United Airlines 2010 Annual Report Download - page 157

Credit Card Processing Agreements.
United and Continental have agreements with financial institutions that process customer credit card
transactions for the sale of air travel and other services. Under certain of United’s and Continental’s credit card
processing agreements, the financial institutions either require, or under certain circumstances have the right to
require, that United and Continental maintain a reserve equal to a portion of advance ticket sales that have been
processed by that financial institution, but for which United and Continental have not yet provided the air
transportation (referred to as “relevant advance ticket sales”).
United’s credit card processing agreement with Paymentech and JPMorgan Chase contains a cash reserve
requirement, determined based on the amount of unrestricted cash held by United as defined under the Amended
Credit Facility. If United’s unrestricted cash balance is at or more than $2.5 billion as of any calendar month-end
measurement date, its required reserve will remain at $25 million. However, if United’s unrestricted cash balance
is less than $2.5 billion, its required reserve will increase to a percentage of relevant advance ticket sales as
summarized in the following table:
Total Unrestricted Cash Balance (a)
Required% of
Relevant Advance Ticket Sales
Less than $2.5 billion .................................................. 15%
Less than $2.0 billion .................................................. 25%
Less than $1.0 billion .................................................. 50%
(a) Includes unrestricted cash, cash equivalents and short-term investments at month-end, including certain cash amounts
already held in reserve, as defined by the agreement.
Based on United’s December 31, 2010 unrestricted cash balance, United was not required to provide cash
collateral above the current $25 million reserve balance.
Under United’s credit card processing agreement with American Express, in addition to certain other risk
protections provided to American Express, United is required to provide reserves based primarily on its
unrestricted cash balance and net current exposure as of any calendar month-end measurement date, as
summarized in the following table:
Total Unrestricted Cash Balance (a)
Required% of
Net Current Exposure
(b)
Less than $2.4 billion ........................................................ 15%
Less than $2.0 billion ........................................................ 25%
Less than $1.35 billion ....................................................... 50%
Less than $1.2 billion ........................................................ 100%
(a) Includes unrestricted cash, cash equivalents and short-term investments at month-end, including certain cash amounts
already held in reserve, as defined by the agreement.
(b) Net current exposure equals relevant advance ticket sales less certain exclusions, and as adjusted for specified amounts
payable between United and the processor, as further defined by the agreement.
The agreement with American Express permits United to provide certain replacement collateral in lieu of
cash collateral, as long as United’s unrestricted cash is above $1.35 billion. Such replacement collateral may be
pledged for any amount of the required reserve up to the full amount thereof, with the stated value of such
collateral determined according to the agreement. Replacement collateral may be comprised of aircraft, slots and
routes, real estate or other collateral as agreed between the parties. Based on United’s restricted cash balance at
December 31, 2010, United was not required to provide any reserves under this agreement.
Continental’s credit card processing agreement with JPMorgan Chase and affiliates of JPMorgan Chase
contains financial covenants that require, among other things, that Continental post additional cash collateral if it
155