AirTran Holdings improves cash position with amended credit agreements

Seeking to improve its cash position, AirTran Holdings, parent of AirTran Airways has made changes to its credit agreements that will provide the airline with more than $400 million of unrestricted cash and short-term investments. At the end of June the low-cost carrier reported $389.4 million in unrestricted cash and investments.

AirTran and its lender extended the expiration date of its revolving line and letter of credit by a full year and increased the amount of cash the airline can borrow from $90 million to $125 million. At the same time its letter of credit was reduced from $125 million to $50 million.

In the last year AirTran has been working to reduce debt and has adjusted fuel hedge contracts to reduce its financial exposure to fluctuations in oil prices. The airline has been profitable and expects to remain so for the rest of the year.

“We’re using the letter of credit more efficiently and we have more ability to borrow cash for general corporate purposes,” said Steve Rossum, executive vice president of corporate development for the carrier.

With air travel expected to improve in 2010, analysts have been upgrading their projections for airline financial performance. Other airlines that have recently moved to similarly bolster their balance sheets include American, United, Delta and US Airways.