Denver-based Frontier Airlines and its subsidiaries said on Friday (11 April) it had filed for reorganisation under Chapter 11 bankruptcy – but will continue to operate a full schedule of flights.
That includes honouring ticket reservations, providing refunds and exchanges, and maintaining its EarlyReturns frequent flyer programme.
An unexpected attempt by its principal credit card processor to increase a ‘holdback’ of customer receipts was the driving reason the carrier gave for falling on its sword, severely impacting the company’s liquidity.
The news follows on the heels of a number of other airlines ceasing business, but Frontier’s downfall has apparently not been brought about by the usual cocktail of economic uncertainty and sky-high fuel prices.
“To be clear, we filed for very different reasons than those of other recent carriers, and our customers and employees can be confident that we intend to keep on flying and providing outstanding service and products,” said Frontier president and CEO Sean Menke.
“Frontier has continued to perform relatively well in this difficult environment, and contrary to the trend, we have not seen a decrease in consumer demand, as demonstrated by our record traffic and revenue in March. Unfortunately, our principal credit card processor, very recently and unexpectedly informed us that, beginning on 11 April, it intended to start withholding significant proceeds received from the sale of Frontier tickets.”
Cash forecasts and the business plan would have been rendered impotent, making continuation of normal operations impossible said Menke. But the airline is certainly not giving up with this move, merely trying to buy time.
“By filing for Chapter 11, we will now have the time and legal protection necessary to obtain additional financing and enhance our liquidity,” he added. 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.”
Frontier is in its 14th year of operations and is the second-largest jet carrier at Denver International Airport, with 62 aircraft. In conjunction with subsidiaries Republic Airlines and Lynx Aviation it offers a route network of 70 destinations from its hub, the majority across North America but also to Mexico, Canada and Costa Rica.
US carriers to have gone bust – halting services – in the last few weeks include Columbus-based Skybus, Indianapolis-based ATA Airlines and Hawaiian airline Aloha.