Credit card change forces Frontier Airlines bankruptcy
Low-cost carrier Frontier Airlines has filed for Chapter 11 bankruptcy protection after its main credit card processor suddenly decided to hang onto additional money from Frontier tickets sales.
“Frontier said its principal credit card processor very recently and unexpectedly informed the company that beginning April 11 it intended to start withholding significant proceeds received from the sale of Frontier tickets,” The Wall Street Journal said.
The change presented a serious challenge for cash-strapped carrier Frontier, and “would have represented a material change to our cash forecasts and business plan,” said airline President and Chief Executive Sean Menke. “Unchecked, it would have put severe restraints on Frontier’s liquidity and would have made it impossible for us to continue normal operations.”
The Chapter 11 filing won’t ground the airline. Frontier plans to continue business as usual, operating flights and honoring tickets and reservations as well as providing refunds and exchanges, according to MarketWatch.com.
Frontier’s decision appears to be a strategic one. “Bankruptcy rules will prevent the planned increase in holdback by the card processor, and Frontier said it is prepared to litigate the issue if necessary,” MarketWatch says.