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ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
74
The changes in the net unfavorable contract liability for the years ended December 31, 2011 and 2010 were as follows:
Amount
(in thousands)
Balance at January 1, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,201
Amortization (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,226)
Impairment (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,583
Balance at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,558
Amortization (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,678)
Balance at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,880
(a) We recognized net amortization for the unfavorable portion of the Charter Associate Agreements in the amount of
$1.7 million ($7.5 million was recorded as an increase to net revenue and $5.8 million was recorded as an increase
to marketing expense) for the year ended December 31, 2011 and $9.2 million ($14.7 million was recorded as an
increase to net revenue and $5.5 million was recorded as an increase to marketing expense) for the year ended
December 31, 2010 and $3.3 million ($9.3 million was recorded as an increase to net revenue and $6.0 million was
recorded as an increase to marketing expense) for the year ended December 31, 2009. For the year ended
December 31, 2010, the $14.7 million recorded as an increase to net revenue included $5.6 million in accelerated
amortization related to the termination of our Charter Associate Agreement and certain other agreements with
American Airlines (“AA”) effective December 2010. These agreements were reinstated in June 2011.
(b) During the year ended December 31, 2010, we recorded non-cash charges of $3.6 million to impair the portion of
the asset related to the expected in-kind marketing and promotional support to be received from Northwest Airlines
under our Charter Associate Agreement with that airline. As a result of the completion of the operational merger of
Northwest Airlines and Delta Airlines into a single operating carrier, Northwest Airlines was no longer obligated to
provide us with in-kind marketing and promotional support after June 1, 2010. This impairment charge was
included in the impairment of property and equipment and other assets line item in our consolidated statement of
operations for the year ended December 31, 2010.
As discussed in (a) above, effective December 2010, AA terminated its Charter Associate Agreement and certain
other agreements with us. Consequently, AA was no longer obligated to provide us with in-kind marketing and
promotional support, and we were no longer required to make rebate payments to AA under this agreement. As a
result, in December 2010, we recorded a $3.0 million non-cash charge to impair the asset related to the expected
in-kind marketing and promotional support to be received from AA under its Charter Associate Agreement with us.
This impairment charge was included in the impairment of property and equipment and other assets line item in our
consolidated statement of operations for the year ended December 31, 2010.
The current portion of the liability of $4.4 million and $2.5 million was included in accrued expenses in our
consolidated balance sheets at December 31, 2011 and 2010, respectively. The long-term portion of the liability of $4.4 million
and $8.1 million was reflected as unfavorable contracts in our consolidated balance sheets at December 31, 2011 and 2010,
respectively.
9. Commitments and Contingencies
The following table summarizes the timing of our commitments as of December 31, 2011:
2012 2013 2014 2015 2016 Thereafter Total
(in thousands)
Contract exit costs (a) . . . . . . . . . . . . . . . . . . . $ 10,017 $ 1,229 $ 647 $ 278 $ 63 $ — $ 12,234
Operating leases (b) . . . . . . . . . . . . . . . . . . . . 6,129 6,009 5,030 2,875 2,629 17,525 40,197
Travelport GDS contract (c) . . . . . . . . . . . . . . 39,203 20,000 20,000 — — — 79,203
Other service contracts . . . . . . . . . . . . . . . . . . 6,565 1,656 1,657 — — — 9,878
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 61,914 $28,894 $27,334 $ 3,153 $ 2,692 $17,525 $ 141,512