Frontier says its credit card processor, First Data Corp., unexpectedly decided to keep all the money from passenger credit card ticket purchases until passengers had actually flown. This is to protect First Data, which would be on the hook for refunds if Frontier declared bankruptcy with those funds in its accounts.
This change in policy meant Frontier did not have the cash to continue operations. By filing bankruptcy, Frontier has prevented First Data from keeping the money.
This new policy, if implemented as to all airlines, is another straw on the camel’s back: high fuel prices, sometimes vicious competition, FAA-mandated groundings, and more.
As I recall, there are two technical definitions of bankruptcy. One is having debts that exceed net worth, even though cash-flow may be good. The other is not having sufficient cash to pay debts as the come due, even though assets exceed debts. Frontier appears to meet this second criterion. It has filed a Chapter 11 proceeding, which will allow it to continue to operate while it sorts out its agreement with First Data.
Frontier says it will continue to fly and to meet all its obligations to customers and vendors.
3 months ago