Frontier Files for Bankruptcy Protection

DENVER (AP) -- Frontier Airlines sought bankruptcy protection Friday, the fourth carrier to do so in the past several weeks as exorbitant fuel prices eat into earnings and a weak U.S. economy keeps more people grounded.

Frontier says it will continue operations as it reorganizes.

The low-fare carrier said it was forced into bankruptcy after its principal credit card processor said it would begin withholding a greater share of proceeds from ticket sales.

The Chapter 11 filing in U.S. Bankruptcy Court in New York prevents the credit card processor from increasing its "holdback," Frontier CEO Sean Menke said.

"By filing for Chapter 11, we will now have the time and legal protection necessary to obtain additional financing and enhance our liquidity. Fortunately, we believe that we currently have adequate cash on hand to meet our operating needs while we take steps to further strengthen our company," Menke said in a statement.

ATA Airlines, Skybus and Aloha Airgroup all have filed for bankruptcy in the past two weeks, but Menke said Frontier's reasons for doing so were different.

"Unfortunately, our principal credit card processor very recently and unexpectedly informed us that, beginning on April 11, it intended to start withholding significant proceeds received from the sale of Frontier tickets," he said. "This change in established practices would have represented a material change to our cash forecasts and business plan. Unchecked, it would have put severe restraints on Frontier's liquidity and would have made it impossible for us to continue normal operations."

He said Frontier Holdings Inc. was prepared to litigate, if necessary.

The creditor listed in bankruptcy court documents as having the largest general unsecured claim against Frontier by far was Wells Fargo, with $93.5 million. Frontier said it had fewer than 50 creditors.

At the end of last year, Frontier said, it had assets of $98.3 million and debts of $92.2 million.

A Frontier spokesman said earlier this week the airline had "no concerns about bankruptcy" but added that it was working on strengthening its cash position.

Last month, Frontier said it had agreed to sell four planes to counter rising fuel costs.

Frontier opened in 1994 with less than 200 employees and two planes that flew between its home base of Denver and three cities in North Dakota.

The airline now has about 350 flights to dozens of cities and employs about 6,000 people.

Menke took over Frontier last year and said the airline, like other struggling in the rough economic climate, would seek to boost revenues in new ways.

Menke said earlier this year that he would look into a la carte pricing, charging more for specific services.

Frontier competes with Delta Air Lines, Northwest Airlines, American Airlines, United Airlines and Southwest Airlines. Almost all of the carriers have sought new revenue sources, such as additional fees for checking a second bag.

Frontier shares lost most of their value in premarket trading Friday, tumbling $1.27 to 30 cents each.

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