Airtran 2008 Annual Report Download - page 59

In connection with the Letter of Credit and Revolving Line of Credit Facility, on October 31, 2008, we issued
warrants to purchase approximately 4.7 million shares of our common stock for $4.49 per share. The number of
shares issuable pursuant to the warrants is subject to adjustments depending on whether the holder elects to pay
the exercise price in cash or through delivery of warrants with a value at least equal to the exercise price and is
also subject to adjustments for certain dilutive events as defined. The warrants expire on October 31, 2011.
Credit Card Processing Arrangements
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.
In 2008, we amended our agreements with our two largest credit card processors (based on volumes processed
for us). The agreement with our largest credit card processor expires December 31, 2009. Each of the amended
agreements provides that a processor may hold back amounts that would otherwise be remitted to us in the
event that, among other things, our aggregate unrestricted cash and investments (as defined) falls below agreed
upon levels, or a processor reasonably determines that there has been a material adverse occurrence or certain
other events occur. The amount that each processor is entitled to hold back is determined by a combination of
the level of our aggregate unrestricted cash and investments (as defined) and our profitability. If our aggregate
unrestricted cash and investments (as defined) is less than the specified amounts at specified testing dates, each
processor is entitled to increase amounts held back to specified percentages (ranging from 25% to 100%) of its
exposure to credit card chargebacks. To the extent such increases are funded with unrestricted cash, the
resultant reduced levels of unrestricted cash and investments may trigger incremental holdback requirements
under each of the two processing agreements. We have the contractual right to reduce the amounts which are
otherwise withheld by our two largest credit card processors to the extent that we provide the applicable
processor with a letter or letters of credit. As of December 31, 2008, a $125 million letter of credit had been
issued for the benefit of our largest credit card processor under our Letter of Credit Facility and the processor
was holding back no cash remittances from us.
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 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 holdback.
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