(June 28, 2007) Alternative payments have penetrated the market for airline tickets with Northwest Airlines Inc.’s decision to accept PayPal on its Web site. The move by the major air carrier, which executes about 1,400 daily departures around the world, makes it the first airline to accept PayPal and gives the San Jose, Calif.-based processor access to the huge online travel market. In 2005, leisure travel sales on the Internet totaled $62.8 billion, or about 37% of all e-commerce purchases, according to Forrester Research. Calling the development “exciting,” Stephanie Tilenius, vice president and general manager for merchant services at PayPal Inc., hints more airlines may follow Northwest’s lead. “You’ll see more from us in the future,” she says.

Initially, Northwest is offering PayPal acceptance only to members of its WorldPerks frequent-flier program in the U.S., but the carrier plans to allow all U.S. customers to use PayPal to buy tickets at a later, unspecified date, a Northwest spokesman says. It is accepting PayPal payments only on its own Web site, and only for original ticket purchases. Passengers cannot use PayPal to pay costs that arise from subsequent changes they make to reservations, the spokesman says.

Tilenius says companies like Northwest are responding to the growing importance of alternative payments and to PayPal’s growth specifically. “E-commerce is growing, and alternative payments are the fastest-growing part of the industry,” she says. Alternative payments, which are Web-based payment methods other than bank cards, are increasingly appealing to merchants looking to avoid bank card discount fees. At the same time, PayPal, which now claims 143 million accountholders, also offers merchants a significant base of potentially incremental sales, Tilenius says. The Northwest spokesman would say only that the airline adopted PayPal to give its customers greater choice when paying online.

PayPal for several years has been seeking to derive more transactions from sources outside of the online auctions conducted by its parent, eBay Inc. Recruiting major merchants like Northwest has been helping in that effort. Tilenius says merchant services, which accounts for all off-eBay traffic, processed $4.4 billion in volume in the first quarter, up 51% over the year-ago period. “We have a lot of positive momentum,” she says. Recent signings include The Discovery Channel, MTV, and The Sharper Image.

Northwest has a history of introducing new technology before other airlines. In 1997, it was the first major carrier to deploy ticketing kiosks, and, according to the spokesman, it was also the first to offer full Web-page functionality on mobile devices.