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American Express to restructure business travel unit, cut jobs, in shift to online

@denschaal

Jan 10, 2013 2:40 pm

Skift Take

American Express has been criticized for more than a decade for its sluggish response to the online shift. Today’s restructuring announcement only emphasizes the point.

— Dennis Schaal

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American Express is “reengineering the business model” in its Global Business Travel unit to reflect the shift to online, and the “largest reductions” in 8,500 layoffs that will occur companywide will take places in its travel businesses.

Officials released some fourth quarter results today, a week ahead of a scheduled January 17 conference call, to discuss $895 million in restructuring costs.

The restructuring will impact the Global Business Travel business. Among the elements will be, the company stated:

Reengineering the business model in Global Business Travel to reduce its cost structure and invest in capabilities that better align it with the shift of customer volumes to online channels and automated servicing tools.

Kenneth Chenault, American Express, chairman and CEO, told analysts that the economics of its corporate travel business have changed more dramatically over the years than any other part of the American Express business.

The restructuring in travel and other parts of American Express will enable the company to trim costs, to be more nimble, and to free up money to invest in new opportunities, Chenault said.

American Express stated it will take a $400 million restructuring charge to “adapt parts of the business as more customers transact online or through mobile channels, and provide the resources for additiional growth initiatives in the U.S. and internationally.”

The company plans to eliminate 5,400 jobs during 2013, which would be 8.5% of the current workforce. However, the staffing at the end of 2013 is expected to be 4% to 6% lower than the current workforce because of some job additions.

Officials said the employment cuts will be focused on positions that are not “revenue-generating.”

American Express also took a $153 million charge to fund consent orders signed in October to compensate customers for fees, interest and bonus awards over the past few years.

For the fourth quarter, American Express’ net income fell almost 47% to $637 million, taking the restructuring charges into account.

Complete fourth quarter and full-year 2012 results will be released January 17.

Chenault said the company decided to conduct a conference call today with analysts in the interests of transparency.

Chenault argued that the move to emphasize online channels across the business shouldn’t be considered a sudden move because he’s been talking about the convergence of offline and online for five to six years.

The company’s intent is to move more of the business online is to “continue to be ahead of the curve,” Chenault said.

American Express was the largest U.S.-based travel agency in 2011, with $29.3 billion in sales, according to Travel Weekly’s annual Power List.

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