UAL Corporation, the holding company whose primary subsidiary is United Airlines, has announced that it has reached an agreement in principle with its Mileage Plus co-branded bank card partner, Chase Bank, and Paymentech, one of its credit card processors, to extend the term of their respective agreements.
As part of the transaction, United will receive a payment of $600
million from Chase, which relates to the advance purchase of frequent-flyer miles and the extension of the contract. The company
also expects this transaction will improve cash flow by about $200
million in the next two years.
In addition, the level of reserve or holdback that United is
required to maintain under its credit card processing agreement with
Chase / Paymentech L.L.C. has been reduced to $25 million. This
reduction will result in the release of approximately $350 million in
previously restricted cash.
As a result of its agreement with Chase, the company expects to
increase its cash position by approximately $1.2 billion, including $1
billion in the short term and an additional $200 million over the next
two years. Combined with the previously announced approximately $550
million raised from new transactions in the second and third quarters,
the company will have increased its total cash balance by $1.7 billion
and continues to have more than $3 billion in unencumbered hard assets.
Source: United Airlines
Source: COLLOQUY
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