MasterCard, Air Travel Seek Travelers' Business
NEW YORK -- Vying for a bigger share of the business travel market, MasterCard International will soon offer corporate credit cards in conjunction with Air Travel Card, an airline industry program that handles $5.5 billion of charges a year.
The alliance is meant to aggressively thrust members of the bank card association into the $325 billion worldwide travel and entertainment market, in which MasterCard has only a token presence.
American Express Co. dominates the corporate travel market. In the United States alone, it captures about 80% of U.S. corporate travelers' business each year, according to industry estimates.
"We're going to take a major piece out of American Express' hide," said Dan Ciporin, a MasterCard vice president in charge of franchise management.
The card association said Monday that its member banks will be able to market corporate credit cards early next year with the logos of both MasterCard and Air Travel.
More than 100,000 corporations use charge cards issued by Air Travel, a proprietary payment system owned by 28 airlines. Until now, the cards have been used exclusively to pay for airline flights. Under the co-branding arrangement with MasterCard, businesses will be able to charge all travel expenses with the cobranded card.
That could mean a lot of new business for bank issuers. MasterCard has 750,000 corporate cards outstanding. But travelers, who purchased $45 billion
of airline tickets with plastic last year, charged only about 12% of the amount on their MasterCards.
"The real objective of the cobranding initiative is to bring volume that already exists outside of the system into the system," said Stephen Bartell, who oversees MasterCard's cobranding deals.
With a cobranded card, employees will need only one card when traveling and bills will segregate airline charges from other expenses.
Building on Relationships
The card association also hopes its members will gain business from travel agencies and big corporations that have longstanding relationships with the airline payments system.
The Air Travel Card, founded in 1936, has more than 1.5 million users worldwide and is accepted by 200 carriers. Seven U.S. airlines issue the card to domestic corporations; another 21 issue it abroad.
In 1990, the system handled $4.5 billion in U.S. business air travel sales and $5.5 billion worldwide. That volume, MasterCard executives say, will probably move to the MasterCard system as issuing banks align themselves with the Air Travel plan.
Under the agreement, MasterCard member banks will strike their own cobranding arrangements with individual airlines that issue Air Travel cards.