US Airways 2006 Annual Report Download - page 108

Table of Contents
US Airways Group, Inc.
Notes to Consolidated Financial Statements — (Continued)
the expiration date, which is the later of December 31, 2012 or seven years from the date on which Juniper commences marketing
to the general public.
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 sheets as of December 31, 2006 and 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 a $50 million penalty. 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.
On October 3, 2005, Juniper pre-paid for miles from US Airways Group totaling $325 million, subject to the same conditions as
apply to the $130 million bonus payment. To the extent that these miles are not used by Juniper as allowed under 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 co-branded credit card agreement with Juniper until paid in full.
US Airways Group makes 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 of the co-
branded credit card agreement with Juniper in the event that US Airways Group breaches its obligations under the amended credit
card agreement, or upon the occurrence of certain events.
(l) 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.
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