|
 |
Apr-14-2008Rebound seen in Frontier Airlines stock(topic overview)
CONTENTS:
- The disruptions are expected to cost it more than $30 million. (More...)
- Champion Air plans to cease operations May 31. (More...)
- Delta spokesman Chris Kelly declined to comment about the lawsuit but said Delta - the largest carrier at Palm Beach International Airport - would "vigorously defend" itself. (More...)
- Frontier Airlines was looking at plans to boost revenue and promote a new turboprop service. (More...)
- Denver-based Frontier Airlines was cleared Friday to continue operations while it reorganizes under bankruptcy-court supervision. (More...)
- Even though three smaller carriers had declared bankruptcy and ceased operations in recent weeks, Frontier was apparently doing many things right. (More...)
- Paul Lewis of Cheyenne and his 5-year-old daughter, Emma, check in at the Frontier Airlines counter for a trip to Oklahoma City on April 11, 2008. (More...)
- "Frontier, in an environment of $100 barrel oil, was weak," said Neidl. (More...)
- "Of more consequence would be an eventual liquidation of Frontier, which would eliminate a sizeable operator at the airport," the Fitch report said. (More...)
- Frontier expects to make advance payments of $54.5 million for May, according to court papers. (More...)
- More information about Frontier's Chapter 11 filing is available on the Internet at http://frontierairlines.com/restructure. (More...)
- Frontier received clearance to purchase fuel and meet contracts with other vendors and service providers. (More...)
- Menke pledged to focus on bringing the company to sustained profitability. (More...)
- How First Data deals with merchants is somewhat mechanical, not unlike bank debt covenants, and entirely contractual. (More...)
SOURCES
FIND OUT MORE ON THIS SUBJECT
The disruptions are expected to cost it more than $30 million. On Friday, discount carrier Frontier Airlines filed for Chapter 11 Bankruptcy Court protection after its credit card processor began withholding a larger chunk of receipts from ticket sales. Frontier said it would keep flying, but its bankruptcy filing is another indication of the financial strain affecting the industry and its customers. [1] You are still an employee of Frontier Airlines and will receive your pay and benefits as usual (more on that below). This week, I was notified by our credit card processor that, as of Friday, April 11, due to "current economic conditions, the rise in fuel costs and the other bankruptcies around the industry," they intended to start withholding 50 percent of the credit card funds received from the sale of Frontier tickets. If they went ahead and did this, tens of millions of dollars owed to us by our customers would have been withheld by the credit card processor, First Data. This would have drained our available cash almost immediately and would have made it impossible for us to continue normal operations. Therefore, we decided to file Chapter 11 in an effort to fight this unwarranted step by the credit card processor so that we can continue to position the Company for long term success. I want to emphasize to each of you that this was very sudden and unexpected.[2] Denver-based Frontier Airlines Holdings, Inc. ( FRNT ) - parent company of Frontier Airlines - announced Friday that it is has filed for Chapter 11 bankruptcy protection, citing unexpected problems with its credit card processor. Frontier said it would continue normal business operations - operating its full schedule of flights and maintain employee wages, healthcare, vacation and other benefits. President and Chief Executive Officer Sean Menke went into detailed length about the airline industry's woes, how Frontier is holding up to them and what to expect in the next year. "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," Menke said.[3] Frontier Airlines Holdings Inc., the parent company of Frontier Airlines, filed for Chapter 11 bankruptcy protection late Thursday, but expects to continue normal operations through its reorganization. The Denver-based airline said on its Web site that it decided to file for bankruptcy after its main credit card processor unexpectedly attempted to "substantially increase a 'hold-back' of customer receipts, which threatened to severely impact Frontier's liquidity." The airline planned to continue its full flight schedule Friday. It also will will honor tickets and reservations and provide refunds and exchanges under its standard policies. Its frequent flyer program and customer service programs would remain unaffected, as will wages and benefits, the company said.[4]
The value of Frontier Airlines stock fell by nearly 70 percent Friday with the news the Denver company had filed for Chapter 11 bankruptcy protection the day before. Frontier (Nasdaq: FRNT), which averages four daily departures from Lambert-St. Louis International Airport, filed for Chapter 11 bankruptcy late Thursday in federal bankruptcy court in New York City in response to what the airline said was a threat to its liquidity resulting from actions by its principal credit card processor, Greenwood Village-based First Data Corp.[5] Frontier, the second-largest airline serving Denver International Airport, filed Chapter 11 Thursday in New York City. The airline said it made the decision to file after its principal credit card processor, Greenwood Village-based First Data Corp., changed its procedures, specifically its holdback of receipts from sales of tickets to customers. That, the airline said, severely threatened its liquidity. The airline said it will continue its full schedule of flights and will honor tickets and reservations and provide refunds and exchanges under its standard policies.[6]
The rating company said Monday it doesn't believe the bonds will be affected by the bankruptcy reorganization of Denver International Airport's second-largest carrier. Frontier Airlines Holdings filed the petition to restructure its debt in U.S. Bankruptcy Court last week. The Denver-based airline says it was forced into the step after its credit card processor wanted to begin withholding more of the proceeds from ticket sales.[7] Frontier Airlines became the latest budget carrier to file for bankruptcy protection, but the airline promised to continue normal operations. Frontier, based in Denver, said it had filed for protection after its main credit card processor tried to hold back substantial proceeds from its ticket sales. The airline has serviced Wichita since October, operating three daily flights to Denver through its Lynx Aviation subsidiary.[8] DENVER -- Frontier Airlines sought bankruptcy protection Friday but said it will continue to fly its full schedule. It's the fourth member of the battered U.S. airline industry to file for bankruptcy in the past several weeks. Frontier Airlines Holdings, the low-fare carrier's parent, said it was forced to take action after its principal credit-card processor, First Data Corp., said it will begin withholding a greater share of proceeds from ticket sales. Its agreement with First Data allowed the processer to hold back 45 percent of the amount charged for a ticket until travel is completed.[9] April 11 (Bloomberg) -- Frontier Airlines Holdings Inc., the U.S. discount carrier that serves 70 destinations from Denver, filed for bankruptcy, becoming the fourth U.S. airline to seek court protection in less than a month. Frontier took the step after its credit-card processor, First Data Corp., began withholding proceeds from ticket sales, the Denver-based carrier said in a statement today.[10]
Frontier says it will continue operations as it reorganizes. Frontier Airlines Holdings Inc., the low-fare carrier's parent, said it was forced into bankruptcy after its principal credit card processor, First Data Corp., said it would begin withholding a greater share of proceeds from ticket sales.[11] The cost of fuel, which has soared 78 percent in the past year, has been partly to blame for the bankruptcies of Aloha Airlines, ATA Airlines and Skybus. Frontier, Denver's second-largest carrier, said there were other reasons for its bankruptcy filing on Thursday. It blamed a recent unexpected decision by its credit card processor, First Data Corp., to start withholding "significant proceeds received from the sale of Frontier tickets."[12] The cost of jet fuel, soaring 78 percent in the past year, and a slowing economy were blamed for the bankruptcy filings of Skybus Airlines Inc., Aloha Airgroup Inc. and ATA Airlines Inc., and the shutdown of Champion Air in the past three weeks. Frontier took the step after its credit-card processor, First Data Corp., began withholding proceeds from ticket sales, the Denver-based carrier said.[13]
DENVER (KWGN) Last month Frontier sold four of its planes to cut costs, but that wasn't enough to keep them from filing for bankruptcy. The airline says First Data Corp., it's credit-card processor, located in Greenwood Village, pulled an unexpected move by asking to withhold significant proceeds from ticket sales. Steve Snyder, a Spokesman for Frontier said, "It would've made it very difficult to continue operations, we took a long hard look at things, tried to negotiate with them, but eventually came to the conclusion that this was the best option."[14]
The company pays DIA about $4 million a month in landing fees and rents, and the airline is up to date in payments, DIA spokesman Chuck Cannon said. The company said its bankruptcy filing was due to a plan by First Data Corp., its principal credit-card processor, to hold more cash from Frontier customer ticket sales beginning Friday.[15] First Data, Frontier's primary credit card processor, said it would start withholding advance payments to the airline on Friday. Such a move would choke off a major source of cash flow. Credit card companies typically forward a portion of their ticket sales in cash to airlines at the time a customer books a flight. Airlines use this money to cover operating costs. Since its founding in 1993, Frontier has occupied a middle tier between bare-bones operators like Southwest and "legacy" carriers like United.[16] "You are still an employee of Frontier Airlines and will receive your pay and benefits as usual." Frontier's credit card processor, First Data Corp., notified the airline April 8 that its decision to withhold half the airline's ticket sale income was due to "current economic conditions, the rise in fuel costs and the other bankruptcies around the industry."[17] Frontier's chief executive Sean Menke said the airline saw record traffic and sales in March, contrary to the trend of decreasing consumer demand seen elsewhere in the industry. He attributes Frontier's lack of liquidity not to surging fuel prices but to its principal credit card processor. First Data, one of Frontier's creditors, informed the airline it will significantly increase its "holdback" of receipts and proceeds from ticket sales starting April 11, limiting the airline's liquidity.[18]
"We felt that Frontier would be able to withstand the challenges confronting the U.S. airline industry, which include unprecedented and significant increases in the cost of jet fuel and the impact of the credit crisis in the financial markets, without seeking bankruptcy protection. 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." Its principal credit card processor - which remained nameless - unexpectedly informed the company that significant proceeds from ticket sales would be withheld beginning last Friday.[3] NEW YORK -- Aloha Airlines, ATA, Skybus - one week, three airlines out of business. On Friday, Denver's Frontier Airlines sought bankruptcy protection, blaming a move by its principal credit card processor to withhold a greater share of proceeds from ticket sales.[19] NEW YORK (AP) — Frontier Airlines, the latest airline to file for bankruptcy, was pushed over the brink by a problem that could spread to other carriers: credit card troubles. The carrier on Friday blamed its Chapter 11 bankruptcy protection on a cash squeeze caused by its credit card processing company, which has decided to keep a larger chunk of the Denver airline's ticket revenue.[20] An ominous new problem surfaced Friday when Frontier Airlines became the latest airline to file for bankruptcy. Even worse, Frontier was pushed past its limit by problem that could spread to other carriers: credit card troubles. It became the fourth airline to file for bankruptcy protection in the past two weeks. The carrier on Friday blamed its Chapter 11 bankruptcy protection on a cash squeeze caused by its credit card processing company.[21]
DENVER - Travelers in Denver took notice this week when they learned Frontier Airlines was filing for Chapter 11 bankruptcy. The company was quick to point the blame on its principal credit card processor, First Data Corporation, which says it was in talks with Frontier for several months. "I think it's unusual that the person filing bankruptcy outs the credit processor as Frontier has," said Denver Post Business Columnist Al Lewis in his weekly appearance on 9NEWS Sunday Morning. Lewis wrote a column on the subject this week in the Denver Post.[22] DENVER, April 11, 2008 /PRNewswire-FirstCall via COMTEX/ -- Frontier Airlines Holdings, Inc. (Nasdaq: FRNT) today announced that Judge Robert D. Drain of the U.S. Bankruptcy Court for the Southern District of New York has approved the "first day motions" that Frontier and its subsidiaries submitted as part of their voluntary filing for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Approval of these critical motions helps to ensure Frontier's ability to conduct normal business operations during the reorganization. Frontier has received authorization to: -- Provide employee wages, healthcare coverage, vacation, sick leave and similar benefits without interruption. -- Honor pre-petition obligations to customers and continue customer programs including its EarlyReturns frequent-flyer program. -- Pay for fuel under existing fuel supply contracts, and honor existing fuel supply, distribution and storage agreements. -- Honor contracts relating to interline agreements with other airlines. -- Pay pre-petition obligations to foreign vendors, foreign service providers and foreign governments. -- Continue maintenance of existing bank accounts and existing cash management systems.[23] Frontier made an emergency Chapter 11 filing late Thursday, and Judge Robert D. Drain of the U.S. Bankruptcy Court for the Southern District of New York ruled the airline could keep paying employees and vendors and continue to honor all customer obligations.[15]
Industry analyst Mike Boyd said Wall Street speculation about Frontier likely raised concern at First Data. "When rumors start, it can kill an airline," he said. The filing in U.S. Bankruptcy Court in New York prevents the credit-card processor from increasing its holdback, Frontier CEO Sean Menke said.[9] First Data told the airline April 8 it would retain half the proceeds of bank-card sales and increase collateral to $130 million from $54.5 million, Frontier Vice President Edward Christie said in a statement filed with U.S. Bankruptcy Court in New York.[13]
Bankruptcy prohibits the processor, identified in press reports as Colorado-based First Data Corp., from increasing the holdback. FDC reportedly told Frontier that it would increase required collateral to $130 million from $54.5 million while retaining half its credit card sales. The airline concluded its fiscal year on March 31. It reported a 1.5% drop in mainline yield to 10.83 cents and a 4.9% increase in unit revenue to 8.7 cents as load factor rose 4.9 points to 80.3%. It flies 62 mainline aircraft plus 10 Q400s operated by its new Lynx Aviation subsidiary.[24] The airline also threatened to sue First Data. "The terms of our agreement with Frontier Airlines are not unique; they are considered standard industry practice and terms originally agreed upon by Frontier," First Data, of Greenwood Village, Colo., said in a statement. "They do this because. they're concerned that a carrier will use the proceeds in advance of travel occurring and then not have the funds to actually perform the travel," Mann said. Companies such as First Data usually base cash withholding decisions on their own analysis of an airline's finances — most airlines are contractually required to provide their processors with monthly cash flow reports and forecasts. "They're doing the same thing that I'm doing," said Ray Neidl, an analyst at Calyon Securities who late last month expressed concern about Frontier's projected cash position. Earlier this week, the carrier said it had no concerns about bankruptcy. Credit card processors constantly review the credit profiles of the companies they serve, Neidl said.[20] Frontier Airlines last Friday became the fourth U.S. carrier to file for bankruptcy protection, although unlike recent predecessors Aloha Airlines, ATA Airlines and Skybus Airlines it intends to continue flying while undergoing reorganization. Founded in 1994, the Denver-based carrier blamed "an unexpected attempt by its principal credit card processor to substantially increase a holdback of customer receipts" for its situation, and said it will operate a full schedule, meet its obligations and maintain employment levels and benefits during reorganization. "To be clear, we filed for very different reasons than those of other recent carriers," President and CEO Sean Menke said ( ATWOnline, April 7). "We felt that Frontier would be able to withstand the challenges confronting the U.S. airline industry. have continued to perform relatively well in this difficult environment, and contrary to the trend, we have not seen a decrease in consumer demand."[24]
Suppliers and other vendors payments would be unaffected, the airline said. "Frontier is committed to delivering exceptional customer service and we intend to continue delivering on that promise with normal operations throughout our reorganization process," said Sean Menke, Frontier president and CEO. "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." The airline said it made the decision to file for Chapter 11 bankruptcy after First Data changed its procedures, specifically its holdback of receipts from sales of tickets to customers. That, the airline said, severely threatened its liquidity. "Given the recent progress we have made towards strengthening our balance sheet and obtaining additional financing, it is truly unfortunate that we have had to take this action," Menke said.[5] Menke's letter reiterated the airline's commitment to "provide employee wages, health care coverage, vacation, sick leave and similar benefits without interruption." Stemmler admitted he was shocked by credit-card company First Data's decision to withhold 50 percent of the credit-card funds received from the sale of Frontier tickets, beginning Friday. Stemmler said he believes the carrier's 700 pilots will continue to support management.[25]
"Unchecked, it would have put severe restraints on Frontier's liquidity and would have made it impossible for us to continue normal operations." Bankruptcy code dictates that the Denver-based airline's filing forbids First Data from increasing its withholding of funds, securing time for the airline to reorganize its finances while continuing its operations. Frontier said it would maintain its business throughout the process, including flights, honoring reservations and refunds "as usual," rewards programs, providing employee wages and benefits, and paying its suppliers.[18]
United Airlines low-cost subsidiary Ted offers three daily Tampa-Denver round trips and Southwest Airlines offers one. Both Southwest and United provide intense competition to Frontier at its headquarters city in Denver, where Frontier ranks second to United in market share. It ranks 16th at Tampa International. Frontier said in a statement that the bankruptcy filing was a result of its principal credit card processor, First Data Corp., substantially increasing its "holdback" of customer receipts, which would have "put severe restraints on Frontier's liquidity."[26] "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." Such a "change in established practices" would throw a serious wrench into Frontier's cash forecasts and business plan, Menke said. The bankruptcy filing prevents First Data from imposing the new cash withholding requirement, he said.[20]
The crisis at Frontier is different from the circumstances that caused Aloha Airlines, Champion Air, ATA Airlines and Skybus Airlines to shut down last week. Aside from fuel costs -- which jumped more than 20 percent in 2007 to $2.58 per gallon -- Frontier also faces an eroding cash position caused by changes imposed by its credit card processor, First Data.[27] John Stemmler, who heads the Frontier Airline Pilots Association, said the processor's decision was a shock. "Had it not been for First Data, we really had our act together," he said. Stemmler said he believes the airline's 700 pilots will continue to support management. Frontier has struggled amid rising fuel prices and aggressive competition at Denver International Airport from both United and Southwest airlines. It blamed a 16.3 percent jump in fuel costs a third-quarter loss that more than doubled from the previous year.[11] First Data's decision represents a new threat to an industry facing jet fuel prices that have soared 74 percent in one year, a new government focus on safety that has grounded thousands of flights in recent days and tight competition and falling demand that, combined, have limited carriers' ability to raise prices. "It's just a god-awful time for this industry," said Bob Mann, an independent airline consultant based in Port Washington, N.Y. "This illustrates the uncertainty of capital markets to a T."[20] Jet fuel prices have jumped 74 percent in one year and a new government focus on safety has grounded thousands of flights lately. "It's just a god-awful time for this industry," said Bob Mann, an independent airline consultant based in Port Washington, N.Y. Frontier's problems spooked investors in Mesa Air Group over fears that Mesa Airlines could falter just like its discount-fare rival Frontier.[21]
Unlike the other companies, who have grounded flights, Frontier says it plans to keep operating as normal during reorganization. Now a spokesman for the Denver-based company says its major credit card processor was planning to withhold significant proceeds from ticket sales, something Frontier says would have not allowed them to operate normally. The rest of the industry has been hard-hit as well, as they try to cope with record-high fuel prices. This week, American Airlines had to cancel more than 3,000 flights while it re-inspects hundreds of jets.[28] Dent said that although larger, the turbo-prop is 35 percent more fuel-efficient and a greener, more carbon emissions-gentle aircraft. Its fuel efficiency made a quantum leap into level of importance Friday when Frontier Airlines filed for bankruptcy after its credit card processor began withholding half the proceeds of ticket sales April 9.[17] Another one bites the dust! Frontier Airlines has now filed for bankruptcy after a credit card processor indicated that they would begin withholding receipts from the airline's ticket sales.[29]
Steamboat Springs - Denver-based Frontier Airlines announced it filed for Chapter 11 bankruptcy late Thursday night, citing an unexpected increase in holdbacks of customer receipts by its primary credit card processor.[30] In 2007, the Denver-based airline (NASDAQ: FRNT) carried 332,954 passengers at Sea-Tac Airport, 1.1 percent of the nearly 31.3 million carried by all airlines. Its frequent flyer program and customer service programs would remain unaffected, as will wages and benefits, the company said. The airline said it made the decision to file for Chapter 11 bankruptcy after credit card processor changed its procedures, specifically its holdback of receipts from sales of tickets to customers. That, the airline said, severely threatened its liquidity.[31]
The airline on Thursday asked for protection under Chapter 11 of the U.S. Bankruptcy Code while it reorganizes. A Frontier news release said that an unexpected attempt by its principal credit-card processor First Data Corp. to retain a bigger share of customer receipts prompted its action.[32] U.S. carrier Frontier Airlines, which has filed for bankruptcy, says part of its problem has been a cash squeeze caused by its credit card-processing company, First Data, which is holding back a larger percentage of ticket revenue.[33] First Data's attempt to protect itself actually pushed Frontier to seek bankruptcy protection, the airline said. In its filing, Frontier said First Data sent a letter Tuesday demanding an increase in collateral from $54.5 million to $130 million, effective Friday. Frontier conceivably could have written a check, wiping out roughly half of its available cash. Or First Data could have increased the collateral by holding back a bigger chunk of Frontier's credit-card receipts. That would have choked off the company's primary source of cash.[34] Many companies file for bankruptcy, but few blame their credit-card processor. Frontier Airlines laid its surprise filing directly at the feet of Greenwood Village-based First Data, the company that helps process the payment when a customer buys a ticket to fly.[34] The filing will prevent First Data from implementing the change until Frontier emerges from bankruptcy or the judge makes an independent decision. "We are prepared to litigate this issue if necessary," Menke said. First Data spokeswoman Elizabeth Grice did not return a call seeking comment but e-mailed a statement that said in part: "The terms of our agreement with Frontier Airlines are not unique; they are considered standard industry practice and terms originally agreed upon by Frontier."[32] Michael Capellas comes to town to run First Data Corp., and what is one of the first things he does? Runs our beloved Frontier Airlines straight into bankruptcy court. Frontier put the blame for its surprise filing squarely on First Data, which processes credit-card billings for Frontier. It's a good thing Capellas, who once ran Compaq Computer and WorldCom, has access to a private jet.[35] SAN FRANCISCO, Apr. 11, 2008 (Thomson Financial delivered by Newstex) -- Frontier Airlines Holdings Inc. (NASDAQ:FRNT) late Friday said a bankruptcy court has approved the 'first day motions' as part of the Denver, Colo. -based airline's filing for Chapter 11 bankruptcy.[36] MUMBAI (Thomson Financial) - Standard & Poor's Ratings Services said Frontier Airlines Holdings Inc.' s filing for Chapter 11 bankruptcy protection will not affect the 'A+' rating on the Denver City and County Department of Aviation's senior-lien airport system revenue bonds, issued on behalf of the Denver International Airport (DIA).[37] Frontier Airlines, which flies out of the Akron-Canton Airport, has filed for bankruptcy protection, but officials said the airline would continue operating during its reorganization. Frontier officials confirmed Friday that it would be adding a third direct flight from Akron-Canton to Denver this summer, despite the bankruptcy filing.[13]
Following the announcement of Frontier Airlines' bankruptcy filing, Denver International Airport officials scrambled to retain Wall Street's continued support for a $608.8 million DIA bond sale that had priced only hours earlier.[38] DENVER (AP) - Standard & Poor's Ratings Services is reaffirming its A+ rating on Denver's airport revenue bonds despite Frontier Airlines' bankruptcy filing.[7] The bankruptcy filing by Frontier Airlines this week will not change the carrier's plan to begin service between Durango and Denver starting April 22.[32]
Frontier won't follow the same route as Aloha Airlines, ATA Airlines or Skybus - three airlines that ceased operations after filing bankruptcy petitions in the past two weeks. "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 Sean Menke, Frontier president and chief executive.[26] The cost of jet fuel, soaring 78 percent in the past year, and a slowing economy were blamed for the bankruptcy filings of Skybus Airlines Inc., Aloha Airgroup Inc. and ATA Airlines Inc., and the shutdown of Champion Air in the past three weeks. "We filed for very different reasons than those of other recent carriers,'' Frontier Chief Executive Officer Sean Menke, who took over the job seven months ago, said in the statement.[10] Skybus Airlines Inc., a low-fare carrier started less than a year ago, filed for bankruptcy April 5. Champion Air, a Bloomington, Minnesota-based carrier that offered charter flights to sports teams, cited high fuel bills and the slowing economy when it said this week it will stop flying May 31. In its court filings, Frontier indicated that fuel suppliers were tightening their credit terms, cutting into the company's liquidity.[10]
Frontier Airlines lost $32.5 million in last year's fourth-quarter and its fuel costs rose 22% from late 2006, according to a document filed with the U.S. Bankruptcy Court.[39] With Frontier's Chapter 11 filing, creditors' demands for payments now will require a bankruptcy judge's approval while Frontier keeps flying and reorganizes. Frontier lost $32.5 million in last year's fourth quarter more than double its loss in the same period the year before and its fuel costs rose 22% from late 2006, according to a document filed with the U.S. Bankruptcy Court.[39]
Frontier Airlines (nasdaq: FRNT - news - people ) announced it filed for Chapter 11 in the U.S. Bankruptcy Court in New York. Frontier is just the latest in an increasingly long line of airlines to see its fortunes decline during the current economic downturn, although the particulars of its case are unique.[18] '''We continually monitor and manage the credit risks associated with processing transactions in industries where we provide services,''' the statement says. '''The terms of our agreement with Frontier Airlines are not unique; they are considered standard industry practice and terms originally agreed upon by Frontier. We have been in ongoing dialogue with Frontier Airlines for several months and will continue to work with them in as constructive a manner as possible.''' The low-fare carrier filed its petition Thursday in U.S. Bankruptcy Court in Manhattan and is operating as normal.[40]
Denver-based Frontier said it will continue to operate a full schedule of flights, pay suppliers and employees as it reorganizes. The filing in U.S. Bankruptcy Court in New York prevents the credit card processor from increasing its "holdback," Frontier CEO Sean Menke said.[11] Stockholders are now quite nervous, and are considering pulling out to avoid further losses. According to a statement, Frontier said that they would continue to operate without disruption during the bankruptcy proceedings, offering their full schedule of flights, honoring reservations, and paying both its employees and suppliers. Denver-based Frontier said that they were forced to file for bankruptcy protection "following an unexpected attempt by its principal credit card processor to substantially increase a 'holdback' of customer receipts, which threatened to severely impact Frontier's liquidity."[29]
Miller said that cheap introductory fares to a number of cities in the United States would also remain unchanged. ''No fares have changed; no schedules have changed,'' she said. Frontier said it filed for bankruptcy after one of its main credit card processors announced a policy change for bookings that would have resulted in a ''liquidity crisis'' had company officials not filed for bankruptcy protection.[41]
VOICEOVER: The news keeps getting worse for the struggling airline industry, with more trouble on the horizon after another carrier goes bankrupt. Friday, Frontier Air said it filed for Chapter 11 bankruptcy protection, a move that comes on the heels of three other airlines who recently had their wings clipped by the ongoing cash crunch.[28] CHICAGO (Reuters) - Frontier Airlines Holdings Inc received U.S. court approval on Friday to operate in Chapter 11 bankruptcy protection, where it sought refuge from financial pressures of skyrocketing fuel prices and a weakening economy.[42] DENVER (AP) — Frontier Airlines sought bankruptcy protection Friday, the fourth carrier to do so over the past several weeks as exorbitant fuel prices eat into earnings and a weak U.S. economy keeps more people grounded.[11]
Frontier Airlines of Denver filed for Chapter 11 bankruptcy protection late Thursday.[43] TAMPA - Frontier Airlines filed for Chapter 11 bankruptcy protection on Friday, but told passengers it intends to provide uninterrupted service including its reservations and frequent-flier programs.[26]
A marketing sign for Frontier Airlines stands in front of the ticket counter at Denver International Airport on Wednesday, hours after Frontier filed for Chapter 11 bankruptcy.[30] The news that Frontier Airlines had filed under Chapter 11 of the federal bankruptcy code late Thursday may not send the Denver carrier on a white-knuckle ride, but there certainly are choppy skies ahead.[16]
I know this will come as a very difficult surprise to many of you, but late last night Frontier Airlines Holdings, Inc. voluntarily filed to reorganize under Chapter 11 of the U.S. Bankruptcy Code. This move stands in stark contrast to what you have heard from me and the management team in recent days and weeks regarding our financial stability and our plans to weather the storm, so I want to share with you the specifics as to why we are making this seemingly sudden change in direction. Before I do that, I know you won't be able to read this letter with a clear head if I don't state that the Chapter 11 filing does not change our day-to-day lives.[2] Will you be less likely to book a ticket on Frontier Airlines, after the company filed for Chapter 11 bankruptcy reorganization? ( Read related story.)[44]
Airline consultant Robert Mann said one of Menke's top objectives right now is to make sure that employees continue to provide great customer service. An important factor in Frontier's future will depend on its securing debtor-in-possession financing for the company as it goes through bankruptcy, according to Henry Harteveldt, an analyst at Forrester Research. "I think Frontier has many things going for it, including a fleet of fuel-efficient Airbus planes, a good reputation, a loyal following," he said. A look at history reveals that most airlines that go into Chapter 11 don't end up making it long term, he said. "But it's possible that Frontier will be able to buck that trend," Harteveldt said.[44] Frontier chief executive Sean Menke has focused on increasing the number of passengers feeding through Frontier's Denver hub. "They made some very big mistakes with their non-hub flying," Jenkins said. It can be a challenge to manage through bankruptcy, which can be a disruptive and distracting process for management and other employees. If workers are uncertain about their future, it could trickle down to an airline's customer service.[44] Oasis Hong Kong Airlines, a long-haul budget carrier, suddenly went into liquidation and canceled all flights. "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," Sean Menke, Frontier president and chief executive, said in a statement.[8]
Castelveter did not want to speculate on why Frontier was adding a flight to the Akron-Canton market, but said, ''if you're going into bankruptcy, you're certainly not going to fly a route that's losing money.'' A statement from Frontier Chief Executive Sean Menke said the airline was filing for bankruptcy for ''very, very different reasons than those of other recent carriers.[13]
Frontier joins ATA Airlines, Skybus, and Aloha Airgroup as the fourth airline in less than a month to file for bankruptcy at a time of rising fuel prices and other pressures on the airline industry. Even though Frontier has posted losses in three of the last four quarters, president and chief executive Sean Menke said Frontier had been taking steps to improve its balance sheet. '''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,''' he said in the press release announcing the bankruptcy.[40] Frontier believed it could withstand challenges to the airline industry, including the increased cost of fuel and the credit crisis, without resorting to bankruptcy, Sean Menke, the airlines president and CEO, said in a statement.[32]
Neidl added that tough competition in Denver from United Airlines (nasdaq: UAUA - news - people ) and Southwest Airlines (nyse: LUV - news - people ) will prove the demise of Frontier. "This is not a troubled airline," countered Michael Boyd, an independent airline industry consultant in Englewood, Colo. Boyd argued that Frontier is a victim of "gossip and innuendo in the media." He explained that credit card companies withhold certain amounts of cash to protect themselves. Various media outlets predicted that Frontier would file for bankruptcy, causing Wells Fargo and other financial institutions to "get squirrelly about airlines," and increase its holdback, Boyd said. "It's like cutting off an artery to the brain" and "could knock down any airline." Neidl conceded that Frontier "maintains a very modern fleet," which could be used as collateral during its bankruptcy.[18] Regardless, Frontier's filing drew attention to the little-known world of credit-card processing and the industry rules that govern who's responsible when someone cannot pay. Consumers may think that moments after a credit card gets swiped, a restaurant, retail store or airline gets the cash put directly into its bank account. That's not so. Companies such as First Data act as "processors," working with the bank that issued a credit card and the merchant that accepts it. A restaurant, which delivers its moderately priced product to the consumer before the transaction is rung up, poses little risk to a processor like First Data.[34] First Data said in a statement, "We continually monitor and manage the credit risks associated with processing transactions in industries where we provide services." They went on to say, "The terms of our agreement with Frontier Airlines are not unique; they are considered standard industry practice and terms originally agreed upon by Frontier." What does this mean for those passengers that have already booked vacations and other travel plans.[14]
Frontier said that move would "severely impact the airline's liquidity." First Data Corp., a Greenwood Village-based company, informed Frontier on Tuesday that it was boosting its reserve requirements from $54.5 million to $130 million because of increasing risk to its viability. "We have been in ongoing dialogue with Frontier Airlines for several months and will continue to work with them in as constructive a manner as possible," First Data said in a statement.[15] In the current economic turmoil, First Data has been keeping a close eye on credit conditions. In its most recent annual report, it said its business could be hurt "if general market softness. should continue for an extended period of time or deteriorate further." Frontier did not name First Data as its processor in filings with the Securities and Exchange Commission but said it switched to a new processor in the last months of 2007. It wound down a collateral agreement with its old processor March 31, moving entirely to First Data. The SEC filings showed that Frontier maintained collateral last year with its previous processor in amounts ranging from $38 million to $66 million at the end of each quarter.[34]
According to a statement filed by a Frontier executive with the bankruptcy petition, First Data only on Tuesday informed the airline that it wanted to increase its reserve by $75.5 million, and it would start doing so Friday.[40] An airline spokesperson told the Associated Press that the current holdback was 45%, but that First Data wanted to increase it to 50% immediately and to 100% by May 1. A statement submitted by Frontier senior vice president of finance Edward W. Christie III says that on April 8, First Data sent Frontier a letter stating its intent to increase, beginning on April 11, the collateral required under their bank card agreement from $54.5 million to $130 million.[40]
Frontier Airlines pointed the finger of blame directly at First Data Corp. for its bankruptcy filing Friday.[45] The change, the airline said, "would have put severe restraints on Frontier's liquidity and would have made it impossible for us to continue normal operations." The bankruptcy filing prohibits First Data from increasing its holdback, Frontier said.[12]
Frontier maintained a $54.5 million credit-card deposit with First Data and one of $18.5 million with American Express, according to the company's bankruptcy filing.[45] Moussa questions whether First Data could have handled things differently. "One can't help but wonder if First Data is overreacting and really pushing one of its customers toward bankruptcy," Moussa said. What happens if all credit-card processors respond to a rash of four airline failures by raising reserve requirements on all carriers, he asks. "It might just be the nail on the coffin for the already ailing industry," he said. First Data faces pressures of its own. Kohlberg Kravis Roberts & Co. acquired the once public company in a leveraged buyout last fall, lifting the debt on its balance sheet from $2.5 billion to more than $22 billion.[45] Industry analyst Mike Boyd said it appears the bankruptcy was triggered by Wall Street speculation about Frontier, which likely raised concern at First Data. "When rumors start, it can kill an airline," he said.[11]
Local leaders, including Gov. Bill Ritter and Denver Mayor John Hickenlooper, expressed support for Frontier. "They are a great local company with thousands of dedicated employees who have the skills and expertise to succeed in this competitive industry," Hickenlooper said in a statement. DirecTV, which offers in-flight entertainment on Frontier, said the bankruptcy wouldn't change its relationship with the airline.[15] Frontier Airlines CEO Sean Menke wrote an empathetic letter Friday morning to the company's 6,000 employees, explaining the sudden decision to file for bankruptcy. "I know you won't be able to read this letter with a clear head if I don't state that the (bankruptcy) filing does not change our day-to-day lives.[25]
Frontier Airlines Holdings, Inc. is the parent company of Denver-based Frontier Airlines. Currently in its 14th year of operations, Frontier Airlines is the second-largest jet service carrier at Denver International Airport, employing approximately 6,000 aviation professionals.[23] The airline will continue operating as it works through Chapter 11, a fact that pleases DIA officials. "We are pleased that Frontier expects to continue normal operations and will provide full flight schedules for its passengers at Denver International Airport," said DIA's new aviation manager, Kim Day.[46] United Airlines plans to start charging $25 for a second checked bag May 5. While the carrier was the first to announce the policy, eventually Northwest, U.S. Airways, Continental and Delta each made its own plans to start charging for a second checked bag. That means a passenger checking two bags could end up paying $50 extra for a round-trip flight, which on a $200 fare would be a 25 percent tack-on. United this month decided it will expand its charge for a second checked bag to refundable tickets, matching other airlines. "Sounds to me like they're just passing on the costs to us," said Jeff Polder of Longmont, who was flying out of Denver International Airport to Tampa, Fla., for a vacation last week.[47] The Denver-based carrier, which will continue to operate as it reorganizes, blamed not high fuel costs or competition but credit-card processor First Data Corp.' s decision to hold back up to 100 percent of proceeds from ticket sales until the passenger's flights are completed. "This change in established practices would have represented a material change to our cash forecasts and business plan," CEO Sean Menke said in a statement.[48] First Data, a credit card processor, planned to hold back significantly more proceeds of Frontier's ticket sales from credit cards. That would protect credit card issuers, which must give refunds to customers with unused tickets when a carrier goes bust.[39] The letter also says First Data planned to retain 50% of bank card sales. '''This material and unexpected notice of an intent to alter our payment stream would have deprived us of approximately 50% of expected receipts for ticket sales under the bank card agreement on a go-forward basis,''' Christie'''s declaration says. '''Such a change in the debtors''' (Frontier'''s) cash flow would have had an immediate and material effect in their liquidity.'''[40] The move ends a policy under which the processor, First Data Corp, passed on most money from ticket sales to Frontier.[20]
Frontier's agreement with First Data allowed the processer to hold 45 percent of the amount a passenger charges for a ticket until travel is completed. "This change in established practices would have represented a material change to our cash forecasts and business plan," Menke said.[11] "Why is it that an airline is put into the classification that just because you buy a ticket, you're entitled to a meal? Show me where that happens. A model for such a branded-fare system is Air Canada, where Menke worked before joining Frontier last year. It's a shift for airlines like Frontier and Southwest, which have had more of a single-class strategy compared with airlines like United that offer first class and business class but now are looking for ways to charge more for certain services.[47]
"Before deregulation, if your planes flew half full, you can make money. It just doesn't work that way anymore," Baird said. "Even though airline deregulation was 30 years ago, people are still trying to develop viable business models that work in this environment." The recent rash of filings involves smaller carriers such as Denver-based Frontier and Aloha Airlines. The industry went through a string of large-scale bankruptcies earlier this decade, triggered by rising labor costs, a stock market crash and the Sept. 11, 2001, terrorist attacks.[49] The Denver Business Journal spoke with several airline industry analysts about what Frontier's bankruptcy means for the low-cost carrier.[43]
Flights go to Frontier's hub in Denver, then to an additional 70 Frontier cities. ''We've added this summer flight in response to the great summer season last year. When companies file for bankruptcy reorganization, it's often more of a financial transaction and seldom has a direct impact on the operations of the organization, said David Castelveter, vice president of communications for the Air Transport Association, an airline trade group based in Washington, D.C. Situations differ among carriers, but sometimes airlines reduce flights during a reorganization and other times they increase flights to get some more revenue.[13] DURANGO, Colo. -- Regardless of recent financial developments, Frontier Airlines is continuing with its plans to launch intrastate service between Denver and four smaller municipalities, including Durango. Durango-La Plata Airport will welcome its first Frontier flight on Earth Day, April 22, when a Bombardier Q400 turbo-prop aircraft touches down.[17] Frontier Airlines, which filed for bankruptcy last week, plans to start charging $3 for food in flight May 1. It started testing the effort on some flights this month. Frontier hasn't matched the $25 second-checked-bag fee, but that doesn't mean it isn't considering charging extra for more of its services.[47] OAKLAND -- The skies remained unfriendly Friday with word that Frontier Airlines filed for bankruptcy, and American Airlines cancelled 24 Bay Area flights, including all flights serving Oakland.[21]
Frontier Airline's actions trying to come to an arrangement with its creditors means that its aircraft have not been grounded. The Americans call is "bankruptcy" but it's not so: actions under Chapter 11 of the Bankruptcy Code are the equivalent of the UK's Voluntary Arrangement under which a company applies to the Court for an order that no creditor can put it into liquidation whilst it seeks to reorganise itself in a manner which the creditor or the Court decide are in their best interest. Then, is that Frontier remains fully open to trade - a completely different position from that affecting several other airlines which are currently failed, unless someone takes them over.[50] "There was no advance warning," Hodas said. "This has all transpired in the last three days. The feeling is that Chapter 11 is going allow us the ability to straighten out these financial issues under the protection of the bankruptcy court so that we can emerge a stronger and more long-term viable airline." First Data downplayed its role in the situation.[46] Unlike recent airline bankruptcies at Aloha, ATA and Skybus, which sprang from high fuel prices, Frontier says a creditor's action forced it into bankruptcy court.[39] ''We do not see a future for Frontier as it faces tough competition in Denver from United on the network side, and Southwest on the low-cost side,'' Neidl said in a research note. Frontier is fighting for a share of the market with Southwest Airlines Co., the largest discount airline, and Ted, the low-fare unit of UAL Corp.' s United Airlines, while its costs balloon from record fuel prices.[13] Name me an airline that hasn't filed chapter 11 in the past 10 years. Aren't we flying more than before 9/11? It seems to me that the cost of a ticket to anywhere has shot up in price. Maybe Frontier should look at the bonuses given to its upper management and see if it can't trim some greenbacks off until the company is again stable. I think the Prez of this company should not take a salary until the company shows a profit. We all know who's going to take the brunt of the cost of this one, don't we.[16] The Denver-based carrier filed Chapter 11 bankruptcy last week and expects to take up to a year and a half to emerge. "It gives us the breathing room and the strategic ability to make some additional changes if we feel it's necessary," Frontier spokesman Joe Hodas said. Frontier does not plan to alter initiatives underway that will restructure its route network and implement a different fare structure with customer ticket prices based on level of service received.[44]
Frontier officials say passengers shouldn't notice any changes in service during the expected nine to 18 months required to emerge from Chapter 11. The carrier says it will maintain flight schedules and honor its frequent-flier program. Let's hope, then, that the Chapter 11 filing is a mere blip on the radar, and that this reorganization will allow Frontier to return to financial vitality. As I read this fine editorial I have been thinking how loyal the RMN is being to our local airline. This pleased me until I got to the bottom of the page and saw a United Ad on the left.[16]
A promotional sign for Frontier Airlines holds a bit of irony as the airline's ticket counters continue to serve passengers Friday at DIA despite the bankruptcy filing.[15] "We regret that the current economic conditions have led to today's bankruptcy filing by Frontier Airlines. The terms of our agreement with Frontier Airlines are not unique; they are considered standard industry practice and terms originally agreed upon by Frontier."[34] With its recent bankruptcy filing, Frontier Airlines joined a long list that includes almost every major carrier.[49]
JACKSON, Wyo. (AP) Despite filing for bankruptcy last week, Frontier Airlines will begin flying into Jackson Hole Airport on May 15, according to officials with the airline and the airport.[41]
At the end of last year, Frontier said, it had assets of $98.3 million and debts of $92.2 million. A Frontier spokesman said earlier this week the airline had "no concerns about bankruptcy" but added that it was working on strengthening its cash position.[19] Last week, Calyon Securities analyst Ray Neidl voiced concerns about some budget airlines, including Frontier. He said Frontier's cash holdings were likely to fall well below 10 percent of expected revenue by the end of the year and estimated it would have less than 5 percent of revenue in cash at the end of 2009. Frontier spokesman Joe Hodas said earlier this week the airline had "no concerns about bankruptcy."[11] "I think there are other marginal carriers that could succumb," Calyon Securities analyst Ray Neidl said. In a recent report, Neidl noted that most major carriers have amassed hefty stockpiles of cash that should help them weather what is expected to be a rocky year for the industry. He cited concerns about low-cost carriers AirTran Holdings Inc. and Frontier Airlines Holdings Inc., saying their cash holdings are likely to fall well below 10 percent of expected revenue by the end of the year. Since the Sept. 11, 2001, attacks, a 20 percent cushion "became a more realistic target level for cash," he wrote. "Most of the public companies can make it through the year, but if anyone's at risk, it's the low-cost carriers," Neidl said.[19] In November 2006, Frontier and AirTran announced a first-of-its-kind integrated marketing partnership that offers travelers the ability to reach more than 80 destinations across four countries with low fares, aboard two of the youngest fleets in the industry. For more in-depth information on Frontier Airlines, please visit its Web site at FrontierAirlines.com. Forward-looking statements involve risks and uncertainties that could result in actual results differing materially from expected results and represent the Company's expectations and beliefs concerning future events based on information available to the Company as of the date of this press release. Additional information regarding risk factors that may affect future performance at the Company are contained in the Company's SEC filings, including without limitation, the Company's Form 10-K for its fiscal year ended March 31, 2007.[23]
"We continually monitor and manage the credit risks associated with processing transactions in industries where we provide services. The terms of our agreement with Frontier Airlines are not unique; they are considered standard industry practice and terms originally agreed upon by Frontier. We have been in ongoing dialogue with Frontier Airlines for several months and will continue to work with them in as constructive a manner as possible."[46]
Frontier's problems may hint at a wider problem - one which may spread far outside the airline industry. The company says that its cashflow was suddenly and adversely affected when its credit card processor suddenly decided to increase the proportion of payments that it retained against bad debt and chargebacks.[50] "We're strong in the marketplace, we're well positioned, and we have the lowest cost structure in the industry." Frontier said its Chapter 11 filing would stop its chief credit card processor from increasing its "holdback," Frontier CEO Sean Menke said.[19] Frontier president and CEO Sean Menke sent the following e-mail to Frontier EarlyReturns members this afternoon following the company's Chapter 11 bankruptcy filing.[51]
The airport took the additional step of refunding the variable-rate bonds because interest rates were so favorable, said Margaret Danuser, debt administrator in Denver's revenue department, who also was at the DIA bond sale in New York. Koniz said he turned on the "Today" show Friday morning and was stunned to hear of Frontier's bankruptcy filing as the first story on the news. "I was slackjawed," he said later Friday.[38] "We've been scrambling all day on conference calls with ratings agencies and underwriters." Frontier's filing meant DIA needed to update disclosure information to investors on the bonds they had just purchased and reassure them "that the action taken by Frontier did not impact the credit quality of the airport," said Bob Gibson, the Denver revenue department's director of financial management. Moody's affirmed its A1 rating on DIA's debt, noting "Frontier has indicated its intent to continue operations with limited disruption in Denver." Late in the afternoon, Standard & Poor's reaffirmed its A+ rating on DIA's bonds, saying in a bulletin on the impact of Frontier's filing that DIA "should not experience any erosion in financial performance as a result of this bankruptcy filing -- at least in the near term."[38]
Frontier's pre-petition obligations total about $1.8 million, representing March landing fees that are due April 20, 2008. The city has the option to draw upon a $3 million letter of credit (LOC) to pay this obligation if it so chooses. 'These pre-petition obligations are small, given the overall financial profile of DIA, and the city should not experience any erosion in financial performance as a result of this bankruptcy filing -- at least in the near term.[37]
First Data proposed the bigger withholding, telling Frontier it would take 50 percent of credit-card receipts, according to the bankruptcy filing.[34] "We regret that the current economic conditions have led to today's bankruptcy filing by Frontier Airlines," Greenwood Village-based First Data said in the statement.[46]
By filing for bankruptcy, Frontier can fend off First Data until a judge issues a decision or the reorganization is completed.[11]
First Data informed Frontier that it would withhold 100 percent of the Denver-based carrier's credit card transactions beginning May 1, said Joe Hodas, spokesman for Frontier (NASDAQ: FRNT).[46] In essence, what First Data Corp. decided was that, if Frontier stopped flying then it would be required to refund credit card payments for flights that did not take place. Credit card business is, in this respect, a little like self-insurance.[50] If a processor like First Data is unable to get the money back from Frontier, it - not the bank that issued the credit card - is on the hook.[34] The change is intended to protect First Data, which under standard credit card conditions would be responsible for ticket refunds if Frontier stopped flying.[33]
John Stemmler, president of the Frontier Airline Pilots Association, said the credit card company action was a key factor.[8] When they filed for bankruptcy today, we did drop coverage of the company. The immediate reason why filed is because the credit card company that processes their credit card payments increased the holdback from 45 percent credit card transactions to 100 percent. They basically are saying that because the company's liquidity was a little shaky, they wanted to have that additional protection in place. Frontier felt that that was too much. so it put them under a liquidity crisis to protect themselves from that as well as from debt holders.[43] I have not seen a bankruptcy that was prompted by a credit card processor before. This is new to me. I felt that Frontier was at a significant risk of bankruptcy because their cash levels were dipping, their losses were rising and they didn't have an answer for what was going on with oil prices.[43] Now analysts believe most larger airlines have sufficient cash to weather the current economic downturn and spike in fuel prices. The six largest airlines — AMR Corp.' s American Airlines, Delta, UAL Corp.' s United Airlines, Northwest Airlines Corp., U.S. Airways Group Inc. and Continental Airlines Inc. — have a combined $20 billion in cash on their balance sheets, Mann said. Their credit card processors won't likely change withholding requirements unless there is a significant change in operating conditions. It's the smaller companies with less cash that are more at risk of facing new cash withholding rules, analysts say. Calyon's Neidl dropped coverage of Mesa Air Group Inc., citing its small capitalization.[20] All cited some combination of high fuel prices and falling demand, among other factors. While it's not uncommon that banks processing airline credit card transactions hold a certain amount of a carrier's proceeds in their own accounts until a passenger completes his or her travel, it is unusual for a processor to suddenly change its cash withholding policy, analysts say.[20]
Negative news reports and analyst research notes can also undermine a credit card company's confidence in an airline by contributing to fears that an airline's failure is imminent, said Mike Boyd, president of the Boyd Group consultancy in Evergreen, Colo. "It could happen to any airline," Boyd said. It's not the first time credit card companies have imposed cash withholding requirements on airlines.[20]
Champion Air plans to cease operations May 31. Several major airlines have gone into and come out of bankruptcy, including Delta and Northwest, which both came out of bankruptcy in 2007. In its news release, Frontier said it intends to operate a full schedule of flights; honor tickets and reservations; provide ticket refunds and exchanges as usual; provide uninterrupted employee benefits, including salaries, health care, vacations and sick leave; and pay suppliers for goods and services. [32] Frontier expects to continue typical operations, including operating all scheduled flights and honoring all tickets and reservations, and does not expect any interruptions in employee wages and benefits or supplier payments, according to a news release.[30]
Fleet service employee Brad Kathol waits for people to board a Frontier Airlines flight.[8] Frontier Airline's mainline operations offers 24 channels of DIRECTV(R) service in every seatback along with a comfortable all coach configuration. In conjunction with its regional jet fleet, operated by Republic Airlines, and a fleet of ten Bombardier Q-400 aircraft operated by Lynx Aviation (a subsidiary of Frontier Airlines Holdings, Inc.), Frontier offers routes linking its Denver hub to 70 destinations, including 62 U.S. cities in 36 states spanning the nation from coast to coast; six cities in Mexico; one in Canada and one in Costa Rica.[23] Three-way competitions have brought an end to other airlines, including the original Frontier, which ceased operations in 1986. While Denver makes up only a portion of Southwest's and United's traffic, Frontier has only its Denver hub, and nearly all of its flights go to or from Denver. Frontier has been staging an effort to diversify its flying, adding Q400 turboprop planes for shorter flights in the Rocky Mountain region, including routes to Colorado Springs, Aspen, Durango and Grand Junction to start in the next several weeks. Frontier chairman Sam Addoms and chief executive Jeff Potter both left in September, when Menke took the helm.[15] Frontier Airlines (FRNT) fended off a skittish creditor by seeking bankruptcy-court protection last week, but its future could depend on how successfully it battles two muscular rivals in a city that may not have room for all three. The scrappy discount airline is now a strong No. 2 carrier in its Denver hometown, behind United Airlines (UAUA), and well ahead of No. 3 Southwest Airlines (LUV).[39] Frontier Airlines is our hometown carrier, and it has been a valued partner at DIA since the airport opened. We have full confidence in Frontier's leadership, and we believe it will emerge from this restructuring process in a strong financial position and will remain one of Denver's premier businesses."[46] It's business as usual Friday at the Frontier Airlines ticket counter at Denver International Airport.[25] Frontier Airlines is the second-largest airline operating out of Denver International Airport.[46]
Although Frontier decided to keep flying, it also faces fuel-price pressures. Frontier faces aggressive competition from United and Southwest airlines at its Denver International Airport hub.[9]
Companies in bankruptcy could be seen as good acquisition targets "because you can tailor the assets of the combined firm using the company in bankruptcy as a vehicle to do so," Mann said. Others question whether any airline would want to inherit the competitive challenges with United and Southwest that Frontier faces in Denver. Some carriers may eye certain Frontier assets, such as its planes.[44] ATA, Aloha Airlines and Skybus are small carriers that have shut down in the past two weeks. Hodas said it's too early in the bankruptcy process to have made any decisions on whether Frontier will seek to change labor agreements under bankruptcy. "Certainly that is within the company's rights within the bankruptcy proceedings, but we don't have any plans at this point to do that," he said.[15]
Frontier spokesman Joe Hodas dismissed speculation about the airline's future. ''I understand the concern, but there are no fundamental issues with Frontier,'' he said. Van Auken at the Akron-Canton Airport said she believes Frontier ''will come out a stronger, better carrier. A half dozen airlines were in bankruptcy this time last year.[13] Frontier Airlines' future now hinges on how it navigates bankruptcy reorganization, what happens to the price of oil and whether proposed airline mergers and acquisitions among other carriers play out.[44]
Frontier filed for bankruptcy on Thursday, becoming the fifth U.S. airline in two weeks to take drastic measures to counter a steadily deteriorating business climate.[27] 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.[11]
Now but a few weeks later, at least four (4) airlines have filed for federal bankruptcy protection, with more bankruptcy filings that may follow. The airline industry is disintegrating before our eyes just like the tired old defective planes which they pretend to maintain. This past week saw record numbers, in the thousands, of planes grounded.[26] ATA Airlines, Skybus and Aloha Airgroup have also filed for bankruptcy protection in the past three weeks.[52]
As airlines restructure under bankruptcy protection, they sometimes emerge looking quite different from when they went in. "What they'll do is they'll assess each aircraft and lease on a case-by-case basis to determine whether they can get a better deal," bankruptcy attorney Stephen Stapleton said. "I think that they'll simply hedge their bets for a while and make an assessment of what they need and what they don't need." He said that in a weak economy, bankruptcy protection will allow them flexibility. Airline consultant Darryl Jenkins said he believes Frontier needs "to stick to their hub flying."[44] The contract with Frontier includes a clause allowing the contract to be terminated should the airline file for bankruptcy protection, Gluszek said, adding that there has been no discussion about exercising the clause.[8]
Unable to survive on half rations of cash flow for any length of time, Frontier sought bankruptcy protection. While holdbacks can trigger a bankruptcy filing, they aren't the "cause."[45]
High traffic and strong March sales are not enough to make Frontier Airlines soar. The budget airline, like many others, is filing for bankrupcy--but this time, cautious creditors are thrown in the mix.[18] The nation's economic slowdown has added to airlines' troubles. Frontier customers at DIA on Friday said they would remain loyal to the hometown airline, best known for the cute animal pictures on its airplane tails. Brian and Holly Bradley of Breckenridge were catching a flight to Los Angeles to visit her parents. The couple said they fly Frontier at least four times a year. "They have consistently been a good airline. They have good direct flights out of Denver," said Holly, 31.[15] Delta also plans to begin charging $25 for frequent-flier flight bookings if the flight includes a segment operated by a different airline -- such as a Delta partner -- and is issued by a Delta representative. "Fuel prices have placed increased pressure on our ability to be a profitable airline, and the reality is we have to pass along these costs to customers, especially with the 80 percent increase in fuel costs we've seen in the past year," Delta spokesman Kent Landers said. Robert Polk, co-owner of Polk Majestic Travel Group in Denver, said he expects airlines to continue down the path of extra and increased fees. "I think they're debating about whether to roll (extra fees) out all at once or to roll them out piecemeal," he said.[47] The airline industry is being hit with a double whammy of escalating fuel costs and a slumping U.S. economy, which threatens to crimp air travel, especially by high-dollar business fliers. The price of jet fuel has climbed 76% during the last year, hitting a record $3.69 a gallon this week.[1] Frontier and other airlines are hurting in the face of a weak economy, skyrocketing jet-fuel costs and sour credit-market conditions. Many analysts expect the U.S. airline industry to post a loss this year, after back-to-back years of profits.[12]
Frontier's troubles add to the turbulence in the U.S. airline industry. AMR Corp.' s American Airlines canceled more than 3,000 flights this week to inspect and repair wiring on its Boeing Co. MD-80 jets.[13] Frontier became the fourth U.S. airline to seek court protection in less than a month, adding to the troubles of the beleaguered industry.[12]
Sabino didn't forecast a specific number. Frontier spokesman Joe Hodas downplayed those concerns, as did John Stemmler, head of the Frontier Airline Pilots Association. "While we don't currently anticipate any job cuts, this is a fairly tumultuous industry at this time, and we need to remain flexible and responsive to rapidly changing market conditions," Hodas said.[25] Susan Stanley, vice president of public relations at Wells Fargo, told Forbes.com that the bank did not have any exposure to the airline but was acting as a trustee for various securities and other transactions involving Frontier Airlines. She did not specify the nature of those transactions. "This change in established practices would have represented a material change to our cash forecasts and business plan," said Menke.[18] Vaughn Cordle, an analyst at AirlineForecasts in Washington, D.C., says Frontier lacks enough cash to survive a prolonged economic downturn. He expects it to lose about $80 million this year. "As a stand-alone airline, it's hard to make the business case that they're viable," Cordle says.[39] At the end of last year, Frontier had assets of $98.3 million and debts of $92.2 million. The carrier has adjusted routes, put four jets up for sale, laid off 100 employees and conducted an extensive review of its schedule in an effort to rein in costs.[11] In recent months, the nation's $350 billion auction-rate bond market collapsed, sending interest rates soaring on auction-rate bonds that DIA and other public entities had issued. Finance officials from DIA and Denver had no warning that Frontier was about to file for Chapter 11 protection, Koniz said, when they monitored the sale Thursday in New York of the bonds.[38]
Frontier said it had to file Chapter 11 after its credit-card processor wanted to withhold a larger portion of advance payments made by customers for airline tickets fearing Frontier was at higher risk.[49] Airline consultant Julius Maldutis believes Frontier's future is "to a large degree going to be a function of what happens to oil prices." "That's going to force, I think, additional carriers also to go into Chapter 11 or to cease operations," Maldutis said. "It is only the beginning.[44] United and Delta emerged from bankruptcy as leaner carriers, using the Chapter 11 reorganization to shave billions of dollars in debt, gain concessions from unions and secure additional funding. "They both emerged as lower-cost, but they're not immune to everything else that has gone on in the industry," said airline analyst Robert Mann.[49] Lewis points to the price wars between carriers as a main reason for the volatility in the industry. "This is a business where everybody is in a death match for market share. These carriers just run themselves into the ground; 150 airlines have filed bankruptcy since 1982," said Lewis.[22] Add in soon-to-be-defunct Champion Air and December casualty MAXjet Airways, and the rapid-fire round of airline failures that began March 31 starts to look like an ominous trend. Considering the heavy toll high fuel prices are taking on the industry, it's no surprise travelers, investors, airline employees - and bankruptcy lawyers - are wondering who might be next.[19] Jet fuel prices have increased by 71% in the past year, says the U.S. airline industry. That, coupled with the huge disruption caused to the industry by the demands of FAA inspectors, and price competition, is leading to many airlines suffering what might turn out to be the worst economic conditions since the post 11 September 2001 period. Higher prices for fuel have now been so sustained that even companies that hedged a year ago are not as well protected as they had hoped. Airline fuel is sold in USD and so passengers in U.S. dollarised economies have not had the benefits of the falling USD that European and UK customers have seen - not that that has prevented EU and UK companies introducing fuel surcharges similar to those in dollarised economies.[50]
Considering the sour state of the airline industry, however, the move by Denver's hometown airline may be the sort of aggressive step that can keep the carrier vital as it weathers dramatic surges in operating costs - mainly jet fuel, which has nearly doubled in price over the past 12 months.[16] A report from Calyon Securities predicted the U.S. airline industry would lose more than $1 billion in 2008, mostly from the one-two combo of high fuel costs and shrinking demand, Reuters reported.[3]
Beleaguered American Airlines, still coping with thousands of flight cancellations, said Friday that it would raise fares by as much as $30 on round-trip tickets to help offset rising fuel costs. The move came the same day American canceled almost 600 more flights as it continued to inspect its MD-80 jetliners for compliance with federal safety rules.[1] The extra fees aren't necessarily a panacea for the economic troubles airlines are facing. Skybus Airlines, which launched flights last year with an "a la carte" price structure, including a $5 fee to check a bag, a $2 charge for a soft drink and a $10 fee for priority boarding, shut down this month. Skybus said on its website that it "struggled to overcome the combination of rising jet-fuel costs and a slowing economic environment."[47]
Last week alone, American cancelled more than 2,500 flights and stranded an estimated 100,000 travelers. Two weekends ago, Skybus Airlines shut down operations and declared bankruptcy, becoming the third carrier in the span of a week to close its doors - joining the ranks of Columbus, Ohio-based carrier joined Aloha Airgroup Inc.' s Aloha Airlines and ATA Airlines Inc. Delta Air Lines Inc. ( DAL ) and Northwest Airlines Corp. ( NWA ) have been in merger talks for months now, with a major holdup coming from the 12,000 pilots between them who've yet to endorse the deal. In the merger arena, UAL Corp.' s ( UAUA ) United Airlines and Continental Airlines Inc. ( CAL ) had also started talks earlier this year, but negotiations are on pause as the two airlines are waiting to see what happens with Delta and Northwest, a source with knowledge of the matter told Reuters.[3] In an interview Tuesday, AirTran President and Chief Executive Bob Fornaro drew a sharp contrast between the Orlando-based carrier and the airlines that went out of business last week. He said first-quarter revenue rose 6 to 7 percent, and that advance bookings through the third quarter are better than at the same time last year. "These were very, very weak airlines," Fornaro said, adding the carrier was "absolutely not" expecting to file for bankruptcy.[19] American is the last major carrier to match fare hikes by rivals United Airlines and Southwest Airlines, meaning the price increases are likely to stick. Although it comes at a touchy time for American, which scrubbed more than 3,000 flights this week because of the safety inspections, one fare expert downplayed the effect on the embattled carrier's image with travelers. "They've had so much bad press over the last 72 hours that this is just a pimple," said Tom Parsons, chief executive of Bestfares.com. "They can deal with this."[1]
"I think United will have more control and then the price of tickets will go up in the city," said another. Snyder added, "Frontier is going to get through this and we're going to be an even better and stronger carrier after all of this. None of the flights are being affected, it's business as usual today, tomorrow, next week, next month, hopefully next year."[14] Frontier is the fourth carrier to file for bankruptcy over the past several weeks as exorbitant fuel prices eat into earnings and a weak U.S. economy keeps more people grounded.[41] Like other airlines, Frontier has suffered greatly from recent increases in fuel prices.[15]
ATA Airlines, Skybus and Aloha Airgroup filed for bankruptcy in the past three weeks -- all blaming the surging price of aviation fuel -- and shut down passenger operations.[9] ATA Airlines, Skybus, and ALOHA Air Group each filed for bankruptcy in the last few weeks, causing cancellations and long delays for frustrated passengers.[28]
Jeanne Kirkpatrick, Jackson Hole Airport assistant airport director, said the bankruptcy filing is nothing unusual. ''We've had three other airlines who filed for Chapter 11 over the years,'' she said. ''They continue to operate normally.''[41] The low-cost carrier filed for Chapter 11 bankruptcy protection last week, a move that sent the company's share price plummeting.[6] Four of the nation's largest carriers -- United Airlines, Northwest Airlines, Delta Air Lines and U.S. Airways -- sought bankruptcy protection within a three-year span.[49]
Delta spokesman Chris Kelly declined to comment about the lawsuit but said Delta - the largest carrier at Palm Beach International Airport - would "vigorously defend" itself. Mesa is seen by some analysts as more vulnerable than other regional operators, such as Republic Airways Corp. and SkyWest Inc., because it is less diversified. It has also been dogged by a series of legal disputes involving subsidiary go!, an inter-island airline in Hawaii. In January, go! reported a $20 million operating loss in its first 16 months of operation. [19] If First Data's hold went unchecked, "it would have put severe restraints on Frontier's liquidity and would have made it impossible for us to continue normal operations,'' Menke said. The 30 largest creditors without collateral backing their claims are owed a total of $109 million, court papers show.[10] Besides having $54.5 million on reserve with First Data, Frontier also has $18.5 million on deposit with American Express Co., according to the filings.[40]
Moussa said processors routinely ask for collateral, and merchants typically avoid writing a check for the amount by agreeing to large withholdings, even up to 100 percent, until the new collateral figure is fulfilled. That suggests Frontier's withholding percentage would have dropped back down after the extra $75 million in collateral was raised. "It's completely within (First Data's) right to because they're the ones who are going to be exposed to the risk," Moussa said. "They've been around for a long time, and they're pretty good at mitigating their risk."[34] The next thing you know, First Data sent Frontier a letter demanding another $75.5 million in collateral within three days.[35] "But it appears First Data has gone to Frontier and said, 'You need to give us $75 million.[22] Frontier reported that First Data sent it a letter Tuesday lifting the reserve requirement to $130 million.[45]
First Data will be on the hook for millions of dollars in undelivered flights if Frontier ceases operations. When consumers make a credit-card purchase, they have a guarantee from Visa and MasterCard to cover things like defective goods or undelivered services.[45]
Frontier's marketing plans center on attracting national customers to Colorado's recreation areas, but First Data's direct link to current economic conditions moved fuel efficiency to center stage, highlighting the Frontier Bombardier Q400's bonus gifts to Colorado's environmentally savvy clientele. Before the financial monkey wrench appeared, Frontier's route augmentation was billed as bringing 50 percent savings to its Colorado customers.[17] Williams wonders if the entire credit crunch hasn't made all financial players much more fearful, a little quicker to pull the trigger when things turn south. Despite any public posturing, Frontier and First Data are expected to reach a compromise as quickly as possible and their lawyers are reportedly already talking.[45]
Until Frontier met that higher cap, First Data said it would hold back half of the company's credit-card revenues. That First Data requires reserves is standard industry practice, and it's also standard to raise them when risks increase, said Jim Daly, a senior editor with Digital Transactions, an industry trade publication.[45] First Data demanded more collateral. This move. um. forced Frontier into the very bankruptcy First Data feared. I was not a finance major, so I am still trying to understand how this move was smart.[35] According to Frontier, the automatic stay provision of the bankruptcy code prevented First Data from increasing the holdback.[40]
First Data is afraid that if Frontier were to go bankrupt, it would be stuck reimbursing credit-card customers for unusable plane tickets.[35] The change is intended to protect First Data, which would be on the hook for ticket refunds if Frontier stops flying.[20]
Card processor First Data decided to keep a larger chunk of the airline's ticket revenue.[21] Greenwood Village, Colorado-based First Data, the biggest credit card payment processor, was bought by leveraged buyout firm Kohlberg Kravis Roberts & Co. last year.[10] Previously, First Data held back 45 percent of the low-cost carriers credit card sales receipts.[46]
Justifiably so. That's leading to a more careful analysis of everybody's credit position." First Data said its demand was based on its original agreement with Frontier.[35] Spokespersons for Frontier and First Data, which is based in the Denver suburb of Greenwood Village, could not be reached late Friday for clarification.[40] Frontier's filing will block efforts to collect debts, including the proceeds that First Data is seeking to retain.[10] Frontier called First Data's move a "material and unexpected notice of an intent to alter our payment stream" that "would have had an immediate and material effect in (Frontier's) liquidity."[34] "I am shocked that First Data literally has the ability to control what Frontier had to do. "I was born in 1938, and I remember my parents talking about the Great Depression, and the horrors of the bank closings," she said. "I feel like we're on the brink of this right now."[35]
"We are grateful that Judge Drain granted the critical first day motions that will enable Frontier to continue normal operations," said Sean Menke, Frontier President and CEO. "Importantly, the aviation professionals of Frontier are focused today -- and will be throughout the Chapter 11 process -- on delivering exceptional customer service.[23] "We are grateful that Judge Drain granted the critical first day motions that will enable Frontier to continue normal operations," Sean Menke, the company's president and chief executive officer, said in a statement.[27]
The cheapest fare, for example, might not allow checked bags and might not include frequent-flier miles or pre-assigned seats. More expensive fares might include those services and things like in-flight television or a movie. "You have expenses that continue to climb," said Frontier chief executive Sean Menke in an interview this year.[47]
Frontier Airlines was looking at plans to boost revenue and promote a new turboprop service. [48] The outlook is stable. Frontier Airlines, including its affiliates, currently has the second-largest market share at DIA, representing 22.7 percent of the airport's passenger traffic in 2007.[37] Frontier carries about 21 percent of the overall traffic at Denver International and leases about 20 gates, dominating one of the airport's three concourses. Frontier passenger Preston Tucker, 19, a University of Colorado student, said he didn't expect the filing to affect his plans. "As long as they keep flying, it is not going to cause problems," he said. Frontier opened in 1994 with fewer than 200 employees and two planes, flying between its Denver home and three cities in North Dakota.[11] Frontier, like numerous other airlines, has been mentioned as a merger candidate, in particular with JetBlue Airways, which also has a modern fleet and a cadre of loyal passengers. The airline that got its start in 1994 and is noted for its array of animal logos on its aircraft tails flies 62 aircraft and has 6,000 employees, 5,000 in Denver.[26]
"I don't think you will see any airline come into Denver and say, 'We will try to replace Frontier with another hub operation,' " Harteveldt said. Some airlines such as United or Southwest may add flights to fill in some gaps.[44] I don't have a negative opinion of Frontier's management. I just think they ran into some industry fundamentals that they couldn't control and Denver is a very expensive airport. It's also a competitive market, and the oil prices have tripled over the last three years. I think they will restructure their operations. I'm not saying it's out of the question that they will file Chapter 7, but I would be surprised.[43] "However, the potential for negative implications on the airport financial metrics exist, should Frontier significantly reduce or cease operations," S&P; added. "What's clear is that someone thought its credit quality was eroding," S&P; analyst Kurt Forsgren said about Frontier and its Chapter 11 filing. Fitch also affirmed its A+ rating on DIA debt, saying, "With Frontier continuing to operate, the immediate effect on the airport should be negligible."[38] READ court documents pertaining to the Chapter 11 filing. VIEW a slide show of Frontier images.[51]
"Frontier is not liquidating, Frontier is not shutting down,'' said Delta lawyer Marshall Huebner of New York's Davis Polk & Wardwell, while commenting on other recent airline bankruptcies at a court hearing today.[10] "I think Frontier is going to be OK," Stapleton said. "The first-day pleadings they filed (in a New York bankruptcy court) indicate that they're going to come out of this relatively unscathed."[44] Judge Robert Drain of the U.S. Bankruptcy Court for the Southern District of New York granted Frontier's request to permit it to honor reservations, pay wages, vendors and other expenses, and maintain frequent flier programs.[27]
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.[19] The company has debt of $500 million to $1 billion and about the same in assets, according to documents filed in bankruptcy court.[10]
The company won approval from U.S. Bankruptcy Court Judge Robert Drain to continue fuel supply agreements.[10] As I have stated many times recently, our executive management team has been working diligently and tirelessly to extend our runway by securing additional cash to bolster our balance sheet. We were successfully making progress on a number of fronts that would position us well for the future and with the protection of the bankruptcy court, we plan to continue to pursue those opportunities.[2]
Denver-based Frontier Airlines was cleared Friday to continue operations while it reorganizes under bankruptcy-court supervision. [15] Frontier Airline's mainline operation has 62 aircraft with one of the youngest Airbus fleets in North America.[23]
John Stemmler, president of the Frontier Airline Pilots Association, said the airline had done "some good things" to reverse revenue trends. "But if the credit-card company acts, it's another variable that can trump a lot of good work," he said. "There are a lot of moving parts, and this was just one of them that we didn't expect to happen to us.[15] "You are still an employee of Frontier Airlines and will receive your pay and benefits as usual."[25]
The airline now has about 350 flights to more than 60 cities and employs about 6,000 people. Frontier shares lost most of their value in trading Friday, tumbling $1.12 to 45 cents each. AP Business Writer Sandy Shore and AP Writer Ivan Moreno contributed to this report.[11] An airline like Frontier, however, is a different kind of merchant. Frontier's customers pay hundreds of dollars well in advance of their flights.[34] Routes with discretionary travelers meant decreased demand and the flights became too expensive to operate, Boyd explained. While other airlines would have held on to those aircraft and tried to find places to fly them, Frontier smartly sold them.[18]
Southwest is growing rapidly in Denver, a city it didn't even serve until 2006. By next month, Southwest will be flying non-stop to 13 destinations that weren't on its Denver route map last May. Some such as Albuquerque, Los Angeles and San Diego are among Frontier's top 15 in seat capacity out of Denver, according to a USA TODAY analysis of airline schedule data from OAGback Aviation Solutions. Southwest also is beefing up frequencies on other routes, such as to Chicago Midway, Nashville and Salt Lake City.[39] "We'll continue to provide satellite-delivered in-flight entertainment for Frontier customers," said DirecTV spokesman Robert Mercer. Modern-day Frontier began flying in Denver in 1994 after Continental Airlines cut its schedule here.[15] "We do not see a future for Frontier as it faces tough competition in Denver from United on the network side and Southwest on the low-cost side," Calyon Securities airline analyst Ray Neidl said Friday.[39] Airline-industry observers have said the three-way competition among United, Frontier and Southwest makes Denver one of the most competitive airline markets in the country.[15] Frontier has continued to grow since Southwest arrived, but heavy competition in Denver is keeping fares lower, thus putting pressure on revenues for the airlines.[15]
When Southwest returned to Denver in 2006, Frontier did not retrench; it expanded service, and added new destinations. This healthy competition has led to record passenger counts at Denver International Airport and enhanced DIA as an economic engine for the Front Range.[16] The new service will connect passengers to a wealth of national destinations through the Denver hub. "It looks like a De Havilland Dash 8 on steroids," said Durango-La Plata Airport Director of Aviation Ron Dent of the Frontier aircraft.[17]
Frontier, Denver's second-largest carrier, plunged 69 percent to 48 cents at 4:30 p.m. New York time in Nasdaq Stock Market trading, after tumbling 12 percent yesterday.[10] Shares of Frontier fell to 48 cents on the Nasdaq stock market, down $1.09, or 69 percent. Bloomberg News contributed to this report.[12]
Frontier's $92 million of 5 percent convertible bonds due in 2025 traded at 28 cents on the dollar today, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.[10] Frontier's surprise move left the airport scurrying to reassure investors about a $608.8 million bond sale set to close Monday.[38]
In December, Frontier cut about 100 positions to save $5 million annually. In January, Frontier reported a record $32.5 million loss for its fiscal third quarter and announced it would sell four of the 22 Airbuses it owns. Frontier has slowed its growth, cutting a number of routes, including most of Frontier's flights that don't go in or out of Denver.[15]
Two weeks ago, Mesa Air Group Inc., which provides regional service for U.S. Airways, United Airlines and Delta Air Lines, said Delta planned to cancel a major contract-flying agreement worth $20 million a month, amid a disagreement over the number of flights completed.[19] Shares closed at 48 cents, which is down $1.09, or 69.43 percent. On its Web site, the airline said it will continue its full schedule of flights and will honor tickets and reservations and provide refunds and exchanges under its standard policies.[5] The airline now has about 350 flights to dozens of cities and employs about 6,000 people. It says it will continue operations as it reorganizes.Avondale Partners airline analyst Bob McAdoo, meanwhile, predicted in a research note Monday that upstart Virgin America - which is privately held and therefore releases less operating information than publicly owned carriers - could be the next casualty. McAdoo cited preliminary filings with the Department of Transportation that suggest the carrier is rapidly losing money, and flew planes that were considerably emptier than some of its competitors through the end of last year. "We caution that these estimates are based on limited (Transportation Department) filings and may be overly pessimistic," he wrote.[19] "The risk really is in some of the second-tier carriers that have less financial means than the major airlines," said Kevin Mitchell, chairman of the Business Travel Coalition. One area of concern is regional airlines, which do most of their business feeding passengers in small markets to larger hubs on behalf of the bigger carriers. Their long-term contracts were always assumed to guarantee a certain level of business for years to come. With larger airlines under pressure to rein in expenses, even the extent of those promises is now in doubt. "The major airlines are trying to cut costs as much as possible, and the regionals are one area where they can do that," Standard & Poor's airline analyst Jim Corridore said.[19] Many did so in the months after the Sept. 11 terrorist attacks because of worries about the industry. Several airlines, in fact, declared bankruptcy in the years after the attacks, due to the downturn in business and by the recession earlier this decade.[20] Frontier's future might depend on consolidation in the airline industry, which could lessen competition.[44]
In 2007, Frontier represented 16.3 percent of total airline rentals, fees, and charges collected by the city and 7.8 percent of total airport system gross revenues.[37] Frontier announced plans to fly into Jackson Hole in February. Jackson Hole Airport officials have said they think the discount airline could help make flying into the valley more affordable.[41]
If it wasn't, the company can expect some angry calls from Frontier's fans. "They are the only ethical airline," said Schmidt "Their staff is nice, their planes clean, they're on time, everybody is treated courteously.[35] Frontier flew a full schedule of 405 flights, serving 29,088 customers. More than 74 percent of those flights arrived on time, with zero cancellations as of Friday afternoon, the company said.[15]
Menke's letter may have calmed many, but it didn't stop experts from warning that layoffs could be in the cards. "I think it's inevitable," said Gary Chaison, professor of labor relations at Clark University in Worcester, Mass. Chaison estimated Frontier would have to cut 20 percent of its work force, or about 1,200 employees, as it restructures its debt and tries to climb out of bankruptcy. "If you are going to get laid off, this is the worst possible timing," Chaison said. "This is the beginning of a recession; housing is awful, which means it's hard to relocate.[25] Frontier carries about 21 percent of the overall traffic at Denver International Airport. Frontier opened in 1994 with fewer than 200 employees and two planes, flying between its Denver home and three cities in North Dakota.[41] Frontier flies seven daily flights from Dallas/Fort Worth Airport to Denver. It is in the process of dropping a daily D/FW flight to Mazatlán, Mexico. Its 350 daily flights also reach Costa Rica and Canada. It has about 6,000 employees.[9]
Last month, Frontier said it had agreed to sell four planes to counter rising fuel costs. Frontier opened in 1994 with less than 200 employees and two planes that flew between its home base of Denver and three cities in North Dakota.[19] In a research note to clients Friday, Neidl said the bankruptcy "happened more quickly than we expected." "We do not see a future for Frontier as it faces tough competition in Denver from United on the network side and Southwest on the low cost side," he wrote.[11]
In the past month alone, three other airlines have filed bankruptcy amid the economic slowdown and rising fuel costs.[49] The airline reported a net loss of $32.5 million, including $4.8 million in start-up costs, schedule readjustments and other losses for Lynx, and $3.5 million stemming from increased fuel costs.[30] Like the financials, most of the airlines are suffering the same major problems - increased fuel costs, slowing demand and a weakening U.S. economy.[3] After Menke took over, the financial picture for airlines worsened as fuel costs rose.[15]
Travelers planning to take to the skies anytime soon should consider adding extra money to their list of things to bring along. As airlines are trying to cope with high fuel costs, they're increasingly tacking on fees for once-free services and trying to sell additional amenities. It's an effort to bring in more money without raising fares so much that it discourages air travel in an uncertain economic environment.[47]
Frontier is a low cost carrier that provides a higher level of service than many. Its aircraft have seat-back video, for example. They are on a pay per use basis and cash is not accepted.[50] Neidl recently concluded that Frontier would be among the first of the small carriers to run low on cash if oil remained at about $110 a barrel.[35] Frontier had about $170 million in cash at the end of December, and Menke in a statement Friday said "we believe that we currently have adequate cash on hand to meet our operating costs." The company is working to get financing and to improve its liquidity.[44] DIA owes Frontier $7 million in net revenue credit and $3.74 million in fuel tax credit.[46]
All of our other award-winning customer service programs remain in place. Frontier took this action following an unexpected attempt by our principal credit card processor to substantially increase a "hold-back" of customer receipts, which threatened to severely impact our liquidity.[51] "I had no idea that when I charged my Frontier tickets on my credit card, that Frontier wasn't getting the money within a reasonable time frame," said Frontier fan Anne Schmidt of Lakewood.[35]
Holdbacks refer to the amount of a card charge for an airline ticket that the processor keeps in reserve until the cardholder actually travels. It is intended in part to cover cancelations or other potential chargebacks in the often-long time between the booking and the flight.[40] "When someone buys a ticket using a credit card, the card processor holds back 45 percent of the fare until the flight is flown," Snider said.[32]
ExpressJet: Offshoot of regional airline mostly serving Continental. Sun Country: Minnesota-based discounter will lay off nearly 30 percent of its pilots May 1 to Oct. 31 and cut back on flights because of high fuel prices.[25] United is studying other airlines' new fees and fee increases, United spokeswoman Robin Urbanski said. "In this environment, a lot of people need to find new ways to make money because it's difficult to do that with these high fuel prices and still, fares are relatively low," Urbanski said. Other airlines' moves to match United's extra charges could give carriers more confidence to add other fees as they all jump at opportunities to bring in more revenue. "I think if they can find a rock that they think there'll be more revenue under it, I think they'll turn it over and see if somebody will pay for it," Polk said.[47] The high price of jet fuel has taken a heavy toll on the airline industry and particularly on low-margin discount carriers.[8] Bryan said spiraling fuel prices could lead to more bankruptcies and consolidation in the industry. Regional carrier ExpressJet and recent start-up Virgin America, both of which serve Southern California, are seen as somewhat vulnerable to rising fuel costs.[1] Last year, the carrier spent $6.7 billion on fuel -- at an average price of $2.12 a gallon -- compared with $2.7 billion in 2003, when jet fuel was 88 cents a gallon. "It's a difficult decision to make, but fuel costs are so burdensome right now that we feel we need to match these increases to mitigate that," American spokesman Tim Wagner said.[1]
Lewis says the high oil prices, which have hovered around $110-a-barrel, have played a huge factor in the profit margins of all airlines. "United Airlines was in bankruptcy for three years and came out of bankruptcy and who knows, they may be back in bankruptcy with $110-a-barrel oil if things keep going the way they are," said Lewis.[22] "I am not too worried about the bankruptcy," said an employee who stood outside the building, smoking a cigarette. He declined to reveal his name but said he has been with the airlines for 10 years. "I think it's just a survival tactic," he said. "They'll sort it out with the credit-card company."[25] U.S. Airways filed bankruptcy twice in just more than two years. American Airlines and Continental Airlines stayed solvent with the help of substantial concessions from their unions.[49] Three other U.S. airlines filed for bankruptcy in the last month and ceased operations.[1]
Even though three smaller carriers had declared bankruptcy and ceased operations in recent weeks, Frontier was apparently doing many things right. [16] Frontier said the bankruptcy would not affect operations, which will continue as normal.[37] Moving beyond today's news, I want to be VERY clear that Frontier is open for business and we expect to continue normal operations throughout the reorganization process.[2] Frontier is committed to delivering exceptional customer service and we intend to continue delivering on that promise with normal operations throughout our reorganization process.[51] Frontier's frequent flyer program and customer service programs would remain unaffected, as will wages and benefits, the company said. "All I can tell you is that our employees are extremely supportive so it's not an adverse relationship," said Joe Hodas, Frontier spokesman.[5] The court action allows Frontier to provide employee wages, health care and other benefits, and honor customer obligations, such as its Early Returns frequent-flier program.[15]
Late last year, Frontier laid off 86 employees, ended service to Mexico from some non-Denver markets and dropped flights to Florida and Nevada from Memphis.[39] "There will be no disruption to service." Frontier has an average of 350 daily departures and arrivals at DIA and 6,000 employees -- 5,000 of them in Denver.[15]
Frontier's daily nonstop round-trip flight between Tampa International Airport and Denver was not affected Friday.[26] Ron Dent, director of aviation at Durango-La Plata County Airport, was confident Friday that the three daily flights that Frontier plans to make between Durango and Denver will take place.[32]
The change also gives San Juan County customers a faster link to a major air traffic hub in that Frontier's Bombardier Q400s can get people to Denver "almost as fast as the jets." Four Corners Regional Airport Manager Brent Shiner said whether San Juan County travelers opt to drive to Durango to fly to Denver "would be their own decision -- something we cannot predict."[17]
Paul Lewis of Cheyenne and his 5-year-old daughter, Emma, check in at the Frontier Airlines counter for a trip to Oklahoma City on April 11, 2008. [15] Delta and Northwest are reportedly continuing to pursue a merger, and United Airlines chief executive Glenn Tilton has been pushing for consolidation for years. It's possible an airline may want to acquire Frontier, say some observers.[44] "Now there's the fear that people will say 'We don't want to be flying on a bankrupt airline,' " Clouse said. I guess they'll fly Southwest, further curbing Frontier's cash flow. This is very confusing to those who love to fly Frontier.[35] All of the big boys were restructuring. That's what they're doing, but on a smaller scale. ''This is a unique filing for bankruptcy. Usually, when you are filing for bankruptcy, it's to shed big debt load. What Frontier is doing is making sure they are protecting their cash flow.[13] "We regret that the current economic conditions have led to today's bankruptcy filing by Frontier Airlines."[15] Despite the bankruptcy filing, the airline pledges there will be no disruption in service.[15] The bankruptcy filing also blocks First Data's plans to hold back credit-card revenues. "It is to everyone's benefit to work this out quickly.[45] In a statement, First Data said it regretted that the '''current economic conditions''' had led to the bankruptcy filing.[40]
"You start spreading rumors about me, and I'll start filing bankruptcy too," Boyd said. Neidl stands by his report and gives First Data more credit. "I'm sure they weren't paying attention to me," Neidl said. "I'm sure they conducted their own analysis and came to the same conclusion I came to.[35]
Credit-card processors like First Data will ask merchants for more collateral to protect themselves when financial conditions deteriorate. Those same financial stresses, however, make a merchant less able to meet those demands -- what some observers call a formula for bankruptcy.[45]
First Data is one of the world's largest money movers, collecting more than $8 billion in revenue in 2007 by processing billions of credit-card, debit- card and ATM transactions. It counts as customers 5.4 million merchants in 37 countries.[34] For 2007, First Data recently reported revenues of $8.1 billion and a loss of $907 million. That compares with revenues of $7.1 billion and a net income of $1.5 billion in 2006.[45]
How quickly First Data wanted to get the reserve up to $130 million was not immediately clear.[40]
Greenwood Village-based First Data responded with regrets that "economic conditions" forced the Denver-based airline into reorganization, but otherwise kept quiet.[45] First Data's decision represents a new threat to an industry facing challenges on numerous fronts.[21]
In the case of Frontier, the new requirement — known in industry speak as a holdback — was the proverbial straw that broke the camel's back.[20] "Frontier is a survivor," Dent said. "This is a tough time to be in the industry, but I think Frontier will make it."[32]
"Frontier, in an environment of $100 barrel oil, was weak," said Neidl. "It could have been an oil company, or another supplier, or anyone else," that forced Frontier into bankruptcy by asking for money. [35] Frontier's bankruptcy may be just a legal maneuver in response to a stringent accounting requirement. Its reorganization will be subject to the whims of the economy, the credit crunch and ridiculous oil prices.[35] Boyd argued that Frontier's line of aircrafts indicates good management. As fuel prices rose, Frontier sold off aircrafts used in flight routes that were no longer profitable to fly, such as longer flights to destinations such as Guadalajara, Mexico.[18] ATA, based in Indianapolis, filed for court protection April 2 and ceased operations, citing fuel prices and the loss of a contract for military charter flights.[10]
Ray Neidl, an analyst with Calyon Securities, said "the fare increases aren't coming close to matching the fuel price increases." Wall Street's bleak view is reflected in airline stocks, which have lost three-quarters of their value since early last year, based on an index of airline shares.[1] During the past year, Frontier's stock price has ranged from a low of 37 cents to a high of $7.46.[6] Frontier shares (ticker: FRNT ) plunged $1.09, or 69.4 percent, to 48 cents in heavy trading Friday. It had traded as high as $7.46 in the past year.[9] Frontier shares plummeted Friday, closing at 48 cents, down from $1.57 on Thursday. That's down from about $12 three years ago.[15]
Frontier shares plummeted 66.9% on Friday's news, or $1.05, to 52 cents in late-afternoon trading.[18]
Frontier's average fuel cost rose from $2.12 a gallon for the quarter ended Dec. 31, 2006, to $3.39 a gallon as of April 9.[10] Unlike Southwest, Frontier offers every passenger assigned seating and personal entertainment from seatback monitors. These amenities are available at a cost that's often competitive with Southwest and typically less than United and other "full-service" carriers.[16]
Today Frontier has 62 planes and serves about 12 million passengers annually with flights to 60 U.S. cities, as well as destinations in Mexico, Canada and Costa Rica.[15] Frontier began in Denver in 1994. It has an average of 350 daily departures with flights to 60 U.S. cities, as well as destinations in Mexico, Canada and Costa Rica.[8] You can count on Frontier, along with our codeshare partners, as we connect you through our Denver hub to 66 destinations in the U.S., Canada, Mexico and Costa Rica.[51]
Third, because Frontier has been a solid corporate citizen and an admirable ambassador for Denver. For those reasons and others we hope Frontier emerges an even stronger and healthier company.[16] "I really don't believe (layoffs) are in the cards for us; I really don't," Stemmler said. It is likely Frontier pilots and flight attendants will support the company through its reorganization, given their largely amicable relationship with management.[25] Castelveter did not want to speculate on why Frontier was adding a flight to the Akron-Canton market, but said, ''if you're going into bankruptcy, you're certainly not going to fly a route that's losing money.''[13] Hodas declined to comment about the future of Frontier'''s new subsidiary Lynx Aviation, whose turboprops long have been rumored to eventually touch down at Yampa Valley Regional Airport. Lynx originally planned to begin offering flights in summer 2007, but its federal certification experienced multiple delays.[30] Aquino spent some time at the American Airlines counter at Oakland Airport. He kept asking questions about his friend's flight, but ultimately could get no firm answer. His friend is due into the Oakland area this weekend. Katie Tankersley, a Tracy resident, found a flight to New Orleans on Friday after her American Airlines booking was cancelled on Thursday.[21] On the top of the financial hardships, airline safety is being questioned. American, forced to ground its entire MD-80 fleet this week for a wiring inspection, has canceled at least 200 Saturday flights, including 28 at O'Hare International Airport, a spokeswoman said.[12] Frontier has five flights per day scheduled at San Francisco International Airport and also flies into San Jose International Airport.[21]
The airline operates six daily flights out of Midway Airport to Denver.[12] Alaska Airlines provided one of the few bright spots for an industry that is being jolted by turbulence from bankruptcies, service shutdowns, and safety-related flight cancellations.[21] In the middle of massive flight disruptions at American Airlines because of federally ordered maintenance inspections, the financial distress in the airline industry hit home again.[12] The near freefall of the U.S. airline industry is strongly reminiscent of the downfall of financials that began tumbling last summer.[3]
The spate of shutdowns could have an indirect impact on Richmond International Airport by making it harder for major airlines to win merger approvals, said George Hoffer, an economics professor at Virginia Commonwealth University who studies the airline industry.[48] Low-cost carrier Southwest is among the strongest competitors in the airline industry nationally.[15] Industry observers are reluctant to predict which airline, if any, could next leave passengers stranded. They agree that any further failures this year are unlikely to involve names atop most frequent-flier lists.[19] Shiner hopes the new links to Colorado's popular skiing, river and backcountry get regional support because the economic environment within which the airline industry operates is now at the mercy of unique and challenging forces.[17]
The new fees are in addition to airlines' fuel surcharges and fare increases. "There's a couple of math wizards with accounting pencils thinking, 'Wow, we can make X amount of revenue if we do this,' and you take it to the marketing department and they say, 'Are you kidding? People are going to go nuts!' " Seaney said.[47] All the details are in our Power Plays Report. This entry was posted on Monday, April 14th, 2008 at 1:21 pm and is filed under Airlines, Top News. You can follow any responses to this entry through the RSS 2.0 feed.[3] ATA Airlines, Skybus Airlines and Aloha Airlines all have filed for bankruptcy in recent weeks.[48] Among smaller carriers, Southwest Airlines and Alaska Airlines haven't fallen into bankruptcy.[49] Mesa has declined to comment on whether it faces bankruptcy. Larger carriers canceled thousands of flights affecting more than a quarter of a million passengers this week to check electrical wiring in MD-80 aircraft.[20] On Friday the carrier scrapped 595 flights, including 86 at O'Hare. After revelations that Southwest Airlines continued to fly planes that were overdue for inspections, the Federal Aviation Administration has come under heavy criticism from Congress and others for being too cozy with the airlines it's supposed to regulate.[12] On its website, the airline said it would continue its full schedule of flights and will honor tickets and reservations and provide refunds and exchanges under its standard policies.[31] The airline also said tickets would continue to be honored and customer refund policies for unused tickets remained the same.[13]
The world's largest air carrier, American Airlines - principal subsidiary of AMR Corp. ( AMR ) - canceled 933 to continue inspections on MD-80 aircraft wiring.[3] • Second-largest carrier at DIA behind United Airlines. • Has about 350 daily departures and arrivals out of its Denver hub.[45] The bankruptcy process for Denver International Airport's second-largest carrier is expected to take nine to 18 months.[15] United, Denver International Airport's dominant carrier, took more than three years.[49]
"Of more consequence would be an eventual liquidation of Frontier, which would eliminate a sizeable operator at the airport," the Fitch report said. "Market factors may work against the carrier as it pursues its reorganization," the ratings agency said, adding that Fitch "cannot rule out this possibility." [38] The potential for negative implications on the airport financial metrics exist, should Frontier significantly reduce or cease operations,' S&P; said.[37] "Based on conversations I've had with Frontier, I anticipate no immediate impact to the airport's revenues or financial position.[46]
The action by the credit-card processor changed the situation. "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," Menke said. "This change in established practices (by the credit-card processor) would have represented a material change to our cash forecasts and business plan.[32] "We believe that we currently have adequate cash on hand to meet our operating needs," Frontier Chief Executive Sean Menke said in a statement.[20] We are still up and operational," said Sean Menke Frontier's chief executive officer in an employee memo.[17]
A few hours after Menke's e-mailed letter went out to employees on Frontier's intranet, the company headquarters at 7001 Tower Road looked calm from the outside.[25]
Frontier is operating a full schedule of flights and paying suppliers and employees as it reorganizes.[7] Denver-based Frontier began operations in 1994 with fewer than 200 employees and two Boeing 737-200s.[32]
Frontier's mainline operation has 62 Airbus SAS A320 series jetliners and its Lynx Aviation unit has 10 Bombardier Inc. regional turboprops, the company said.[10] Demands from credit-card processors are often the untold story behind many bankruptcies, Williams said, which makes Frontier's public outing of a company it needs to survive so unusual.[45] Given the generally bleak economy, the action by the card processor would have adversely affected Frontier's business plan, Snider said. "They would have put us in a considerably tough position," Snider said.[32] Anthony Sabino, a law professor in the Tobin College of Business at St. John's University in New York, also speculated that Frontier would "undoubtedly have to fire some folks at some point."[25] U.S. carriers will post combined losses of $1.2 billion in the first quarter, according to Ray Neidl, a Calyon Securities Inc. analyst in New York.[10]
Frontier expects to make advance payments of $54.5 million for May, according to court papers. [10] Frontier is exploring options including an equity infusion, Christie said. Frontier is considering securing the financing with the equity in its aircraft, which Christie estimated at "in excess of $150 million.''[10]
The airline lost a record $32.5 million in the final quarter of 2007, the most recent reporting period.[16] The airline had promoted $10 fares for at least 10 seats on each flight.[47] More than 400 flights have been scrubbed at O'Hare. The disruption will last at least until Saturday night, when the airline expects to have all of its MD-80s back in service.[12] The airline said it will cancel an undetermined number of flights on Saturday, but expected to resume normal operations by Saturday night.[20] The cancellations by American Airlines forced some air travelers in the East Bay to scramble yet again to find alternative ways for trips to be completed. Other area residents were unsure if friends or relatives would arrive on time over the weekend. "I have a friend coming in from Boston, but American can't be sure if she will have a flight," said Ed Aquino, a Vallejo resident.[21] The biggest fallout has been at American, the world's largest airline, which operates a hub at O'Hare. For the second time in two weeks, it grounded 300 MD-80s, nearly half of its overall fleet, to recheck whether wiring is properly secured in wheel wells.[12] Three airlines have gone out of business in recent weeks and that has passengers feeling a little nervous.[14] A week ago, Frontier said that its passenger miles, a measure of the miles that paying passengers are flown, increased almost 15 percent in March.[32] In 2007, Frontier carried roughly 22.7 percent of passenger enplanements at DIA.[46]
"I think Sean is a good CEO so far. I think he's the right person and the right position, but maybe not the right time," said investor Yongping Duan, who owns nearly 10 percent of Frontier's shares. He added, "He can't change the oil price, so that's the problem."[44] Frontier carries about 21 percent of the overall traffic there, dominating one of the airport's three concourses.[9]
There is also public information about the bankruptcy that can be found at www.FrontierAirlines.com/restructure. I hope as you learn more, you will come to understand that this reorganization will help position Frontier for long term viability. It can provide us with the means to address our short-term financial challenges and better position us to be a successful competitor in this challenging marketplace.[2] Frontier has struggled for years through strings of financial losses and has been unable to maintain consistent profitability.[15] Canton native Paul Tate, then-chief financial officer, had been badgered by relatives for five years that the Akron market was a good one for Frontier.[13]
More information about Frontier's Chapter 11 filing is available on the Internet at http://frontierairlines.com/restructure. [23] "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.[11]
I would be surprised. I think the company will attract new financing once they restructure through the bankruptcy process. Companies typically take a proactive stance to file Chapter 11 so they don't have to file Chapter 7. They do so in an early enough period so they have enough assets left to protect.[43] Virgin America spokeswoman Abby Lunardini, reached as the carrier prepared to launch a new route between Los Angeles and Seattle, dismissed concerns about the company's health and said the Burlingame, Calif. -based carrier's occupancy levels had improved considerably in recent weeks. "Our business model is strong and we're continuing to grow aggressively," she said.[19] Commercial real-estate brokerage Sperry Van Ness said it has been tapped to sell 41 acres of real estate along International Drive, where plans, approval and entitlements are already in place for a two-phase InterContinental Hotel & Resort project called Palazzo Del Lago. In January, developers for the 1,215-unit project said they planned to break ground later this year, with plans to open in 2010. Orlando defense contractor Vcom3D Inc. has received Army deals worth close to $1 million to provide iPod translation services for armed forces in Iraq and Sudan, the company said this week.[52] The bond sale will redeem $450 million in DIA auction-rate debt and $154 million in variable-rate airport bonds, as well as cover insurance and other bond-sale costs.[38] "With $110 per barrel for crude oil and $3 per gallon for jet fuel, if the cost of fuel goes up even one penny for a plane the size of Great Lake's (19-passenger) craft, it costs $93,000 per year," Dent said. "No one can raise their fares that much."[17]
Frontier received clearance to purchase fuel and meet contracts with other vendors and service providers. [15] With your help, our customers will see no change in the unparalleled level of service that Frontier provides.[2] Kathy Miller, director of customer service for Lynx Aviation, said ''absolutely, positively yes'' the airline was still planning on operating in Jackson Hole.[41] No more. This spring started with cracked Southwest Airlines planes. The FAA allowed these planes to remain in revenue service. The FAA allowed passengers to fly in these cracked airplanes. Southwest was more than happy to take money from passengers for flying in these cracked planes.[26] Passengers have been forced to cope with higher fares, more-crowded planes and unexpected chaos in the nation's airports. "There's a lot of tension at the airports these days," said Dean Headley, a professor at Wichita State University in Wichita, Kan., and co-author of the annual Airline Quality Rating.[1] Airport management's expectation is that the airline will continue to lease gates at the current rental rates and remain current on a post-petition basis.[37]
Your EarlyReturns miles are secure - Our EarlyReturns program is unaffected, and you can continue to enjoy the program's benefits, including the opportunity to earn and redeem miles on Frontier and AirTran flights.[51] "Unchecked, it would have put severe restraints on Frontier's liquidity and would have made it impossible for us to continue normal operations," Menke said.[3]
"We continually monitor and manage the credit risks associated with processing transactions in industries where we provide services," it said. I guess there's a clause that says Frontier must put up more collateral if its cash position slips.[35]
Menke pledged to focus on bringing the company to sustained profitability. He has strived to show a sharper focus on the bottom line and restructured the airline's route system. [15] The processor went on to say that it essentially was following established business practices governing relationships between merchant acquirers and airlines.[40] Airlines have now raised fares or imposed fuel surcharges seven times since mid-December, Parsons said. Travelers in smaller markets not served by discount airlines have been especially hard hit, he said.[1] The approval will allow the carrier to pay employees wages and benefits without interruption, pay for fuel under existing contracts, honor existing fuel agreements, maintain existing bank accounts and pre-filing honor obligations to customers, foreign vendors and foreign governments.[36] By yesterday, the carrier was restructuring under the shield of bankruptcy court.[48] The carrier applied for Chapter 11 protection on March 20, blaming a price war with Mesa Air Group Inc.' s Go! inter-island carrier.[10]
How First Data deals with merchants is somewhat mechanical, not unlike bank debt covenants, and entirely contractual. [45] "First Data, with our bank partners, processes transactions for a variety of businesses around the world," First Data officials said in a statement.[46]
SOURCES
1. American Airlines to hike air fares - Los Angeles Times
2. A letter from Frontier CEO Sean Menke : Frontier Bankruptcy : The Rocky Mountain News
3. Frontier Airlines Files for Bankruptcy Protection, Says Operations Will Continue As Normal
4. Frontier Airlines files for bankruptcy - Austin Business Journal:
5. Frontier Airlines files for Chapter 11; flights to continue, stock price falls - St. Louis Business Journal:
6. Rebound seen in Frontier Airlines stock - Denver Business Journal:
7. KJCT8.com - Grand Junction, Montrose - Weather, News, Sports | S&P; reaffirms A+ rating on Denver airport bonds
8. Kansas.com | 04/12/2008 | Frontier files for bankruptcy
9. Star-Telegram.com: | 04/12/2008 | 4th airline files for bankruptcy
10. Bloomberg.com: U.S.
11. The Associated Press: Frontier Files for Bankruptcy Protection
12. Frontier adds to airlines' troubles -- chicagotribune.com
13. Ohio.com - Despite bankruptcy, Frontier adds flight
14. Frontier Airlines files for bankruptcy | News | CW2 Colorado | KWGN-TV
15. Court clears Frontier to fly as it regroups - The Denver Post
16. Rooting for Frontier's survival : Editorials : The Rocky Mountain News
17. Durango-Denver route moves ahead - Farmington Daily Times
18. Frontier Airlines Not Grounded Yet - Forbes.com
19. Empty skies: Wave of airline bankruptcies shakes industry
20. The Associated Press: Airlines Face New Cash Challenge
21. Frontier files Chapter 11 - Inside Bay Area
22. 9NEWS - Business - Article - Frontier, First Data play the blame game
23. Frontier Airlines Receives Court Approval for First Day Motions
24. ATW: Frontier declares bankruptcy but promises to keep flying
25. CEO Menke tells employees it's business as usual : Airlines & Aerospace : The Rocky Mountain News
26. Frontier Flies Into Chapter 11
27. Frontier gets bankruptcy court approval to keep flying | Reuters
28. The Real News: Frontier flies into Chapter 11
29. Frontier Airlines Files for Chapter 11 Bankruptcy | Cleveland Leader
30. Craig Daily Press / Frontier files for bankruptcy
31. Frontier Airlines files for bankruptcy, will keep flying - Puget Sound Business Journal (Seattle):
32. Durango Herald Online
33. MICEBTN - Frontier blames card company for cash squeeze
34. Credit-card collateral led to bankruptcy filing : Airlines & Aerospace : The Rocky Mountain News
35. First Data's demand turns fears to reality - The Denver Post
36. Frontier: Court allows first day motions under bankruptcy filing
37. Denver Intl Airport rating unaffected by Frontier Airline bankruptcy filing- S&P; - Forbes.com
38. DIA retains good debt ratings - The Denver Post
39. Frontier struggles with rivals Southwest, United in Denver - USATODAY.com
40. News
41. cbs4denver.com - Colorado Wire
42. Frontier gets bankruptcy court approval to keep flying | U.S. | Reuters
43. Airline analysts weighs in on Frontier bankruptcy - Denver Business Journal:
44. Frontier: Tweaks or overhaul? - The Denver Post
45. Frontier points at First Data - The Denver Post
46. First Data offers regrets about Frontier Airlines - Denver Business Journal:
47. Not all's fare as airlines seek cash - The Denver Post
48. Frontier files bankruptcy - Business - More - inRich.com
49. Most airlines struggle to stay solvent - The Denver Post
50. Aviation: Low Cost Carrier Frontier files for insolvency protection / Aviation / The Chief Officers' Network - your business advantage - The Chief Offficers' Network
51. Frontier CEO reassures frequent fliers - The Denver Post
52. Another airline in Chapter 11 -- OrlandoSentinel.com
GENERATE A MULTI-SOURCE SUMMARY ON THIS SUBJECT:
Please WAIT 10-20 sec for the new window to open...
You might want to EDIT the default search query below:
Get more info on Rebound seen in Frontier Airlines stock by using the iResearch Reporter tool from Power Text Solutions.
 |
|  |
|
