Frontier Files For Chapter 11 Bankruptcy Protection

Frontier Airlines today said it filed for Chapter 11 bankruptcy protection, claiming its primary credit card processor increased the share of customer receipts it would hold.

Frontier said its "principal credit card processor," which it did not identify, "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."

The carrier said it expects to continue normal operations and planned to honor all reservations, maintain its frequent flyer program, continue to compensate employees and "pay suppliers for goods and services received during the reorganization process." The carrier in filings said it plans to honor agreements with ARC, bank settlement plans, travel agencies and global distribution systems, expecting no disruption in those systems.

Frontier's announcement follows bankruptcy filings among several smaller U.S. carriers—Aloha Airlines, ATA Airlines and SkyBus—that also, unlike Frontier, ended operations. Frontier president and CEO Sean Menke in a statement today said, "To be clear, 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."

Menke in a statement today said the credit card processor's "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."