US Airways 2005 Annual Report Download - page 137

Table of Contents
US Airways Group, Inc.
Notes to Consolidated Financial Statements — (Continued)
Under the amended credit card agreement, Juniper will pay to US Airways Group fees for each mile awarded to each credit card account administered
by Juniper, subject to certain exceptions. Pursuant to the original credit card agreement, Juniper paid to AWA a bonus of $20 million. Juniper also
agreed to pay a one-time bonus payment of $130 million, following the effectiveness of the merger, subject to certain conditions. The $130 million
bonus payment was made to AWA on October 3, 2005. The entire $150 million balance for bonus payments are included in "Deferred gains and other
liabilities" in the accompanying consolidated balance sheet as of December 31, 2005. US Airways Group will not recognize any revenue from the
bonus payments until the dual branding period has expired, approximately February 2008. At that time the Company expects to begin recognizing
revenue from the bonus payments on a straight-line basis through December 2012, the expiration date of the Juniper agreement. Further, if Juniper is
not granted exclusivity to offer a co-branded credit card after the dual branding period, US Airways Group must repay the bonus payments and
repurchase unused pre-paid miles with interest, plus $50 million in liquidated damages. Juniper will pay an annual bonus of $5 million to US Airways
Group, subject to certain exceptions, for each year after Juniper becomes the exclusive issuer of the co-branded credit card.
In addition, Juniper pre-paid for miles from US Airways Group for an aggregate of $325 million, subject to the same conditions as apply to the
$130 million bonus payment. To the extent that the miles are not used by Juniper as allowed under with the co-branded credit card program in certain
circumstances, US Airways Group will repurchase these miles in 12 equal quarterly installments beginning on the fifth year prior to the expiration date
of the amended credit card agreement until paid in full. US Airways Group will make monthly interest payments at LIBOR plus 4.75% to Juniper,
beginning on November 1, 2005, based on the amount of pre- purchased miles that have not been used by Juniper in connection with the co-branded
credit card program and have not been repurchased by US Airways Group. US Airways Group will be required to repurchase pre-purchased miles under
certain reductions in the collateral held under the credit card processing agreement with JP Morgan Chase Bank, N.A. Accordingly, the prepayment has
been recorded as additional indebtedness.
Juniper requires US Airways Group to maintain an average quarterly balance of cash, cash equivalents and short-term investments of at least $1 billion
for the entirety of the agreement. Further, the agreement requires US Airways Group to maintain certain financial ratios beginning January 1, 2006.
Juniper may, at its option, terminate the amended credit card agreement, make payments to US Airways Group under the amended credit card
agreement in the form of pre-purchased miles rather than cash, or require US Airways Group to repurchase the pre-purchased miles before the fifth year
prior to the expiration date in the event that US Airways Group breaches its obligations under the amended credit card agreement, or upon the
occurrence of certain events.
(o) In connection with US Airways Group's emergence from bankruptcy in September 2005, it reached a settlement with the PBGC related to the
termination of three of its defined benefit pension plans. The settlement included the issuance of a $10 million note which matures in 2012 and bears
interest at 6% payable annually in arrears. 131