What an awful two weeks for the airline industry, eh? Among the recent headlines:
"Aloha Airlines shuts down passenger operations: report," Reuters news agency, March 31.
"ATA Airlines discontinues all flights, files for bankruptcy," Associated Press, April 3.
"Skybus calls it quits, experts called the airline's model 'dumb'," Associated Press, April 5.
To these we can now add one more: Denver-based Frontier Airlines (Nasdaq: FRNT ) , a carrier I've had the pleasure of flying several times, filed for Chapter 11 bankruptcy protection on Friday.
The good news? No shutdown is planned. According to a letter sent to frequent fliers by CEO Sean Menke, Frontier filed for court protection because of an "unexpected" increase in the amount its principal credit card processor, First Data, plans to withhold from the sale of tickets.
Menke, quoted in a company press release, says that a Chapter 11 filing freezes creditors from taking action that would alter a pre-existing revenue-sharing relationship.
No word yet on whether First Data plans to challenge Frontier's stance, but executives say they are "prepared to litigate" the issue if necessary.
Now for the bad news: Frontier joins an auspicious list of carriers to have spent time under the purview of the bankruptcy courts. United parent UAL (Nasdaq: UAUA ) , Continental (NYSE: CAL ) , Delta (NYSE: DAL ) , and Northwest all share that dubious distinction.
American Airlines parent AMR (NYSE: AMR ) stands out as one of the few to keep the courts at bay. But the carrier isn't without problems. American canceled some 3,000 flights last week because of maintenance issues.
For Frontier, a discounter that contends in its home market with top discounters Southwest (NYSE: LUV ) and JetBlue (Nasdaq: JBLU ) , the filing means it will get time to restructure and work through liquidity issues. That's good. But I question whether it will be enough.
Southwest, for all of its faults, can turn a profit charging just $110 per passenger. Frontier hasn't been close to making money while charging just $104 a seat.
So, good luck, Frontier folk. You run a friendly, fun-to-fly airline. I just hope that, in today's market, "friendly" and "fun" can still be profitable.
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