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Airlines confront credit card fraud in the air

Mary Kirby, the CEO of Runway Girl Network, joins MoneyWatch's Amey Stone to discuss how some airlines' in-flight transaction methods leave them open to credit card fraud, and what the industry is doing to combat the problem
Airlines confront credit card fraud in the air 01:30

When it comes to credit card fraud while flying, it is the airlines that may be the most common victims, said Mary Kirby, the CEO of Runway Girl Network, an aviation industry media company.

It's a little-known fact that most credit card purchases that take place in the air don't actually go through to the credit card company in real-time. The flight attendant swipes the card through a point-of-sale device, which stores the information until the plane lands and arrives at the gate.

Some passengers intentionally take advantage of this (some without realizing it) and use cards that are expired, over their limit or even fake. "There is an issue of shrinkage in flight," Kirby said. "The airline doesn't know the card is no good until that passenger is long gone."

Although most credit card purchases on U.S. flights are small, when you take into account the large number of them -- now that most carriers don't take cash -- and the expensive, duty-free purchases possible on international flights, it adds up. Kirby said estimates for annual total losses due to bad credit cards runs into hundreds of millions of dollars a year.

In-flight connections to the Internet will change all this, but it may flip the risk to the passenger, Kirby warned. When point-of-sale devices transact in real-time during flights -- which is coming soon for many and here already for some carriers -- flight attendants will know instantly if a card is good.

Kirby noted, however, that there may then be new risks of credit card fraud for passengers. Currently, connected tablets provided by the carriers to their staff (including pilots), typically aren't safe from hackers. A recent industry study suggested that 57 percent of these tablets don't have proper cybersecurity. "It was a warning to the the industry," she said, "This is something you need to address."

Kirby said her aviation industry website, Runway Girl Network, will be following this issue closely. "Now that the airlines can have connectivity, there is a whole world of questions about cybersecurity that are just coming to the surface."
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