Quote:
Originally Posted by Michael Morrison
Frontier have just filed fro Chapter 11 Bankruptcy protection.
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Having a read of a thread of the same topic at A.net... one member has provided what seems to be a possible explanation for Frontier's decision to file for Ch. 11.
From Ikramerica:
From how I understand it, they had to enter Ch.11 ASAP so that the CC (Credit Card) company could not change the terms of their deal.
After reading up on "hold backs" and how they work, the CC Processor is within their right to change the terms if they see a fundamental change in the business they are working with. It's within the contract F9 (Frontier Airlines) has with them. They must be worried about F9's losses and that the mantra for ATA and AQ (Aloha Airlines) passengers has been "contact your credit card company" which is plastered all over the web as advice. I'm sure the credit card companies are ****ed they are being put in the middle, and the processors even more so (charge backs are expensive), and so are now increasing hold back on all "shaky" carriers to protect themselves. And from how I understand it, the processor could basically hold all F9s credit card transactions for a long period of time as security.
But by filing Ch.11, that freezes all contracts and terms as is for a set amount of time (60 days?). At least that's how I understand it. Then the BK judge can sort through it. But it means everything holds as is, the CC processor can't increase the hold back, and F9 stays liquid. Probably.
Link to thread
Sounds like a plausible explanation for Frontier's sudden announcement. Seems like they're trying to think more about long-term viability and don't want to get caught out by this sudden squeeze that creditors have placed upon struggling airlines.