DENVER — Frontier Airlines, which filed for Chapter 11 bankruptcy protection today, blames an "unexpected attempt" by First Data Corp., its principal credit card processor, "to start withholding significant proceeds received from the sale of Frontier tickets," said a report published on CNN's Web site (www.cnn.com).
Typically, credit card processors turn over revenue to airlines in a couple of days, but can hold back a percentage of revenue from financially weak airlines like Frontier until the passenger takes the flight. Frontier was notified that, as of today, First Data Corp. would substantially increase the holdback of customer receipts.
Frontier President/CEO Sean Menke said the change "would have put severe restraints on Frontier's liquidity and would have made it impossible for us to continue normal operations."
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Bankruptcy code prohibits First Data Corp from increasing holdbacks. Frontier is also facing increased competition in Denver, its major hub city, as well as high fuel prices that continue to plague all air carriers.
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