United To (Some) Travel Agents: Credit Card Fees Are Your Problem

It appears United has taken the next step in the airline industry's never-ending quest to lower distribution costs or at least get others to shoulder the burden for them. As first reported in The Beat, United informed a currently unknown number of travel agents that they must process credit card transactions themselves and then report the sale as a cash transaction. Until now, when a travel agency (or online travel agency) has sold a published ticket on United (or any other carrier) the credit card is actually processed by the airline. As such, the airline is responsible for paying the 2 percent to 3 percent (in rough numbers) that Amex, Visa, Mastercard and Discover charge for using their cards.  [more] In the new world proposed by United, agents will process the credit cards themselves (presumably along with an additional consumer fee) and then remit the full amount of the ticket back to United. This would obviously save a considerable amount of money for United if widely adopted.Still too early to tell what this means for consumers but if the airline industry adopts United's moves broadly, consumers may be forced to pay one more fee if they are not willing or cannot visit an airline's Web site directly. Given the usual herd mentality in the industry starting way back when commissions were reduced and carrying forward to today's myriad of baggage, mileage redemption and call center fees, it would not be surprising to see this play out in a broader way.If adopted even more broadly and applied to the OTAs, they would be forced to reinstate some sort of booking fee in order to cover the costs of paying credit card merchant fees. This would return a pricing advantage to the sites that had recently been removed. We have heard the OTA's efforts to to drive growth have been successful.

These insights are excerpted with permission from Tom Botts' Hudson Crossing blog.