Frontier Airlines fails; becomes fourth US airline to files for bankruptcy in four weeks
12 Apr 2008
Four US airlines have filed for bankruptcy in as many weeks – not a happy state of affairs for the American airline industry! However, while the previous three, namely ATA Airlines, Skybus and Aloha Airgroup, had cited rising fuel costs as the reason of failure, the latest addition to the list, Frontier Airlines, says the cause is something else.
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, as much as 50 per cent immediately and the entire amount from May onwards.
These figures are much higher than the 45 per cent which First Data had first agreed to hold back until travel was completed. Analysts estimate that concerns on Frontier's profitability may have prompted First Data to cover its bases and make such a move.
However, the airline has temporarily stalled First Data's move by seeking bankruptcy protection at the US Bankruptcy Court in New York on Friday, and has assured passengers and investors that it will continue to fly its full schedule.
The airline employs 6,000 people and operates 350 daily flights. It is based out of Denver and accounts for 21 per cent of the traffic from the Denver International Airport. In this sector it faces stiff competition from United Airlines and Southwest Airlines.
Share of the airline plunged $1.09, or 69.4 percent, to 48 cents in heavy trading on Friday. This quite a contrast to its 52-week high of $7.46.
