Air Canada has announced that it has accepted a proposal from a new service provider for the provision of its principal credit card processing services requirements in North America for Visa and MasterCard, for a five year term beginning at the expiry of the current agreements being replaced.
Air Canada and the unnamed credit card processor have agreed to triggering events upon which Air Canada would be required to provide the credit card processor with deposits. The obligation to provide, and the amount of, deposits required would be based upon a matrix measuring, on a quarterly basis, both a fixed charge coverage ratio and unrestricted cash of Air Canada.
Agreement between Air Canada and the credit card processor is subject to certain conditions, including conclusion of formal documentation.
Air Canada is required to keep a certain amount of cash in its bank account in order to satisfy the covenants of its credit card processors and those cash reserves requirements can be onerous. Last year the carrier cut a deal with one of its big credit card proecesors to chop the amount of cash the airline needed to keep on hand to satisfy the processor's requirements. Air Canada was able to cut $500 million from its summer bank requirements. Under the new terms of the credit card agreement, Air Canada needed to keep only $800 million on hand.
