American Express 2001 Annual Report Download - page 17

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We also transformed the economics of this business by making a fundamental
change in the source of our revenue. Traditionally, we earned our fees from com-
missions paid by suppliers such as airlines or hotels. Starting in the mid 1990s,
however, the airlines sharply reduced their commission rates. In response, we
redesigned the business and now rely on customers to pay transaction fees for our
travel services, rather than having our revenue based on commissions from sup-
pliers. In 2001, 70 percent of our travel revenues came from customer fees and
only 30 percent from suppliers. A few years ago the mix was just the opposite.
These changes enabled us to manage successfully through one of the toughest
years in recent history for travel, while operating the business profitably. We
also took advantage of the downturn in travel to step up our sales efforts. We
finished the year with an impressive list of new travel clients, including
Aventis in the United States, Jaguar Cars Limited and Land Rover UK in the
United Kingdom, Ford in Latin America, Philips in Taiwan and PepsiCo
Europe and Xerox in Europe. Worldwide, we now handle corporate travel for
more than 50,000 companies.
LOWERING RISK PROFILE
As I stated earlier, the second major step we took to improve the company’s
long-term position was to decrease our overall risk profile:
ATAMERICAN EXPRESS FINANCIAL ADVISORS,WE HAVE SUBSTANTIALLY
REDUCED OUR EXPOSURE TO HIGH-YIELD INVESTMENTS AND UPGRADED
THE QUALITY OF OUR HIGH-YIELD BONDS. Over the past several years, we
had a larger percentage of high-yield investments in our portfolio than was the
insurance industry norm. While these investments had provided excellent
axp_15
We are re:balancingthe company’s overall risk-reward profile.