Most Amex Cuts in Back Offices Abroad

American Express Co.'s plans to cut 3,300 employees in its Travel Related Services unit will mainly target back-office card functions in overseas markets, a company spokeswoman said Tuesday.

Most of the cutbacks, announced Monday, are set for countries where American Express is consolidating operations centers. The company is placing such functions as customer service, bill processing, and account statements in large regional centers.

The two largest centers, in Brighton, England, and Sydney, Australia, were opened a couple of years ago. They handle business from Europe and Asia, respectively, and are able to accommodate many languages, compared with the smaller centers that focus on one country.

In addition, some business travel concerns will be eliminated abroad.

"We have acquired a number of travel agencies over the years, but in some locations we may close a few," said American Express spokeswoman Susan D. Miller.

The company would not disclose whether card or travel services will experience the greater number of job losses. In some cases, employees have not yet been notified, said Ms. Miller.

An undisclosed amount of eliminations will occur in the United States.

On Jan. 14, the corporate services unit, which provides business travel and corporate card services, was told in a memo from vice chairman Kenneth I. Chenault that it will be pared down. Corporate services will be reorganized based on its number of clients rather than geographical location.

Corporate services is the only U.S.-based unit to be notified so far of changes.

American Express Travel Related Services employs 60,000 of company's 72,000 employees worldwide.

The job losses will cost American Express $70 million in severance pay and $55 million to close leased facilities.

The company said it does not expect to benefit from the savings for another two years. It plans to reinvest the money in new businesses and alliances with other financial services companies.

A recent example of such alliances is a joint venture with Natwest Bank and United Airlines to offer a cobranded credit card in the United Kingdom and a corporate card with United Airlines in the United States.

"American Express will spend more money in strategic alliances overseas because it is working," said Donaldson, Lufkin & Jenrette analyst Susan L. Roth.

Currently, about 30% of the company's revenues comes from its international operations. The goal, however, is for international to represent 50%.

Ms. Roth believes the company's plan to accelerate its expense-reduction costs will fuel more aggressive marketing, particularly in the card business, which experienced significant growth in the fourth quarter.

Billed business on American Express cards in the quarter rose 16%, to $51.1 billion, which the company attributed to higher spending per card member. Total cards in force rose 8.2%, to 41.5 million.

Offsetting the increased billings was a 4% decrease in net card fees, to $415 million. Fee income is decreasing because American Express is offering more low- and no-fee credit cards.

For the quarter, American Express' earnings increased 55%, to $595 million.

Including the restructuring charge of $138 million in the fourth quarter, net income at Travel Related Services declined slightly to $1.11 billion from $1.12 billion a year ago. The expense was timed to coincide with a $300 million after-tax gain from the sale of American Express' holding in First Data Corp. stock.

American Express still owns 3.3 million shares of First Data stock.

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