Airlines could see more green by abandoning cash

By Kyle Peterson

CHICAGO, Oct 5 (Reuters) - Major U.S. airlines, struggling to keep pace with their younger low-cost rivals, are rushing to enable wider use of credit and debit cards for in-flight purchases, a step that could spur both revenue and cost savings for the recovering industry.

American Airlines, the world's largest carrier and a unit of AMR Corp (AMR.N), is the latest traditional airline to experiment with eliminating cash transactions on its flights.

The airline has extended a test of using only credit and debit cards for on-board payments through October and soon will decide whether to make all its flights cashless.

Travelers on smaller point-to-point carriers like JetBlue Airways (JBLU.O), Alaska Air Group (ALK.N) and Virgin America already make wide use of payment cards on flights.

Virgin, a new entrant in the U.S. market, is completely cashless and features technology that allows passengers to use credit card terminals on seat backs to order products and services.

"This goes to a larger trend toward experimenting with different revenue opportunities," said Doug Abbey, an airline consultant at Velocity Group. "I suspect we'll see further experimentation."

The airline industry is recovering from a years-long downturn triggered in large part by the advent of low-cost competition. In the last five years, major airlines slashed costs and streamlined operations to compete more aggressively with their more nimble rivals that keep pressure on fares.