Airlines nearly broke the payments industry
Spirit Airlines is far from the first airline to go bust. PanAm, TWA, Thomas Cook, and scores more have ceased operations impacting millions. This is why Warren Buffett declared that airlines were a “bottomless pit” for an estimated $2.5 to 4.0 trillion in investments since 1914.
In the late 1980s two high-profile airline bankruptcies nearly collapsed world’s largest payment processor. These events fundamentally changed how the payments industry treats high risk merchants and ushered in reforms — the same ones now saving stranded Spirit passengers.
The Processor: National Data
National Data Corporation (NDC) is the predecessor to today’s Global Payments. Founded in Atlanta, GA in 1967, NDC grew alongside the payments card industry in the 1970s and 1980s, eventually processing most of the world’s card transactions by 1987.1
NDC reached this apex thanks to a combination of novel technology, a talented team, and, more than anything, acquisitions. Throughout the 1980s, the company spent hundreds of millions buying up merchant portfolios from other processors and banks like Chemical Bank (now Chase). It was the Chemical Bank portfolio, purchased in 1987, that contained two large airlines — NDC’s first exposure to the industry.
The Airlines: Eastern & Braniff
The airline industry of the 1980s was fueled by one word: deregulation. After fare, route, and startup controls were removed in 1978, airlines quickly began spinning up, consolidating, and going bust.
Braniff Airlines was the result of a 1983 bankruptcy proceedings from the first Braniff International Airlines. The company spent the next 6 years gobbling up small- and medium-sized regional airlines. This was the company NDC received from Chemical Bank in 1986. Around the same time, NDC also added another growing airline as a client.
Eastern Airlines was the largest airline by number of passengers in 1985 — outpacing PanAm, United, American, and TWA.6 Though the airline had a rocky history with labor disputes and management, it remained near the top of the market throughout the decade. This made it the perfect target for a Barbarians at the Gates—style takeover.
Airline mogul and corporate raider Frank Lorenzo purchased Eastern Airlines in 1985. Following the deal and the fashion of the time, Lorenzo then saddled the company with millions debt and exacerbated disputes with unions between 1985 and 1989.
By 1989, both companies were laden with combined billions in loans that they could never repay. In March, Eastern declared bankruptcy and ceased operations following a weeks-long strike. Then, Braniff abruptly declared bankruptcy in November saying “we have run out of cash.” With both airlines gone, NDC was left staring at a bottomless pit.
The Aftermath
“If you owe the bank $100, that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.” — J. Paul Getty
NDC didn’t directly lend Eastern a dime. But when Eastern stopped flying, NDC, like every other credit card processor, was on the hook for every ticket waiting to board.
The Fair Credit Billing Act of 1978 legally requires credit card companies to refund purchases if the product or service isn’t delivered. With most purchases, payment follows delivery. With airline tickets? Your money moves weeks or even months before you take your seat on the flight
Thanks to the 1978 credit protections, consumers wanted to pay for airline tickets with credit cards. In the mid-1980s, several airline failures led to credit card processors footing large bills to rebook and repay consumers. So due to those same protections, credit card processors didn’t want to process cards for airline tickets. The holdback (aka “reserve requirement”) was the solution to break the stalemate.
Holdbacks required airlines and other “high-risk” merchants to retain a percentage of all ticket sales as collateral. These were initially set at 10% to 40% of revenue; but for NDC, that wasn’t enough cushion due to management’s lack of understanding of the industry and to Braniff and Eastern’s size and scope: the two airlines combined were worth +$3.3 billion prior to folding.
Following more than two decades of dominance, NDC ended 1989 with a $8 million operating loss aftering footing the airline’s bills. This loss stood out compared to the +$4 million it generated each year since 1985. The share price immediately fell 33% on the news and continued falling nearly 70% until 1991. This saw the company cut 60% of staff just to stay afloat. To this day, NDC and its successor, Global Payments, never actively partnered with airlines.2
The Reforms
The holdback system was already taking shape at the time of Eastern and Braniff’s collapse. Holdbacks and reserve requirements are now standard practice in the card industry.
Twenty years after the NDC fiasco, First Data (now Fiserv) allegedly informed Frontier Airlines that the reserve requirement would be increasing from 45% to 100% in just 21 days. This equated to $75.5 million in cash that Frontier would need to provide in 2008, just as the Financial Crisis was rearing up.
Frontier chose to file for bankruptcy specifically to trigger the automatic stay provision of the bankruptcy code. This would prevent First Data from increasing the reserve requirement until a judge was able to review the case. The two companies would reach a settlement two months later in June 2008.
Acquirers today now universally require 20 to 50% holdback reserves from airlines as a standard practice. From Delta and United to Spirit and Ryanair, all airlines have to wait until your flight is off the ground to spend the money you paid them using a credit card. In 2025, major US airlines carried liabilities of +$23 billion or ~12% of their full-year 2025 revenues.
The $300 million in reserve funds Spirit had on its balance sheet have provided some of the cash to help stranded Spirit passengers get home while refunding countless others. The funds are a customer’s escape rope from the bottomless pit and an acquirer’s insurance to not face the same fate as NDC.
As for Global Payments? They spent the last 37 years actively avoiding airlines. Then it acquired WorldPay — which processes payments for some of the largest carriers like British Airways and Virgin Atlantic — in January 2026. As of writing, it remains to be seen whether Global’s management will be wary of another acquired book of airline business, even 37 years on. The question now is whether the holdback protections can withstand the institutional scar tissue.
I’ve written about National Data Corporation (NDC) several times before, so check out those pieces for the full story.
Author’s note: If this sounds like the Wikipedia summary, it’s because I wrote the article back in 2024. See the edit history.
Well…almost never…
Thx for this! It would be interesting to contrast this dynamic with the airlines’ card issuing businesses.
Elevon, div of US Bank, also did some airline processing.