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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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Reader Comments (Page 1 of 1)
4-11-2008 @ 1:50PM
Mike Link said...
When it is all said and done there will be one federally run airline. Too bad we can't outsource the airline industry?
4-11-2008 @ 5:33PM
SKG said...
This is such ashame. I love flying Frontier and have consistently used their direct service to Denver from my city since they began offering it about 8 years ago, the only direct flight to Denver. The ticket prices were always very reasonable. I am really going to miss this airline. They have already stopped the flights out of my city beginning in June. Now I will have to drive three (or more) hours to an airport for a direct flight to Denver. Bummer!
4-11-2008 @ 4:55PM
Jim said...
I am a stock holder but am concerned at the management of the FAA incident. It could ahve been handled differently by both parties. American certainly did not need th ebad press.
American is the largest carrier in the US and maybe the world. The have about 6 billion in cash right now and annual revenue of 20 Billion. They are positioned to whether the storm but need to work on their cost structure whcih is always painful in the airlines indistry.
They are also looking to shed themselves of non strategic business interests like their regional carriers and financial management company. Again, I am amazed that they are doing this now rather than earlier.
Goes to show you that alot of these MBA types still do not have a handle on the interworkings of their companies.
4-11-2008 @ 10:21PM
flyer said...
The FAA was geting hyper over some comments by the administrator and following "work to the Rules" regulations. ( which are some times very stupid).
This incident shows the stupidity of thinking of a bueaurcacy. FLYABLITY was NOT an issue here and it may cause AA to go into bankrupcty.
I am a commercal pilot, I have owned airplanes and have spent many $ to look at at nonexistant problems! But to ground nearly 2000 flights,cost 100milion + is just stupid.
4-11-2008 @ 6:30PM
Gary said...
If you remember last Friday there was a comment from some left winger about shuting down the hole airline business and starting over. Have you tried to fly this week?
I hope you are going to be happy with the loss of your opportunity to fly on the cheap. I will still be flying as my job requires it and you will be paying more for my products.
4-11-2008 @ 6:35PM
Dave said...
Outsource the airline industry? To whom? Brazil or China? Maybe India? Yeah, that would be great.....a crash a month.
As for Frontier, they are a failed business with a flawed busniess plan. Why they got tax payer money in the form of an ATSB loan I'll never figure out. United and Southwest are killing them in Denver, and they simply cannot compete. Period.
So much for the fad of "low cost carriers." Jet Blue is next. Southwest will survive because they've been around for over 35 years and they know what they're doing....
I did like the animals on the tails....and their commercials were cool......peace out Frontier!