Credit card processing agreement extended
ATLANTA (AP) – The parent of discount carrier AirTran Airways said Wednesday it has reached deals to extend its credit card processing agreement with its largest card processor and to give itself more financial flexibility.
The Orlando, Fla.-based company said the card processing agreement has been extended to Dec. 31, 2010.
AirTran said it was not subject to any cash holdbacks as of Wednesday with its two largest card processors.
Also, AirTran and a key lender have extended the expiration date of its combined letter of credit and revolving line of credit to the end of 2010. The amount it can now borrow has increased to $125 million from $90 million. The total size of the credit line has been reduced from $215 million to $175 million.
AirTran expects to end the current fiscal quarter with more than $400 million of unrestricted cash and short-term investments.
Several other major carriers, including Delta Air Lines Inc. and the parent of American Airlines, have made moves recently to bolster their available cash amid soft demand for air travel. The late fall and winter season are traditionally weaker than the spring and summer seasons.
Despite continuing financial turmoil in the airline industry, the credit markets have loosened a bit, allowing carriers to refinance existing debt or find new sources of cash.
AirTran CEO Bob Fornaro said in a statement that his carrier’s deals show that its financial partners are confident in the airline’s ability to execute its strategic plan.
AirTran is a unit of AirTran Holdings Inc. Its hub is in Atlanta.
Atlanta-based Delta, meanwhile, said Monday that it had closed on $2.1 billion worth of financing, which will help with the major debt payments it has due next year.
The world’s biggest airline operator said it refinanced about $1.5 billion in debt from Northwest Airlines, which it acquired last year. It said the transaction generated another $600 million in cash.
Delta expects to end the quarter on Wednesday with $5.6 billion in cash.
The new debt is secured by Delta’s Pacific routes, including route authorities, slots, and gate leases.
American Airlines parent AMR Corp. said Sept. 17 that it raised $2.9 billion in cash and fresh financing. Fort Worth, Texas-based AMR said the extra funding it has received includes $1 billion in cash from an advance sale of frequent flier miles to Citigroup. it also said it has received $1.6 billion in sale-leaseback financing commitments from GE Capital Aviation Services, a unit of General Electric Co., and $280 million in cash in a loan from GE Capital Aviation Services secured by aircraft.
The transactions were expected to increase the company’s cash balance to roughly $3.7 billion by the end of the third quarter on Wednesday.