Frontier Airlines files for chapter 11

Christine · 04-11-2008, 07:18 AM

Frontier Airlines files for bankruptcy
Low-fare carrier plans to keep running while it reorganizes
The Associated Press
updated 5:53 a.m. ET, Fri., April. 11, 2008
DENVER - Frontier Airlines Holdings Inc. has filed for Chapter 11 bankruptcy protection, but unlike other airlines filing for bankruptcy in recent weeks, it plans to keep running while it reorganizes.

The low-fare carrier said its filing Friday came after an unexpected attempt by its principal credit card processor to start withholding significant proceeds from the sale of Frontier tickets, which threatened to hurt Frontier’s liquidity.

The Chapter 11 filing in U.S. Bankruptcy Court in New York prevents the credit card processor from increasing its “holdback,” 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. 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,” Menke said in a statement.

Frontier, whose major hub is in Denver, has been affected as other airlines have by rising fuel costs and the credit crisis in financial markets.

ATA Airlines, Skybus and Aloha Airgroup all have filed for bankruptcy recently, 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. Unchecked, it would have put severe restraints on Frontier’s liquidity and would have made it impossible for us to continue normal operations.”

He said Frontier was prepared to litigate, if necessary.

The creditor listed in bankruptcy court documents as having the largest general unsecured claim against Frontier by far was Wells Fargo, with $93.5 million. Frontier said it had fewer than 50 creditors.

At the end of last year, Frontier said, it had assets of $98.3 million and debts of $92.2 million.

A Frontier spokesman had said earlier this week the airline had “no concerns about bankruptcy” but added that it was working on strengthening its cash position.

Last month, Frontier said it had agreed to sell four planes as it dealt with rising fuel costs.

© 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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Kristy! · 04-11-2008, 07:22 AM

This is getting a bit scary. It's like you're afraid to book a flight because you don't know if the airline will be around in a week!

Alyssa · 04-11-2008, 07:25 AM

really good reasons to buy trip insurance!!!

Christine · 04-11-2008, 07:37 AM

if you buy trip insurance make sure your insurance covers airfare, my mom had to cancel flights for my cousin and grandma once and it was a huge fight to get the money back.

thomastaci22 · 04-11-2008, 07:37 AM

Thanks for this information! My sister and her husband booked their flights to our wedding in San Diego on Frontier, so I'll have to look into it! Thanks Christine!

Morgan · 04-11-2008, 08:29 AM

I'm ready for my wedding to be done in 2 months so I can stop worrying about my flight getting canceled!

ErinB · 04-11-2008, 08:39 AM

Quote:

Originally Posted by Alyssa

really good reasons to buy trip insurance!!!

If I hadn't already, I would be doing this NOW!!!

Quote:

Originally Posted by Morgan

I'm ready for my wedding to be done in 2 months so I can stop worrying about my flight getting canceled!

I know! I'm praying to the airplane gods nothing happens to Northwest before June 24th!

Leia78 · 04-11-2008, 08:51 AM

I am getting worried about all the airlines filing brankruptcy and canceling flights b/c of the wedding. This is crazy.

jean-marcus · 04-11-2008, 09:06 AM

good lord another one

? is air travel even going to be possible any more? it seems like they are dropping like flys. i dont feel safe buying a ticket because what if they file chap 11 and leave me stranded somewhere having to buy another ticket like ATA did

Andi · 04-11-2008, 01:03 PM

As a Denver native, Frontier Airlines is known as our "hometown" airline here. I have several close relatives who have been in the airline industry for long time. Flights, schedules, EVERYTHING is running as normal. Chapter 11 is very different from Chapter 7 and while i don't know the full details of it all, I do feel very confident in telling everyone here that they will not close their doors and stop flying tomorrow due to this. Can it happen though? yes it could, but it could also happen to any other airline out there as they are all struggling right now due to rising costs and other issues. Sorry that is my little rant on Frontier

As far as trip insurance...yeah might be a good idea for ANY airline we all have our wedding trips booked on...after all, we will be traveling for our weddings!