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Credit Card Processing Arrangements
12 Months Ended
Dec. 31, 2011
Credit Card Processing Arrangements [Abstract]  
Credit Card Processing Arrangements
Credit Card Processing Arrangements
The Company has agreements with organizations that process credit card transactions arising from the purchase of air travel, baggage fees, and other ancillary services by customers. As it is standard in the airline industry, the Company's contractual arrangements with credit card processors permit them, under certain circumstances, to retain a holdback or other collateral, which the Company records as restricted cash, when future air travel and other future services are purchased via credit card transactions. The required holdback is the percentage of the Company's overall credit card sales that its credit card processors hold to cover refunds to customers if the Company fails to fulfill its flight obligations.
As of December 31, 2010, the Company had advance ticket sales and $9 Fare Club memberships purchased with credit cards of approximately $101.1 million. The Company was in compliance with its credit card processing agreements, and the required holdback was $87.7 million, which was partially offset by a letter of credit (LC), issued in favor of the processor in the amount of $15.0 million. As such, as of December 31, 2010, the processors were holding back $72.7 million of remittances after considering the letter of credit (LC), issued in favor of the processor.
During 2011, the Company amended its processing agreements with all of its processors. Prior to the amendments, the credit card processors required the Company to maintain cash collateral equal to approximately 100% of the Company's air traffic liability. The amendments were approved in light of the Company's improved balance sheet as a result of the recently completed IPO, the related recapitalization and the elimination of the holdback held by the credit card processors, effectively bringing the Company's restricted cash balance to zero, provided that the Company continues to satisfy certain liquidity and other financial covenants. Failure to meet these covenants would provide the processors the right to reinstate a holdback, resulting in a commensurate reduction of unrestricted cash. As of December 31, 2011, the Company continued to be in compliance with its credit card processing agreements, and the processors were holding back $0 of remittances.
The maximum potential exposure to cash holdbacks by the Company's credit card processors, based upon advance ticket sales and $9 Fare Club memberships as of December 31, 2011 and 2010, was $115.2 million and $86.1 million, respectively.