Airtran 2008 Annual Report Download - page 24

If our liquidity position deteriorates significantly, it could be further adversely impacted in the event our
primary credit card processors were to re-impose or increase existing holdbacks on payments due to us
from credit card transactions.
We have agreements with organizations that process credit card transactions arising from purchasing air travel
by our customers. Each of our agreements with our credit card processors allows, under specified conditions,
the processor to retain cash related to future travel that such processor otherwise would remit to us (i.e., a
“holdback”). Holdbacks are classified as restricted cash on our consolidated balance sheet. Our exposure to
credit card holdbacks consists of advanced ticket sales that customers purchase with credit cards. Once the
customer travels, any related holdback is remitted to us. The imposition of holdbacks or increases in the amount
of existing holdbacks will adversely affect our liquidity and could result in a material adverse effect on our
business, including our financial condition and operations.
As of December 31, 2008, we had advanced ticket sales of approximately $223.5 million related to all credit
card sales. As of December 31, 2008, we were in compliance with our processing agreements and based on our
level of profitability and unrestricted cash and investments, as defined, our two largest processors were entitled
to holdback 50% of their exposure to credit card chargebacks. Had we not been in compliance with the
agreements, or if our level of unrestricted cash and investments, as defined, was lower, our potential cash
exposure to additional holdbacks by our largest two credit card processors based on advanced ticket sales as of
December 31, 2008, after considering the $125 million letter of credit issued in favor of our largest credit card
processor, was up to a maximum of $84.0 million. Our levels of unrestricted cash and air traffic liability are
highly seasonal reaching their highest levels in the early summer and late fall and reaching their lowest levels in
the winter; accordingly the amounts potentially withheld by our credit card processors are also higher, and in
some cases substantially higher, during certain times of the year. Our future aggregate cash and investments will
be dependent on, among other factors, our future profitability, including the cost of fuel, the extent of cash
collateral related to derivative financial instruments we may be required to fund, the level of advance ticket
sales, our borrowing availability under our new Revolving Line of Credit Facility, and the continued availability
of our Letter of Credit Facility. While a decrease in our unrestricted cash and investments could result in
additional amounts being withheld by our credit card processors, to the extent that we achieve specified
aggregate unrestricted cash and investment amounts and profitability levels, each agreement also provides for a
reduction or elimination of the percent of its exposure that each processor is currently entitled to hold back.
Although we have been able to negotiate agreements with our two largest credit card processors, we cannot
predict whether we will continue to be able to maintain agreements with either or both credit card processors, or
the level of holdbacks we will be required to maintain, if our liquidity is further adversely affected for an
extended period of time whether due to changes in fuel costs, high fuel prices or a worsening economic
environment. The inability to maintain our existing credit card processing agreement with our largest credit card
processor would have a material adverse effect on our business. The number of credit card processors providing
services to the airline industry for branded credit cards currently is limited and we believe that certain
processors for such cards generally are not entering into arrangements with new customers. If our agreement
with our largest processor is terminated we may be unable to enter into new credit card processing agreements
with any other processor of similarly branded credit cards on terms acceptable to us or at all. Because our
second largest processor generally issues and processes its own cards, termination of our agreement with such
processor likely would result in our inability to accept such card as a method of payment. Such inability could
also have a material adverse effect on our business.
For additional discussion of our credit card processing agreements see ITEM 7. “MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS –
LIQUIDITY AND CAPITAL RESOURCES – Credit Card Processing Arrangements.” For discussion of the
Letter of Credit and Revolving Line of Credit Facility, see ITEM 7. “MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – LIQUIDITY AND
CAPITAL RESOURCES – Letter of Credit and Revolving Line of Credit Facility.”
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