the purpose of any delay would be to find a solution that reduced United's "payment costs" while providing the agency with alternatives to which it could transition "in a reasonable amount of time."
In the same message, United said it wanted more information about the agency's business, saying the agency and carrier might "jointly" find an "alternate solution."
In other cases, United granted "approximately" 60 days or set a tentative date of Sept. 21 for the cutoff. Some agencies were offered the prospect of additional time, as well.
One note said, "We are looking to see if there are other alternatives that may meet our goals ... and still provide a solution for your company." Another said the carrier was reviewing the situation "to determine if any alternate solutions exist" that would satisfy both parties.
United asked for suggestions from most agencies along these lines but did not indicate what kind of solutions it was seeking.
At press time, United had not responded to Travel Weekly's request for more details.
Not all 28 agencies United targeted in this process are asking for a postponement.
One retailer who asked not to be identified described asking for an extension as an "insult" and pointless. "It is a stay of execution," the agent said. "No matter how I slice and dice it, [United] is still putting me out of business."
In the agent's view, United is employing a divide-and-conquer strategy because if all affected agents were cut off immediately, there would be more pressure for a quick resolution to the issue.
Travel consultant Bob Joselyn sees United's offers of delayed implementation as a similarly sinister strategy.
"This snake has just slithered back into its hole," Joselyn said. "We need to keep sending UA a message by hurting it financially. If the delay lulls the agency community into complacency, the delay will be just the opposite of a victory." -- N.G.
U.S. Rep. Michael Arcuri (D-N.Y.) is "looking at the possibility of calling for congressional hearings" into United Airlines' plan to cut off some agencies' access to the airline's merchant credit card account.
Arcuri's press secretary, Jay Biba, said hearings could begin as early as September.
Meanwhile, United, responding to requests from Arcuri and other members of Congress, informed agencies that were set to lose access to United's merchant accounts that they could request a reprieve of "up to" 60 days. Most had been set to lose those rights on July 20, but United pushed back the cutoff date for all 28 affected agencies to Aug. 3.
Several U.S. senators and House members wrote in letters to United that they were concerned the credit card policy could undermine the federal Fair Credit Billing Act. The lawmakers said they wanted at least 60 days to consider the matter and "if necessary and appropriate, to take action to mitigate the effects of the decision."
In a July 17 letter, United advised 13 members of the House of Representatives of its decision to delay implementation. It also defended its move as being "very limited in scope, confined to a small number of agencies and in no way ... intended to be a broad move in the marketplace."
That was the first public comment the airline had made on the subject, despite the fact that the cutoff notices had triggered a growing storm of protests. Until members of Congress got involved, United had declined to say how many agencies it had notified or how extensively it planned to apply the withdrawal of merchant credit card privileges.
In its response to lawmakers, United declared that its action "neither violates nor undermines the Fair Credit Billing Act. There will be no difference in how credit card disputes will be handled from a customer's perspective. Customers who charge their tickets with travel agents will have the same rights they have always had, including the right to dispute charges to their card issuer for nonperformed services.
United continued, "This is the case when the impacted travel agents use United's merchant account; it will continue to be the case when the impacted agents use their own merchant accounts."
In addition, United said, having agents act as the merchants for United services is "not unprecedented."
United told lawmakers that requiring customers to use agents' merchant credit card accounts worked with thousands of agencies worldwide, adding that it has "many current and long-standing relationships under which the travel agent acts as the merchant of record. The ability to tailor our relationships and programs with these agencies is paramount to our ability to efficiently and effectively bring our service to market."
Nevertheless, Arcuri said he would continue to fight United's plan, citing implications for increased consumer prices and possible job losses across the country. Besides, he said at an ASTA press conference early last week, "United's explanations don't add up." He said it was unclear how a limited application would save the airline much money.
"We need real answers and will continue to press for that," Arcuri said. "The aim is to get United to reconsider" and stick with current business practices.
Celebration, caution
When United's plans became known a month ago, ASTA mobilized members and worked with other concerned groups to focus government attention on the issue.
Paul Ruden, ASTA's senior vice president for legal and industry affairs, said the trade's effort to get Congress involved has been the "best grass-roots response from our members" in his decades at ASTA.
He said member email continued to "pour in," usually advising of letters members had sent to their representatives. Ruden also said that ASTA was hearing from more lawmakers wanting additional information.
He said agents can "all take a deep breath and celebrate, but be prepared to re-engage. There is much more to be done."
Ruden said ASTA continued to believe United's move was just the first strike in a broader plan. And he added that ASTA also saw United's actions as "signaling" other airlines, a breach of antitrust laws.
Kevin Mitchell, chairman of the Business Travel Coalition, agreed, saying it appeared that United wanted to "signal to other carriers that the water is really nice" and they should jump in, too.
He added that if United was really trying to save money on credit card costs, "the real merchant fee costs are at the top of the chain with corporations," which is what worries his constituents.
As for the card issuers, Ruden said, "We've been told the credit card companies are concerned about how this will affect them. ... It disrupts established business practices that have been in place since the advent of the cards."
That concern might be well-founded because, Mitchell said, "a lot of corporations would revisit paying airlines by invoice," which would represent a major change in processes and loss of business for card issuers.
Ruden said no lawmaker or government agency disputed ASTA's assertion that United's proposal would undermine consumer protections provided by the credit card system. This issue is "why it is important that Congress stays involved. It may be necessary to change some laws," Ruden said.
The "other missing factor," he said, is that there is "no process to communicate effectively with United to deal with chargebacks" in the event agencies are merchants. To make things tougher from the trade's standpoint, in about 10 states, Ruden said, it would be illegal for agencies to pass on merchant fees to consumers.
Like Arcuri, Ruden said he was skeptical of United's intent. "We're asking: Where is the real explanation?" he said.
Analysts touched on the matter during the carrier's quarterly earnings call last week.
Responding to questions, United officials said they had to take such "aggressive" and "risky" measures to make their distribution networks more efficient and enhance revenue or save money. President John Tague said United had to become "more efficient about the way we distribute the product, be that improved economics or improved performance from our distributors."
Tague said United had "a number of agencies that have been merchants of record for some time." He characterized the latest move as "merely" an extension of that approach.
As for the future, Tague said he could not "speak to what we will do on a going-forward basis, but I think you can continue to expect us to take calculated risks such as these."
CEO Glenn Tilton said, "There are no sacred cows," adding that no analyst "should be surprised by our aggressive pursuit of those savings."
ARTA in the act
Within the last 10 days, ARTA launched a multipronged attack on United's new policy.
First, it asked the Department of Transportation to launch a rule-making procedure to investigate United's move. In a letter to the DOT, ARTA cited the ARC Industry Agent's Handbook as evidence that United is violating the terms of the sales agreement in pushing ARC travel agencies to be credit card merchants when selling the carrier's services.
Describing United's slow rollout of its new policy as "signaling," ARTA said its complaint to the DOT was intended to deter the carrier from discriminating against some agencies and to deter other airlines from instituting more such policies.
ARTA also wants to take its argument that United is violating the ARC sales agreement before the travel agent arbiter. Because both parties must agree to arbitration, ARTA sent a letter to United asking the carrier to agree to arbitration, arguing this would "save everybody money."
ARTA also asked ARC to "clarify" the impact of United's policy on ARC agencies. In a letter, ARTA asserted that ARC agencies could risk violating the ARC sales agreement if they become the merchants.
ARTA said the Industry Agent's Handbook can be read no other way than that the carrier is the merchant.
Allan Muten, ARC's director of strategic communications, told Travel Weekly that ARC did not see United's move as a violation of the ARC sales agreement. He said each carrier can set its own credit card acceptance rules.
Finally, ARTA and ARTA Canada late last week asked United, in a letter, for a face-to-face meeting "to open constructive dialogue." The groups said they hoped to resolve the issues in ways that work for both the airline and travel agents.