Source: cnn.com Frontier Airlines Holdings Inc. has filed for Chapter 11 bankruptcy
protection, but unlike other airlines filing for bankruptcy in recent weeks, it
plans to keep running while it reorganizes.
The low-fare carrier said its filing
Friday came after an unexpected attempt by its principal credit card processor
to start withholding significant proceeds from the sale of Frontier tickets, which
threatened to hurt Frontier's liquidity.
The Chapter 11 filing in U.S. Bankruptcy
Court in New York prevents the credit card processor from increasing its "holdback,"
Frontier CEO Sean Menke said.
"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," Menke said in a statement.
Frontier, whose major hub is in Denver,
has been affected as other airlines have by rising fuel costs and the credit crisis
in financial markets.
ATA Airlines, Skybus and Aloha Airgroup all have filed
for bankruptcy recently, but Menke said Frontier's reasons for doing so were different.
"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," he said. "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."
He said Frontier was prepared to litigate, if necessary.
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. Frontier said it had fewer
than 50 creditors.
It reported assets and liabilities of $50 million to $100
million.
A Frontier spokesman had said earlier this week the airline had "no
concerns about bankruptcy" but added that it was working on strengthening its
cash position.
Last month, Frontier said it had agreed to sell four planes
as it dealt with rising fuel costs.
