-T / T / +T | Comment(s)

Monday, April 21, 2008

Lynx Life Normal

In the wake of Frontier’s recent Chapter 11 bankruptcy filing, life for the airline and its passengers – as well as its newly launched Lynx Aviation operation – is going on normally to the point the airline continued rolling out is Lynx launch cities. At exactly 8:35 a.m. MDT on April 15 Lynx inaugurated the first flight, of five daily roundtrips, to its newest market arriving at Colorado Springs at 9:14 a.m. It was greeted with water cannons as Colorado Springs entered what the airline called a new era of affordable fare travel.
Colorado Springs is the first of several new regional markets Frontier announced in February, all of which are shorter-haul markets, better suited to leveraging the economics of the 74-seat Bombardier Q400. Lynx launches Durango on April 22, Aspen on April 26 and Grand Junction on May 1. Frontier's new service is expected to reduce the average fare in many of the new markets by as much as 50 percent.
In addition to the expansion in its home state of Colorado, Frontier also announced several new non-stops to other Rocky Mountain and regional destinations from Denver including Fargo, N.D. on May 12, Jackson Hole, May 15; and Missoula and Bozeman, Mont. on May 16 and May 22, respectively.
On April 11 Frontier and its subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code following an unexpected attempt by its principal credit card processor – First Data Corp – to substantially increase a "holdback" of customer receipts, which threatened to severely impact Frontier's liquidity. Frontier immediately announced its intendion to continue normal business operations throughout its reorganization process. During its second trip into bankruptcy, the airline pledged to operate its full schedule of flights; honor tickets and reservations and provide refunds and exchanges as usual; maintain its EarlyReturns frequent flyer program and other customer service programs; provide employee wages, healthcare coverage, vacation, sick leave and similar benefits without interruption; and, pay suppliers for goods and services received during reorganization.
"Frontier is committed to delivering exceptional customer service and we intend to continue delivering on that promise with normal operations throughout our reorganization process," said Sean Menke, president and CEO. "To be clear, we filed for very different reasons than those of other recent carriers, and our customers and employees can be confident that we intend to keep on flying and providing outstanding service and products. However, it has put on hold plans to build a new $55 million maintenance hangar at Colorado Springs, which would have employed 225.
"Given the recent progress we have made towards strengthening our balance sheet and obtaining additional financing, it is truly unfortunate that we have had to take this action," Menke continued. "We felt that Frontier would be able to withstand the challenges confronting the U.S. airline industry, which include unprecedented and significant increases in the cost of jet fuel and the impact of the credit crisis in the financial markets, without seeking bankruptcy protection. Frontier has continued to perform relatively well in this difficult environment, and contrary to the trend, we have not seen a decrease in consumer demand."
The day it filed, Frontier received a Staff Determination Letter from The Nasdaq Stock Market indicating that its securities will be delisted from Nasdaq. The company does not intend to appeal this determination, suspending trading in its stock.
"All contracts and all partnerships are up for discussion and review to ensure that we can come out of this thing as strong and as financially viable as possible,” Frontier spokesman Joe Hodas told the Denver Post, which reported that the airline is seeking more gates and expansion projects to accommodate growth in operations, including its new Lynx turboprop subsidiary.
The bankruptcy filing results from what press reports called an obscure arrangement between airlines and credit-card processors and is the latest in the evolution of the credit crisis in the real estate industry. The Wall Street Journal reported that credit-car holdbacks will likely rise in prominence for investors.
“Typically, an airline will have at least one relationship with a credit-card processor - such as JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC) or First Data - which handles credit-card transactions done through Visa Inc. or MasterCard Inc,” said the Journal. “The airline may also have a separate, second agreement with American Express Co. to process transactions done through American Express credit cards.
Under these relationships, the credit-card processor receives a fee from the airline for its services,” the newspaper continued. “It is also common for the processor to withhold a portion of the air fare that consumers have charged to their credit cards until the completion of the flight. This practice of holding back is to guard against potential flight cancellations and bankruptcy filings. It provides a cushion to the credit-card processor in the event travelers demand refunds or halt credit-card payments due to a canceled flight or a bankruptcy filing by an airline.”
Live chat by BoldChat