Business travel is almost a gotta-have for American Express: It doesn't generate huge revenue, but it helps with the company's other business lines.
American Express indicated last week that it is restructuring its business travel unit toward online and mobile transactions, and today the company released its fourth quarter results, and reported that its global business travel sales fell 1%.
Speaking to financial analysts today, CFO Dan Henry said business travel is not the sole focus of American Express’ $895 million in restructuring costs, but it is “a large piece of the restructuring.”
Henry said although business travel is not a great generator of revenue for American Express, it is “an important business to us” as it enables the company to deepen relationships with corporate clients.
American Express continues to examine ways to reengineer its business travel unit, he said.
One reason business travel is a focus of the restructuring is that it has a new leadership team that wanted to “turn up the dial” to adapt to the shift to online and mobile habits, and the company decided to implement the new leadership’s proposal, Henry said.
In the U.S., American Express’ consumer travel sales jumped 9% in the fourth quarter, compared with the fourth quarter of 2011, but overall its global travel commissions and fees fell 2%, the company reported.
The 2% decrease in travel commissions and fees reflected a 1% jump in worldwide travel sales, which was more than offset by decreasing transaction-related revenue, the company stated.
Interestingly, in the U.S., American Express’ airline-related volume, which represents 7% of its billed business, fell 1% in the fourth quarter of 2012, compared with the same period a year earlier.
For the fourth quarter of 2012 American Express’ net income fell 47% to $637 million on revenue of $7.5 billion, a 2% jump.