Frontier Runs Out of Credit….and Goes Chapter 11
I visited with my friend Johnny Jet in his Manhattan Beach bachelor pad, and learned a bit about the recent spate of airline bankrupcies that are making travelers nervous around the US. Johnny is the editor in chief of Johnnyjet.com and he’s a regular guest on the local ABC news affilate as well as with Peter Greenberg. He told me about the latest victim of the times, Denver-based Frontier Airlines.
Then I picked up the Wall St. Journal for a closer look at just what has happened this once-high flier that has taken a beating from Southwest and United who both operate a heavy schedule out of Frontier’s home airport, Denver.
The tipping point for Frontier was when First Data, the airline’s main credit card processor told them they would be increasing the ‘holdback rate’ of proceeds to 100% from 45%. “This shift threatened to severerly impact Frontier’s liquidity,” the article said.
Companies like First Data ‘typically turn over revenue to airlines in a couple of days…but when they have a customer who is shaky like many airlines are, they set up agreements to keep the money paid by the passengers longer from the time they buy the ticket until the actual date the fly.’
For Frontier, this change was the nail in the coffin that pushed them into bankruptcy. They have said they will continue flying….but Aloha Airlines said the same thing and eleven days later they were gone for good.