Everything’s fine. Don’t worry. Really

We’re okay. Really, we are. Frontier Airlines is telling people as much, evne though it surprised a few people with its bankruptcy filing overnight Thursday/Friday. Frontier, which has an incredibly loyal following in its Rocky Mountain home territory, kept flying, though, unlike Skybus, ATA and Aloha, all of which went into reorganization and shut down. Frontier took pains over the next few days to remind people it was flying and fine.
So did a few other carriers that, in the musty, oft-confused, and often mysterious thing called the public mind, were 2007-09-05T11_24_59-07_00.jpgperhaps facing some turbulence. AirTran, which is doing pretty darn well, thank you, came out and told people it was fine and had plenty of money.
Sun Country, the privately held carrier up in the Twin Cities, went out of its way to say it was confident about its future and enlisted local airline commentator Terry Trippler to say “I believe for the first time in a long, long time this airline’s being run like an airline should. I have high hopes for it. It’s up to the people of Minneapolis/St. Paul to decide if this airline succeeds.” But any appeal to the public depends on public confidence, and the flying public will decide this summer if these carriers build up the cash reserves they will need to keep flying as winter comes.

Frontier puzzled a few people with pointing the finger of blame at its credit-card processor, which was demanding a larger chunk of money in the form of a sharply increased ‘hold back.’ The Frontier-Airlines---Airbus.jpgcompany clearly thought that Frontier, which has lost more than $50 million over the 12 past months, and which faces the same higher fuel costs as every other carrier, was in trouble or flying toward troubles. But Frontier president and chief executive Sean Menke told the airline’s employees in an internal memo that, “this week, I was notified by our credit-card processor that, as of Friday, April 11, due to ‘current economic conditions, the rise in fuel costs and the other bankruptcies around the industry,’ they intended to start withholding 50% of the credit-card funds received from the sale of Frontier tickets.” The credit-card company was taken private last autumn by venture capitalists.
Menke, a former Air Canada executive who had worked at Frontier early on, went on, “If they went ahead and did this, tens of millions of dollars owed to us by our customers would have been withheld by the credit-card processor, First Data. I want to emphasize to each of you that this was very sudden and unexpected. We are the victims of a credit market that is very fragile and the tolerance for risk is extremely low.”
JP Morgan’s Jamie Baker split the difference, commenting, “Given Frontier’s sensitive liquidity position, we believe its processor was already withholding as much as 50% of sale proceeds until time of flight, and may have boosted that to 100% in recent weeks. Accordingly, the cash cushion that otherwise would have been building as summer booking took place failed to materialize.”

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2 Responses to Everything’s fine. Don’t worry. Really

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