American Express to Push Corporate Travel Business

American Express Co., limping from huge losses in its credit card business, said Tuesday that it plans to aggressively expand its business of managing travel expenses for major corporations.

Roger Ballou, president of American Express’ Travel Service Group, described the travel management business as a “huge growth area for American Express.”

“The scope of (travel and entertainment) is massive,” Ballou said. “It is one core strategy of the company to grow in this business.” The company estimates $170 billion was spent in the U.S. last year on business travel and entertainment, including expenses for computers and other expenses involved with modern business trips.

American Express’ Travel Related Services division, which issues its charge cards and Optima credit cards, saw its net income fall 59% in 1991 to $396 million, compared to earnings of $956 million in 1990. Key to the loss was a special provision of $2.3 billion to cover bad debts principally from the Optima business.

Meanwhile, intense competition in the credit card industry limited the growth of American Express’ domestic cards. At the end of 1991, the company had 25.8 million cards in circulation nationwide, down by about 100,000 from the year earlier.

Charles M. Vincent, a bank analyst who follows American Express for Provident National Bank in Philadelphia, said the company is correct in trying to nurture the travel and expense management business.

The travel business is “the engine that’s been driving the company for some time,” Vincent said.

American Express has 5.1 million corporate cards in the U.S. Last year, business travelers charged about $28 billion on the cards. The cards have higher spending and fewer bad debts, making them “a more profitable card than the consumer card,” Ballou said.

To accelerate corporate card usage, American Express is pushing its travel consulting business. In addition to putting a corporate charge card in employees’ wallets, the business books air travel, hotel stays and car rentals at discount rates, he said.

American Express is also acquiring travel agencies and striking alliances with corporations to build up its travel and corporate expense management business. Last week, American Express and American Telephone & Telegraph unveiled a new card aimed at small businesses’ telephone and corporate expenses.

Major corporations, such as International Business Machines, have signed contracts with American Express to handle travel expense management. Ballou said the potential cost savings are dramatic.