Airtran 2010 Annual Report Download - page 85

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Our aircraft lease transaction documents contain customary indemnities concerning withholding taxes under which we are responsible, in some circumstances should withholding taxes be imposed, for
paying amounts of additional rent, as are necessary to ensure that the lessor still receives, after taxes,
the rent stipulated in the lease agreements. These provisions apply on leases expiring through 2022. The
maximum potential payment under these indemnities cannot be determined.
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In our aircraft financing agreements, we typically indemnify the financing parties, the trustee acting on their behalf, and other related parties against tort liabilities that arise from the manufacture, design,
ownership, financing, use, operation, and maintenance of the aircraft, whether or not these liabilities
arise out of or relate to the negligence of these indemnified parties except for their gross negligence or
willful misconduct. We believe that we are covered by insurance (subject to deductibles) for most tort
liabilities and related indemnities, as described above with respect to the aircraft we operate.
Additionally, if there is a change in the law which results in the imposition of any reserve, capital
adequacy, special deposit, or similar requirement which will increase the cost to the lender, we will pay
the lender the additional amount necessary to compensate the lender for the actual cost increase.
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We have various leases with respect to real property and various agreements among airlines relating to fuel consortia or fuel farms at airports in which we have agreed to standard language indemnifying the
lessor against environmental liabilities associated with the real property covered under the agreement,
even if we are not the party responsible for the environmental damage. In the case of fuel consortia at
the airports, these indemnities are generally joint and several among the airlines. We cannot quantify
the maximum potential exposure under these indemnities and we do not currently have liability
insurance that protects us against environmental damages.
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Under certain contracts with third parties, we indemnify the third party against legal liability arising out of an action by a third party. The terms of these contracts vary and the potential exposure under these
indemnities cannot be determined. Generally, we have liability insurance protecting us from obligations
undertaken under these indemnities.
Taxes
We remit a variety of taxes and fees to various governmental authorities, including income taxes, transportation fees and
taxes collected from our customers, property taxes, sales and use taxes, payroll taxes, and fuel taxes. The taxes and fees
remitted by us are subject to review and audit by the applicable governmental authorities which could result in liability for
additional assessments. Contingencies for taxes, which are not based on income, are accounted for in accordance with the
ASC Contingencies Topic. Uncertain income tax positions taken on income tax returns are accounted for in accordance
with the ASC Income Taxes Topic. Although management believes that the positions taken on previously filed tax returns
are reasonable, we nevertheless have recorded accrued liabilities in recognition that various taxing authorities may
challenge certain of the positions we have taken, which may also potentially result in additional liabilities for taxes and
interest in excess of accrued liabilities. These accrued liabilities are reviewed periodically and are adjusted as events occur
that affect the estimates, such as the availability of new information, the lapsing of applicable statutes of limitations, the
conclusion of tax audits, the measurement of additional estimated liability based on current calculations, the identification
of new tax contingencies, or the rendering of relevant court decisions.
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