Frontier still flying amid restructuring
DENVER–Frontier Airlines sought bankruptcy protection yesterday, the fourth carrier to do so in the past few weeks as exorbitant fuel prices eat into earnings and a weak U.S. economy keeps more people grounded.
Frontier says it will continue operations as it reorganizes.
Frontier Airlines Holdings Inc., the low-fare carrier’s parent, said it was forced into protection after its principal credit card processor announced it would begin withholding a greater share of proceeds from ticket sales.
Denver-based Frontier said it will continue to operate a full schedule of flights and pay suppliers and employees as it reorganizes. The filing in U.S. Bankruptcy Court in New York prevents the card processor from increasing its "hold back," Frontier CEO Sean Menke said.
"By filing for Chapter 11, we will now have the time and legal protection necessary to obtain additional financing and enhance our liquidity," Menke said in a statement. "Fortunately, we believe that we currently have adequate cash on hand to meet our operating needs while we take steps to further strengthen our company."
ATA Airlines, Skybus and Aloha Airgroup have also filed for bankruptcy in the past three weeks, but Menke said Frontier’s reasons for doing so were different.
"Unfortunately, our principal credit card processor very recently and unexpectedly informed us that, beginning on April 11, it intended to start withholding significant proceeds received from the sale of Frontier tickets," he said.
"This change in established practices would have represented a material change to our cash forecasts and business plan no qualifying payday advance. Unchecked, it would have put severe restraints on Frontier’s liquidity and would have made it impossible for us to continue normal operations."
The card processor, First Data Corp., had no immediate comment.
The creditor listed in bankruptcy court documents as having by far the largest general unsecured claim against Frontier was Wells Fargo, with $93.5 million (U.S.).
Frontier, which has about 350 flights to more than 60 cities and some 6,000 employees, has struggled amid rising fuel prices and aggressive competition at Denver Airport from both United and Southwest Airlines. It blamed a 16.3 per cent jump in fuel costs for a fiscal third-quarter loss that more than doubled from the previous year.