Frontier Airlines files for bankruptcy. Those five words are a bit of a shock to me. According to the AP:

NEW YORK (AFP) — Denver-based Frontier Airlines said Friday it had filed for bankruptcy after a credit card processor said it would start withholding receipts from the sale of the airline’s tickets.

Frontier said in a statement it would continue to operate without disruption during the bankruptcy proceedings, offering its full schedule of flights, honoring reservations and paying employees and suppliers.

The company said it was forced to file for bankruptcy protection in a New York court “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.”

Frontier flies with a fleet of 62 aircraft (Airbus A320s) and a workforce of 6000. They fly Denver-70 cities and quite frankly they are my favorite airline so it saddens me to see this happen. I have written in the past that I like their business model (similar to Southwest). Apparently they filed after its credit-card processor (First Data Corp) started holding back proceeds from ticket sales. In my opinion it was a good move because a massive cash hold back would have had massive ramifications as far as threatening their liquidity.

So what about my Frontier shares? eek?

I too have a few shares of Frontier Airlines and this bankruptcy did of course nail us. Stock plunged 73% to 42 cents as of one hour ago.

Should I pull out?… I mean Frontier just filed for friggin bankruptcy!

No! Frontier has a sustainable business model and I believe they will recover (see Southwest article). Hold tight, they have as much in assets as they do debt (somewhere between 500 million - 1 billion) so they are in ok shape considering the circumstances. The rising cost of oil will be a problem but travel is NOT drastically declining and I believe Frontier will come back. At least lets hope!

Comments RSS