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Delta amends credit card processing deal

Summary

Delta has eliminated holdbacks with credit card processors, ensuring it will receive payment when consumers use airline credit cards.

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Delta Air Lines announced that it eliminated a $1.1 billion holdback after amending its Visa and MasterCard credit card processing agreement.

The holdback, consisting of an $800 million cash reserve and an associated $300 million letter of credit, was put in place while Delta was going through bankruptcy proceedings. The $800 million will be used to bolster Delta’s U.S. and international markets.

At this time, the whole cash reserve has been returned to the airline, while the letter of credit was terminated.

Earlier, the credit-card processors withheld paying Delta for an amount generally equivalent to potential liability for tickets bought using Visa or MasterCard that had yet to be used for travel.

However, Delta acknowledged that processors may again withhold credit-card payments to the airline after Oct. 31, 2008, if the agreement is not extended.

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