[UPDATE, Dec. 2: The U.S. District Court in New York hearing the case in March granted Altour’s motion to dismiss. In April, Planetarium appealed to the U.S. Court of Appeals for the Second Circuit. That court affirmed the district court’s judgment last month, finding that Planetarium “failed to explain” how the Amex-Altour relationship hinders competition.]
A lawsuit between two travel agencies that could go to trial next year in New York state presents one reason organizations should thoroughly vet potential travel providers, including those suppliers’ suppliers.
Travel management companies often provide their business clients benefits from network affiliations. Product offerings vary among the networks, so changing partners can alter an agency’s value proposition. In rare cases, the changes are not expected.
That’s the scenario in ongoing litigation brought by Planetarium Travel Inc. (PTI) against Altour International. The New York-based agencies respectively are a former and a current member of the American Express Representative Network. That network provides members access to discounted rates and other advantages. Customers of network members also enjoy special Membership Rewards benefits and access to hundreds of travel offices around the world.
Most rep network members are leisure agencies, though several are corporate service providers. The latter group includes Hess Travel, National Travel Service, The Travel Team, MacNair Travel Management, CI Travel and Travelink. An Amex press official declined to disclose the current number of rep network agencies. As of 2010, there were 175 operating 450 office locations, according to a former Amex executive.
A Cautionary Tale
When working with travel agencies that derive products and services from network affiliations, it’s wise for clients to ask for information about contractual commitments, service-level agreements and contingency plans.
Previously head of HRG’s agency network and now president of Hickory Global Partners, Chris Dane said affiliates leave for lots of reasons, but it’s almost always amicable or at least understandable to both parties. That wasn’t the case with PTI and American Express when the latter in late 2009 opted not to renew its longstanding affiliation with the former. The decision allegedly impacted PTI’s corporate clients and wrecked its business, so it sued American Express Travel Related Services Company.
In May 2010, PTI president Blake Fleetwood, now manager of Cook Travel (which also does business as Planetamex), testified during the Supreme Court of New York case that after becoming an Amex rep in the mid-1990s, he hesitated to seek out large corporate clients. He said big clients typically wanted 5- or 10-year agency deals (three to five years is more common), but PTI had an Amex rep agreement of just two years. “I was worried about entering into these contracts with corporations that naturally didn’t want to start doing business with me, an American Express representative, and be told that at the end of the year I could no longer deliver the services I had been promised,” Fleetwood told the court.
He claimed Amex told him not to worry because PTI’s affiliation would renew if it remained in good standing. Fleetwood told the court that he then signed deals with Banco Santander, The Dannon Company, architectural firm Pei Cobb and others. (PTI later also identified Lord Abbott, General Atlantic and Oppenheimer as corporate clients.) It’s not clear if PTI handled some or all those accounts’ corporate travel needs. Fleetwood did not respond to a request last week for more information.
Altour entered the scene in spring 2009 by becoming an Amex rep network affiliate that also offered other members its “host” agency services. Fleetwood said he voiced concern about that deal’s legality, viability as it related to ARC rules and fairness to Amex rep network members. He viewed as unfavorable the financial terms for reps, including how Altour would share upfront commissions and back-end incentives. He claimed his dissent led to PTI’s termination in the Amex network.
Amex executives during testimony said they decided not to renew PTI’s affiliation due to issues they had with how PTI represented the Amex brand.
PTI/Cook Travel and Amex settled in May 2013. Amex paid $550,000 and the parties agreed to enter binding arbitration for any dispute related to the settlement or “any other matter between and among them.”
Case Not Closed
In November 2013, PTI sued Altour in the U.S. District Court’s Southern District of New York. PTI alleged that Altour conspired with Amex to supplant PTI in the Amex rep network and “insulate itself from price competition.”
According to an Amex-Altour contract filed as part of the court case, Amex agreed to “designate [Altour] as a preferred vendor to its rep network” and encourage rep network agencies to purchase Altour services. As the “only” agency to be so designated, Altour agreed to offer its ARC hosting services to “all” network members. These included its airline commission contracts, support desk and — “for the purposes of issuing airline tickets as needed” — access to global distribution systems. The agreement stipulated that rep network agencies can “solicit and procure any other hosting agency.”
The defense called PTI’s conclusions about the Altour-Amex deal “unsupportable” and “mischaracterized.”
“This case is nothing more than an awkward attempt to fit the loss of business PTI suffered as a result of the termination of its contractual franchise relationship with Amex Travel — a dispute which PTI has already fully litigated against Amex Travel in a separate and previously settled suit — into claims of conspiracy,” according to Altour’s attorneys.
PTI did not name Amex as a defendant because of the previous settlement, but implicated it as a co-conspirator. Amex intervened, claiming that by implicating it, Planetarium violated the previous settlement agreement. Amex first moved to keep its Altour contract out of it, then moved for an injunction to stay the legislation.
A jury trial could begin after fact discovery, according to a court case management plan dated Dec. 8, as ordered by U.S. magistrate judge Ronald L. Ellis. The defendant’s motion to dismiss remained pending at press time.