Frontier Air Files for Protection

123jump.com Staff
11 Apr, 2008
New York City

Frontier Airlines stock plunged 71% after it filed for protection from creditors. The company blamed the decision on its principal credit processor on unexpected increase in hold on cash from sale of airline tickets. The airline said it plans to operate full schedule and honor all tickets and reservations and will pay wages and suppliers.

[R]11:30AM New York – Frontier Airlines filed for protection from creditors, stock plunges 71%.[/R]

Frontier Airlines plunged 73% after it filed voluntary protection from creditors for reorganization under chapter 11. The company blamed the credit card processing, company without naming it and said, “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.”

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Frontier Airlines stock plunged 80% after it filed for chapter 11 bankruptcy. Denver, Colorado based airline is the third airline in the U.S. and fifth in the world to file for protection from creditors in the year so far.

President and chief executive Sean Menke said, “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.

This change in established practices would have represented a material change to our cash forecasts and business plan. Unchecked, it would have put severe restraints on Frontier''s liquidity and would have made it impossible for us to continue normal operations.

The automatic stay provision of the bankruptcy code prohibits the credit card processor from increasing its holdback, and we are prepared to litigate this issue if necessary.

By filing for Chapter 11, we will now have the time and legal protection necessary to obtain additional financing and enhance our liquidity. Fortunately, we believe that we currently have adequate cash on hand to meet our operating needs while we take steps to further strengthen our company.”

Frontier said that it will continue to operate under normal conditions and will honor tickets and reservations and pay its employees and suppliers without interruptions.

Frontier president and chief executive, Sean Menke said, “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.”

Frontier ((FRNT)) stocks fell 71% or $1.11 to 45 cents in the morning trading.