Capital Markets

Miles to Go: UAL Sale Boosts Liquidity

Its card-marketing deal with Chase Bank involves advance purchase of frequent-flyer miles, and brings United's parent $1.2 billion.
Stephen TaubSeptember 18, 2008

In the search for liquidity, UAL Corp. is turning to its frequent-flyer mileage program.

The parent of United Airlines said it boosted its liquidity by $1.2 billion after it amended its cobranded card-marketing services agreement with Chase Bank, allowing for the advance purchase of frequent-flyer miles. UAL also amended its credit card processing agreement with Chase/Paymentech L.L.C.

The increase in liquidity includes $1 billion in the short term and an additional $200 million over the next two years.

“This is one of the many steps we are taking to improve our liquidity and increase the amount of cash we have on hand to strengthen our business for all our stakeholders in this volatile fuel environment,” said Jake Brace, UAL’s executive vice president and CFO.

Under the terms of the revised agreement, United has received an additional $600 million from Chase for the advance purchase of the flyer miles, and also for extending the agreement. As part of the transaction, United granted a security interest in various assets, including specified intangible Mileage Plus assets.

United said that it continues to have more than $3 billion in “unencumbered hard assets” to use to raise additional liquidity if needed.