Posted on 04/11/2008 8:06:50 AM PDT by Santa Fe_Conservative
NEW YORK: Denver-based Frontier Airlines said on Friday it had filed for bankruptcy after a credit card processor said it would start withholding receipts from the sale of the airline's tickets.
Frontier said in a statement it would continue to operate without disruption during the bankruptcy proceedings, offering its full schedule of flights, honoring reservations and paying employees and suppliers.
The company said it was forced to file for bankruptcy protection in a New York court "following an unexpected attempt by its principal credit card processor to substantially increase a 'holdback' of customer receipts, which threatened to severely impact Frontier's liquidity."
The move comes amid difficulties across the industry. Two discount airlines, ATA Airlines and Hawaii-based Aloha Airlines, have halted operations after declaring bankruptcy in recent weeks.
(Excerpt) Read more at economictimes.indiatimes.com ...
Is this three in two weeks? Eeek. Very sorry for those out of work now.
As a life-long bookkeeper, I have a question:
IF a credit card processor is charging the client’s credit card at the time of them making a reservation, and NOT giving the funds to Frontier-or any other vendor using credit cards as a method of payment— isn’t that some sort of fraud???
The bank or whatever holder of the credit card is getting fees and interest charged to the credit card holder for as long as 4 months- some flights are booked waaaayy in advance. The bank is making money on withholding these funds from Frontier- or whoever- and now they have contributed to the possible collapse of Frontier, who serves many small airports.
I need a legal opinion here about the banks or the credit card processor doing anything like this.
Considering that my charges at Wal-Mart or wherever are electronically charged in an instant, to my credit card, I want to know that my vendors are getting credit immediately into their bank accounts on a daily basis!!!!!
The credit card companies contract provides they can withold an amount they consider sufficient to allow refunds to customers. This will vary upon the credit worthiness of the client.
Sorry, my last accounting class was in high school :)
Frontier Airlines Files For Bankruptcy; Flights To Continue - Update [FRNT]
After being screwed out of $1600 by Aloha Airlines last week I’ve been more keene on this issue. What I’ve learned is that the airlines are operating on such a tight budget that their operating capitol is basically comprised of advance ticket sales (which is why Aloha sold tickets right up to the 10AM Hawaiian time on Sunday, March 30, knowing they were going to go bankrupt since probably Friday, March 28th, since I don’t know of any bankruptcy courts operating on the weekend...and which, in my mind, is clearly fraud). Also, how can credit card companies immediately pay the full ticket price to the airline at the time of making a reservation and then, when the airline goes bankrupt, claim they have no responsibility....no goods or service ever changed hands.
Maybe the top 5 executives who supposedly “deserve” their millions in bonus money ought to divide it and distribute it to all the travelers displaced by their collective “genius?”
Bummer. I was going to fly them for the first time next month to Denver and Grand Junction. I saw where they stock price was then at 1.50 and I wondered to myself it is was such a good idea. Maybe I will still roll the dice (the company is paying) and try to do my best to help them out.
>>The bank is making money on withholding these funds
>>from Frontier- or whoever- and now they have
>>contributed to the possible collapse of Frontier,
>>who serves many small airports.
It’s enough to make ya think about using CASH, isn’t it?
Irritation with the parasites in the “credit” industry has motivated me to use cash for gas, groceries, clothing... for all purchases when possible.
I’m one of those people the credit card companies love to hate anyways because I pay off my one (1) credit card every month and never pay em a dime of interest.
If they can’t be responsible then screw em. Put em out of business.
actually given the fact that most all federal bankrupcy courts now file paperlessly, you can file 24/7 (except for their tiny little maintenance hour window each week)
Essentially you can file a new case on a sunday morning if you like and have a circuit so equiped.
BTW they will all be paperless if not so already.
remember credit car companies collect off of both ends of the deal.
They charnge the merchant for the use of VISA/MC/AMEX and they charge the customer the interest.
Now if we had paperless cash or a governmental ecash card then it would be a different story since our taxes would pay for the card’s existence and use.
Thanks for the insight. And if it were an initial filing I could see your point. But in this instance Aloha was already protected under a Chapter 11 reorg and was seeking additional reorg due to what it called unfair trade practices whereby Mesa Airlines was undercutting their inter-island fare of $49.99 to $39.99 and Aloha used that pretext to reapply but the Court wouldn’t buy it leaving them with no where to turn. So did the court advise them during the work week or early Sunday mornig via e-mail as you suggest? So far as I know no one’s asked that question. And if they haven’t asked it certainly lends credence to your point! But the bottom line is the Credit Card banks allowed the airlines to “use” ticket purchasing money to operate on, sometimes with no intention of providing the service promised. If you look at the Frontier filing today you’ll see that it is due to their primary bank withholding a large portion of ticket purchase funds to use as refunds in the event Frontier, too, has to seek Bankruptcy protection. Their bank is certainly monitoring whats happening with tickets purchased by credit card, some of which are being refunded but the biggest share is not...at least at this point. The creditors are trying to control the arguement by using “fine print” in the card contracts to define insurance coverage but it’s hard to find any who have insurance in the event an airline goes bankrupt....only flight interruption.
Prior to the change, the CC processor witheld 45% of the charge... perfectly legal.
They changed the witholding to 100%... again, legal, but enough to put any airline into bankruptcy.
The legality all revolves around when the service paid for is provided. If you go into WalMart and buy something, the service is provided at the point of sale. With an airline, the service isn’t provided for months at times, and you are entitled to a refund if the airline goes under. So to cover their keister, the cc processors hold a certain amount back....
The problem with cash here is that if the airline goes under, you’re likely out the money. A CC helps protect that expenditure.
Oh, that, and it immediately marks you as a terrorist, since everyone knows good Americans put everything on credit.
What bugs me here is that the change they made would have put any airline into bankruptcy protection. Somehow they picked out Frontier, which lost 38 million or something like that all last year. Not United, which lost something like 14 times that amount in just the past 3 months....
Their arbitrary application of rules has hit what was in reality one of the stronger players in a weak market.
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