Orbitz 2008 Annual Report Download - page 96

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ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Tax Sharing Liability (Continued)
The table below shows the estimated payments under our tax sharing liability over the next five years:
Year
(in millions)
2008 $ 27
2009 11
2010 16
2011 26
2012 15
Thereafter 182
Total $ 277
9. Unfavorable Contracts
Worldspan
We use GDS services to access certain airline schedule and fare information and to process most bookings. In 2001, when Orbitz and Worldspan had
common owners, Orbitz entered into a contract with Worldspan for the use of GDS services provided by Worldspan for air travel and car rental reservations (the
"former Worldspan contract"). This contract was set to expire on October 31, 2011.
The former Worldspan contract was structured such that we received an incentive payment for each air travel and car rental segment that was processed
through Worldspan. The contract also required us to process a minimum of 16 million combined air and car segments each year. Our failure to process the
required number of segments would result in us having to make a shortfall payment for each segment below 16 million.
The rates earned under the former Worldspan contract were considered unfavorable when compared to market rates at the time of Cendant's acquisition of
Orbitz in 2004 and the Blackstone Acquisition in 2006. As a result, an unfavorable contract liability was recorded at its fair value at each acquisition date. At
December 31, 2006, the net present value of the unfavorable contract liability was $32 million. At December 31, 2006, the current portion of the liability of
$7 million was included in accrued expenses and the long term portion of the liability of $25 million was included in unfavorable contracts in our consolidated
balance sheet. This liability was being amortized to revenue in our consolidated statements of operations on a straight-line basis over the remaining contractual
term.
We completed the re-negotiation of our unfavorable contract with Worldspan in July 2007, concurrent with the then pending acquisition of Worldspan by
Travelport. We entered into a new agreement with Travelport to use GDS services provided by both Galileo and Worldspan. The new agreement replaced the
former Worldspan contract discussed above as well as a GDS contract we had with Galileo. The new agreement became effective in July 2007 with respect to
GDS services provided by Galileo. In August 2007, upon the completion of Travelport's acquisition of Worldspan, the new agreement became effective for GDS
services provided by Worldspan. As a result, the former Worldspan contract was settled, at which time we reversed the unfavorable contract liability and
recorded a corresponding capital contribution in the amount of $28 million from Travelport in our consolidated balance sheet. We believe the rates earned under
the new agreement approximate market
89
Source: Orbitz Worldwide, In, 10-K/A, August 28, 2008