Digital revolution forces Amex to reinvent travel arm

by Phil Davies
by Phil Davies
January 11, 2013 08:10 AM GMT

The majority of 5,400 worldwide job cuts announced by American Express will come from its travel business.

The travel arm is being "fundamentally reinvented as a result of the digital revolution".

The company is seeking to cut costs and transform its operations while more of its customers shift to online portals for booking travel plans and other needs.

Amex said it was having to adapt parts of the business as more customers make payments online or via mobile.

The job losses from a total workforce of 63,500, will be spread proportionally between the US and international markets by the end of the year.

The card provider took almost $600 million in after-tax charges in the fourth quarter of 2012.

The company said that these charges would halve its net profit for the quarter from $1.2 billion to $637 million.

The charges include restructuring costs of $287 million mostly related to redundancy payments, $212 million for Membership Rewards expenses and $95 million for card member reimbursements

Spending by card members in the fourth quarter was 8% higher than a year ago, the company said, "despite a brief dip in late October/early November reflecting the impact of Hurricane Sandy on consumers and businesses in the north-eastern United States".

Total revenues rose 5% on the year to $8.1 billion.

Chief executrive Kenneth Chenault said: "Against the backdrop of an uneven economic recovery, these restructuring initiatives are designed to make American Express more nimble, more efficient and more effective in using our resources to drive growth.

"For the next two years, our aim is to hold annual operating expense increases to less than 3%. The overall restructuring programme will put us in a better position as we seek to deliver strong results for shareholders and to maintain marketing and promotion investments at about 9% of revenues.”

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