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Frontier (FRNT) files for Chapter 11 as threat to US airlines grows

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Another US airline has gone into Chapter 11. This time it was Frontier (NASDAQ:FRNT). According to MarketWatch, "The airline said the decision was taken after its principal credit card processor unexpectedly said it would start withholding 'significant proceeds' received from the sale of Frontier tickets." That may have been the most immediate reason but rising fuel prices and falling passenger receipts are eating at all carrier profits and Frontier joins ATA and Aloha Air in bankruptcy.

Frontier will attempt to continue its scheduled flights.

The news comes along with word that the Delta (NYSE:DAL) pilots union has agreed to terms which will allow the airline to merge with Northwest (NYSE:NWA). Whether that merger is too late to save both companies can only be a matter of speculation.

The airline in the most trouble now is AMR (NYSE:AMR), parent of American. The company has the largest debt-load among major carriers at over $11 billion. Cash flow at the firm has been dropping and management has said that flight cancellations due to FAA inspections will cost tens of millions of dollars.

With a dicey balance sheet and growing revenue problems AMR is the most likely candidate to be the next bankruptcy victim in the industry.

Douglas A. McIntyre is an editor at 247wallst.com.

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Last updated: November 26, 2009: 03:40 PM

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