The last couple of weeks have been loaded with news from United Airlines. And not of the good variety. After all, you’re talking about the airline with one of the oldest complaint websites around, untied.com.
You see, a couple of weeks ago, some travel agencies received a letter from United stating that they would no longer be able to process credit card payments on behalf of the airline. So, if you bought a United ticket from them, the agency would have to process payment through their own merchant account, and then send payment by check or some other form to the airline. More on this later…
In late June, United announced they were issuing bonds for $175 million. The bonds were issued at a discount for lack of buyer interest, even paying over 12% per year. The fact that they were secured through a lien on maintenance parts didn’t help either. Do you really want to buy a bond who can’t offer better security than spare parts?
If its financial picture is not bright, they’re not doing much better (at least on the PR front) operationally. On July 2nd, their Chicago hub was practically paralyzed due to a failure of their check-in systems.
Then, in what has become one of the latest videos forwarded around the world courtesy of YouTube, Dave Carroll, of the band Sons of Maxwell, sings about how United Breaks Guitars. If you haven’t heard the song, you should, it’s pretty good! The story behind it is about the saga of trying to get United to pay for the damages to Mr. Carroll’s $3500 guitar. You can read the story here.
Now, back to the credit card issue. To summarize, a small number of travel agencies (with very low sales volume of United tickets, by the airline’s account), received a noticed that they won’t be allowed to process credit card payments through the airline. Normally, when you buy a ticket (or cruise, or tour, etc.) thrugh a travel agency, the credit card payment is processed by the airline, cruise line, etc. That’s why your statement would say “United Airlines” and not “KC Travel”. United is trying to change that around. So now, your travel agent, if affected by United’s letter, would have to charge your card plus a 3-5% fee charged by the credit card company (which the airlines most probably get a discount on), and then send the payment to United. Since the airlines are no longer paying commission on tickets, it’s not like your agency could absorb the merchant fee, so you’d be paying more.
Even more freightening, by not processing the card payment themselves, United may be released from its liability as a service and product supplier. If you have an issue with them, your credit card company would not be able to help, because the transaction was with the travel agency, not the airline. If you dispute a charge, the travel agency gets hit with it, not the airline. You’re due a refund from them? The refund would have to be paid in cash or check to the agency and then to you, not just credited to your card.
The implications of this change are so severe, that several Congresspeople have asked United to at least delay the policy’s implementation to investigate its repercussions. United just agreed to do this.
Why all the fuzz if this just affects a small number of no-name agencies? Well, airlines have a habit of testing the waters like this to measure the response or opposition to something, and then go full scale. They also have the ahbit of copying one another’s “cost saving measures” and fees, so even if you don’t see this affecting you because you don’t fly United, keep an eye open for what happens next.
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