Frontier Airlines is finding its bankruptcy reorganisation more complex than it had hoped and, despite a recent cash infusion, asked its bankruptcy judge to let it break its Teamsters labour contract so that it can move some maintenance work offshore. The carrier sought Chapter 11 protection in April when its main credit card processor, First Data, changed its terms, increasing its "hold back" of the airline's revenues.
Since then, Frontier has trimmed its fleet, raised passenger fees, culled its loyalty plan, cut back on space at its Denver International Airport hub, laid off workers and sought out new financing. But Frontier told its bankruptcy court judge, Robert Drain, that: "Absent additional cuts to its labour and other non-fuel costs, Frontier has little hope of survival." The airline says it intends to outsource some of its heavy maintenance to Aeroman, the El Salvador-based unit of Canada's ACTS.
Frontier has inked an agreement with its largest unsecured creditors for up to $75 million in loans. It must meet certain financial benchmarks and win new concessions from its unions to get the first $40 million instalment of that, however.
The carrier asked the bankruptcy court judge to allow it to abrogate its contracts with Teamsters Local 961, a move that met with outrage from the president of the local union, Matthew Fazakas. "They just haven't justified the need, and they've stonewalled since July on giving us the documentation we need to make a judgment on what they need. Fuel is going down and they already have some of the lowest costs in the industry," says Fazakas.
Frontier and its unions reached a short-term wage concessions deal in May, but wages are set to "snap back" to earlier levels at the end of September. The judge set an early October date to rule on the airline's request for rejecting the contracts.
Frontier says: "We still hope to resolve this matter without the court's intervention." Exacerbated by increased competition from Southwest at Denver, Frontier's second-quarter operating loss was $44 million and its net loss was $57.7 million.