Another Bankruptcy Shakes Ailing Airline Industry

Frontier Airlines is the fourth U.S. carrier to declare bankruptcy in the past two weeks. The discount airline says it will keep flying. But Frontier — like other airlines — is under tremendous financial pressure as the economy slows and fuel prices soar. Carriers are likely to pass along more of their costs to fliers as they struggle to remain in business.

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From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.

Passengers, creditors, CEOs, anyone who has anything to do with the airline business has had a rough couple of weeks. Here's where things stand: Thousands of flights had been cancelled due to safety inspections. The majority at American Airlines, but also Delta, Alaska, and Midwest. ATA Airlines bankrupt and out of service. Upstart Skybus Airlines - goodbye, and Aloha, sayonara.

Well, today, Denver-based Frontier Airlines filed for bankruptcy protection though its situation isn't quite like the others as NPR's Jeff Brady reports.

(Soundbite of plane taking off)

JEFF BRADY: The difference between Frontier and those other airlines is just about to pass overhead.

(Soundbite of airplane passing overhead)

BRADY: Frontier is still flying, and it expects to operate normally throughout the bankruptcy.

(Soundbite of airport announcement)

BRADY: Here at Frontier's ticket counter at Denver International Airport, it looks like business as usual - no long lines, none of the flights have been cancelled. Frontier spokesman Joe Hodas says, operationally, nothing is different from yesterday.

Mr. JOE HODAS (Spokesman, Frontier Airlines): As far as the consumer goes, as far as our employees go, it's business as usual.

BRADY: Hodas says the company that processes Frontier's credit cards threatened to start holding back tens of millions of dollars in revenue from ticket sales out of concern from Frontier's financial condition. Hodas says, without that money, Frontier wouldn't have the cash it needs to keep going, so it filed for bankruptcy to stop the credit card processor. The Chapter 11 filing was a surprise to many. March was the company's best month yet.

Airline analyst Mike Boyd says Frontier is a mainstream operation unlike the other airlines that have filed bankruptcy recently.

Mr. MIKE BOYD (Aviation Analyst, The Boyd Group, Inc.): I mean, two of them were charter carriers, one is in Hawaii, which is really on the margins, and the other was this fruitcake, you know, sell-$10-seats airline.

BRADY: Boyd says Frontier's problems came after a Wall Street analyst questioned the airline's ability to stay solvent given high fuel prices and increasing competition in Denver from United Airlines and Southwest.

Mr. BOYD: And what happened with Frontier is, you know, rumors got started and the credit card company took probably what they thought was legitimate action because of those rumors.

BRADY: Ray Neidl with Calyon Securities is the analyst in question. Neidl says it was clear to him Frontier was going to have cash flow problems in the near future, and it was his job to warn those who lent the airline money.

Mr. RAY NEIDL (Analyst, Calyon Securities Inc.): Well, it does put the creditors on alert to watch out for the credit position. But if you warn somebody about crossing a street against the red light and a car coming, you know, do you blame a person warning you?

BRADY: Of course, the most immediate problem facing the airline industry right now - the delays and cancellations resulting from safety inspections of MD-80 aircraft. American Airlines has had the most trouble so far. How's it going today? I called our man in Dallas to find out, Wade Goodwyn.

WADE GOODWYN: It's been another bad day for American. I think today is the beginning of the end, but it's not over yet. Six hundred more cancelled flights today which brings the total to 3,000 cancelled American flights. You thought Southwest had egg all over its face these last several weeks with the testimony from the two FAA whistleblowers, and they did. But the last few days for American has been even worse. A lot of angry passengers. Last year, it was violent weather that caused the big problems, but as both top executives have admitted, this year it's been bad management.

BRADY: All right. Thanks, Wade.

GOODWYN: My pleasure.

BRADY: At Frontier's headquarters today, the phone rang nonstop. Customers holding tickets wanted to know if they were still valid. The receptionist patiently told each caller that nothing had changed because of the bankruptcy, nothing but an extra headache for a small airline already dealing with the challenging industry that's facing high oil prices and an economic downturn.

Jeff Brady, NPR News, at the Denver International Airport.

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