Frontier Airlines has filed for bankruptcy but is flying its normal schedule.
Frontier blamed its credit card processor for holding back the proceeds of ticket sales. It seems to be a sign of how precarious airline finances are right now, and how skittish the financial world is about it.
The decision to keep flying, rather than belly-up like Aloha, ATA and Skybus did last week, suggests that Frontier’s executives think the company can overcome its immediate cash-flow problems.
Frontier has posted an explanation of its decision on its Web site with a link to the bankruptcy filing. This unusually forthright move is, in my opinion, pretty smart.
All airlines are having trouble with cash flow right now, with the price of oil through the roof and the financial markets tight as a drum. So the critical difference between a small carrier like Frontier and big ones like American is mainly cash reserves. Some corporations can afford to lose piles of money. Others can’t.
In many ways, Frontier has been a successful low-cost carrier. Business has been good out of its Denver hub, and its load factors were picking up lately. But when competition prevents a company from raising its prices enough to cover its costs, something has to give.
The Rocky Mountain News reports that Frontier lost $32.5 million in the last quarter of 2007. In February it cut back hard on its long-haul flights. In March it agreed to sell four of its jets.
Time will tell whether Frontier can use bankruptcy, as many major carriers have, to cut its costs and come back stronger.