Airline Card Acceptance Is Beginning to Take Off

  More airlines are accepting credit and debit cards for food, beverages and entertainment, and some have grounded cash for onboard purchases entirely. Still, the effect of in-flight card use for small-ticket purchases on the debit card industry remains up in the air.
  Card transactions on an airplane are similar to those conducted on the ground. A crew member swipes the customer's card, often using a hand-held point-of-sale terminal, notes the quantity and type of items purchased and prints a receipt.
  Alaska Airlines is the latest carrier to introduce in-flight plastic payments. The Seattle-based company recently began accepting debit and credit cards for onboard purchases of snacks, drinks and rentals of electronic-entertainment players on 22 daily intercontinental flights. The airline says it plans to phase in the service on more flights this fall and eventually plans to provide it on all flights.
  GuestLogix Inc., a Toronto-based company that supports onboard retail transactions for the airline industry, is supplying the XPDA-S onboard sales terminal being used on Alaska Airlines flights. IT Well of Seoul, South Korea, manufactures the terminal as part of an exclusive deal with GuestLogix, says Brett Proud, GuestLogix vice president of development and delivery.
  Proud declined to name the company that processes the card transactions, which are handled offline in batch formats after flights have landed. Immediate air-to-ground transaction authorizations for sales made in-flight are 12 months to 18 months away, he notes. GuestLogix supports the handling of onboard card transactions for 17 other airlines worldwide, Proud says.
  Smaller airlines, such as Hawaiian Airlines, Frontier Airlines, AirTran Airways and Allegiant Air, were the first to adopt in-flight card-payment technology. Many larger carriers are exploring the option, or they are starting to add card acceptance only on international flights for high-priced merchandise purchases.
  Hawaiian Airlines accepted both cash and card payments starting in September 2005 until it went entirely cashless on all trans-Pacific flights in September 2006 and on all inter-island flights in January. At the inception of its card-payment service, the airline saw 90% cash and 10% credit cards, says Louis Saint-Cyr, vice president of in-flight services with the carrier.
  "Every month thereafter this percentage changed as passengers started getting used to this new technology," he says. "By the time we moved to cashless, our ratio was almost even."
  In addition to increased card usage, Saint-Cyr witnessed an increase in onboard purchases, though he declined to disclose the exact size of the change.
  "When plastic is available, the propensity to spend goes up as does the amount they spend," says Scott Easterling, director of sales and marketing for LiveTV, a provider of in-flight products and services. LiveTV provides its Cashless Cabin card-accepting technology to Frontier, which began its cashless program in April.
  "During the pilot stage at Frontier, they reported a 45% increase in sales," says Easterling, adding that there is not yet enough information to report the effect on sales of the full cashless launch.
  The effect of onboard plastic payments on debit card transactions has yet to be determined. Tim Sloane, director of the debit advisory service at Mercator Advisory Group, says he is not aware of any research conducted on in-flight consumer purchasing behavior.
  Sloane does not foresee an aircraft passenger analyzing which card type-credit or debit-to use for an onboard purchase. "People have an engrained habit with card use, and they'll fall back on that," he says.
  INVENTORY CONTROL
  Hawaiian Airlines, which uses card-scanning technology from Abanco International, is using its card-payments service to control inventory and demand, says Saint-Cyr.
  The purchase data collected from the terminals are downloaded to a Web site. From there, "the information provided can be easily manipulated to provide data which helps us adjust and better understand if we're boarding too much or too little of a certain product," says Saint-Cyr. "Also, it helps us understand demand from market to market."
  LiveTV's Cashless Cabin technology also tracks inventory for Frontier. "It really helps us from an inventory standpoint. It becomes really easy for us to run reports," says Joe Hodas, a Frontier spokesperson.
  Alaska Airlines conducted a yearlong field test of card acceptance and found that customers enjoyed the convenience, according to the company. In plastic-only planes, crew members also do not need to carry large sums of money or take the steps required to handle and deposit cash for the airline, says Saint-Cyr.
  LiveTV, owned by JetBlue, processes credit card transactions and provides swipe technology for four airlines. To date, Frontier is the only carrier the company services to go completely cashless, though it is in the middle of launching Cashless Cabin with an additional airline and recently signed a letter of intent with another, says Easterling, declining to divulge the carriers' names.
  LiveTV processes 5 million to 10 million card swipes each year for the four airlines, says Lisa Eisele, the company's product manager. The card transactions include beverage and entertainment purchases.
  Frontier flight attendants use wireless payment terminals from Motorola Inc.-owned Symbol Technologies Inc., based in Holtsville, N.Y., to collect card payments for entertainment and alcoholic beverages. The terminals store information, monitor inventory and read credit cards, in addition to other features.
  Debit and credit card information is stored in the devices until the plane lands, at which point transaction data are sent over LiveTV's secure network to the company's headquarters in Melbourne, Fla., for processing. The terminals track cash transactions as well as card payments.
  Airlines that use LiveTV for entertainment sales have card-acceptance capabilities in the seatbacks in front of each passenger. Later this year, LiveTV plans to add MasterCard PayPass contactless technology to airlines with the seatback technology, allowing customers to pass chip cards in front of a reader in the seatback to pay for entertainment, says Easterling.
  COST DISADVANTAGE
  One of the reasons the large airlines are behind in adding card-payment technology is the infrastructure cost, says Hodas. "We have 60 aircraft as opposed to 600," he says. "For technologies, it's generally more difficult for a big airline to do."
  In a partnership with American Express Co. that helped minimize costs, American Airlines started a slow rollout of card acceptance in May 2006, says an American Airlines spokesperson. United Airlines, Southwest Airlines and US Airways are looking into emerging technology that can make in-flight payments easier for customers.
  Neither Southwest nor US Airways accept cards on planes. United allows card payments on international flights for duty-free items, which have higher prices, but customers must pay with cash for food and beverages.
  Both Southwest and US Airways have discussed adding onboard card payments but say they need to find the right vendor. Southwest is trying to find options that are not cost prohibitive, says a company spokesperson.
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