National Processing Inc. has lost another major merchant customer to archrival First Data Corp.

The Louisville, Ky., company, which ranks second to First Data in processing credit card transactions for merchants, is losing United Airlines to Chase Merchant Services.

The Chase Manhattan Corp. unit is a member of First Data's merchant bank alliance program.

The airline, which will switch processors in October, is seeking to take advantage of First Data's USAVE marketing program, which targets customers through customized offers in their credit card bills, according to Chase.

The Kentucky processing company, which is 88% owned by National City Corp. of Cleveland, announced this year that it anticipated some defections among major customers because of a competitive pricing environment.

But industry experts said the loss of United was a bad sign, since airlines have traditionally been important for National Processing.

"It is another example of the erosion" of National Processing's stronghold among large card acceptors, said Paul Martaus, president of Martaus and Associates, Clearwater, Fla. "USAVE is a deal maker," and United is after "micro-level marketing."

With USAVE's micromarketing program, Mr. Martaus said, "United Airlines will gain an exacting consumer profile."

Last October, National Processing suffered a major blow when Bentonville, Ark.-based Wal-Mart Stores Inc. switched to First Data.

Wal-Mart contributed an estimated 4% of National Processing's revenue.

United, which handles $4.5 billion of credit card transactions a year, represents less than 1% of total revenue, a National Processing spokesman said.

The airline said pricing was not an issue, but National Processing saw things differently.

United "had demanded certain concessions on price" that National Processing was not prepared to make, said Tom A. Wimsett, the processor's executive vice president of merchant services.

"We would have loved to have kept the business, but it will not impact our scale in order to keep prices competitive in the marketplace," Mr. Wimsett said. "We think we are the premier provider for the airlines."

Last week, National Processing reported second-quarter earnings of $7.2 million, off 3% from a year earlier. But at 14 cents a share it beat analysts' expectations of 12 cents, said Richard Weingarten, director, Salomon Brothers Inc.

In the first quarter, National Processing had seen its profits plunge 94%, to a penny a share.

"The fact they lost a contract isn't necessarily a shock," Mr. Weingarten said. "But United is a fairly significant merchant."

Earlier this year, when National Processing warned about the loss of major customers, Mr. Weingarten said, it also said it would have to reprice parts of its portfolio.

"One of the things we see in this is the importance of having value- added services" like USAVE, Mr. Weingarten said. "It's more important on these big merchant accounts."

He said USAVE demonstrates the "move from transaction processing to information processing" that First Data is making.

A United official, who asked for anonymity, called First Data "a better fit" for his company.

He said Card Establishment Services, which previously belonged to Citicorp, had been United's processor before it was sold to investment firm Welsh, Carson, Anderson & Stowe in 1992. In 1995 the unit was sold again, to First Data.

"We are going back to them because they have a good technological product," he said.

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