American Express slashing travel jobs to help cut costs
AMERICAN Express will slash about 5400 jobs, mainly in its travel business, as it seeks to cut costs and transform its operations as more of its customers shift to online portals for booking travel and other needs.
The job cuts will be partly offset by jobs the company expects to add this year. American Express said the jobs eliminated will span employee seniority levels and divisions worldwide, but will primarily involve positions that do not directly generate revenue for the company.
All told, the company anticipates that staffing levels will end up between 4 and 6 per cent lower this year than in 2012. The company currently has 63,500 employees.
"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," said CEO Kenneth Chenault.
American Express said it would book an after-tax charge of $US287 million due to the restructuring. It's also recording $US212 million in expenses related to reward points for its cardholders and roughly $US95 million in customer reimbursements and other costs.
The combined charges will reduce American Express' fourth-quarter net income by 46 per cent from a year earlier.
The company projects net income of $US637 million, compared with net income of $US1.2 billion, in the same quarter of 2011.
Revenue rose 5 per cent to $US8.1 billion. Analysts expected $US8.01 billion. The company is scheduled to report full results next Thursday.
Overall, American Express has done well after the recession, as upscale shoppers have spent freely. That's because Amex cardholders are in general about a third more affluent than other credit card holders. Through the first nine months of 2012, revenue grew 5 per cent, while net income rose 3 per cent.
Spending by cardholders jumped 8 per cent in the fourth quarter, despite some softening early in the period due to superstorm Sandy, the company said.
Mr Chenault noted that, since the recession, American Express has been consistently gaining market share.
Despite that success, he said the company must embrace new technologies, become more efficient and position itself to invest in growth opportunities in a marketplace that's increasingly becoming defined by consumers' use of the internet and mobile technology.
To that end, American Express' restructuring plan calls for overhauling its travel business to cut costs and invest in ways to cater to a growing volume of customers turning to online and automated tools to make travel arrangements.
"One outcome of this ongoing shift to online is that we can serve a growing customer base with lower staffing levels," Mr Chenault said during a call with analysts.
The company also will reconfigure its cardholder servicing and collections operations to focus more on online and mobile, rather than telephone and mail.
"The overall restructuring program 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 per cent of revenues," Mr Chenault said.