Amex Q3 Business Travel Sales Hit Hard

American Express on Wednesday reported the largest of three consecutive quarterly declines in global corporate travel sales. At $4.4 billion during the September quarter, those sales were down 9 percent year over year. It marked a seventh straight quarter of a downward trend__starting with shrinking growth throughout 2011 and continuing with outright decreases in 2012__and compared unfavorably to an 8 percent increase in Amex's U.S. consumer travel spending. CFO Dan Henry during a conference call with analysts cited a weakening T&E segment for slower growth in the company's Global Commercial Services unit, a drop in total travel commissions and fees, and slower growth in Asia.

"We are seeing lower T&E spending compared to other categories, pretty broadly," Henry said. "We see large corporations in particular being a little bit conservative here and seeing a drop in spending."

Including corporate travel and card programs, GCS third-quarter net income dropped 7 percent to $183 million. Billed business on cards increased 5 percent (8 percent when currency-adjusted), marking a fifth consecutive quarter of declining growth rates. GCS "had a growth rate above the company average in the first half of 2012 and it has declined at a slightly faster rate to move towards the industry average," Henry said. "We have seen this slower growth rate primarily in T&E categories."

Discussing Asia/Pacific, he said declining business in Australia, "particularly in the T&E segment," is the "biggest impact that we are seeing that is influencing the slowdown in the growth rate of billings in that region." He noted the "pretty close linkages" between Australia's economy and China's, which also is experiencing slower growth rates.

Overall, Amex's third quarter travel commissions and fees totaled $465 million, a 3 percent decline "reflecting a 6 percent decline in worldwide travel sales, again reflecting lower T&E spending," Henry said.

American Express also reported moderating growth in cardholder spending, which "rose 8 percent in the United States from a year ago and 6 percent globally," according to a statement by chairman and CEO Kenneth Chenault. "That's a healthy pace in the current environment and an improvement from earlier in the quarter. Nonetheless, it represents slower growth than we were generating earlier in the year, a trend that we're seeing among major card issuers."

Despite T&E segment weakness, Amex posted a 1 percent increase in net income to $1.25 billion. "We generated solid results this quarter against the backdrop of a very uneven global economy," according to Chenault. "Bottom line results were driven by higher revenues and lower expenses, a combination that reflects ongoing efforts to contain operating costs while maintaining a substantial level of investment in our marketing and rewards programs."