Who's next to fold?
- Thread starter bagchucker
- Start date
eolesen
Veteran
- Jul 23, 2003
- 15,959
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Credit card holdbacks are what pushed ATA into their 2004 filing, and it wouldn't surprise me if some of the more questionable carriers are seeing some increases in their holdbacks all of the sudden...
Credit cards make up the majority of the purchases, and the banks decide how much of the funds for advance ticket sales (also called float) get sent to the airline based on their credit-worthiness. Stable airlines get the benefit of low holdbacks, and they get the float (and the interest) from those sales.
What happened with Frontier is the banks decided to cut that so that if they did go under, the banks would have the funds with which to be able to refund credit card holders. If they don't increase the holdbacks, they risk being an unsecured creditor for funds already advanced to the airline.
Credit cards make up the majority of the purchases, and the banks decide how much of the funds for advance ticket sales (also called float) get sent to the airline based on their credit-worthiness. Stable airlines get the benefit of low holdbacks, and they get the float (and the interest) from those sales.
What happened with Frontier is the banks decided to cut that so that if they did go under, the banks would have the funds with which to be able to refund credit card holders. If they don't increase the holdbacks, they risk being an unsecured creditor for funds already advanced to the airline.
You may have stuck your foot in your mouth after my message... You really didnt think Frontier would file? hmmmmmm read the news today
I agree as the fuel and economy doesn't get better. Frontier isn't going to be around long. I wouldn't be surprise Southwest and United really run them out of Denver sooner. We all knew this when Southwest came into Denver. It's going to be United and Southwest in Denver. The stock is no good now and will be delisted soon.
Frontier will be the past as Aloha,ATA, a few more which we don't know yet. Maybe virgina America or jetblue maybe spirit
luv2fly
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- Aug 21, 2002
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The fat lady is warming up. I don't think Frontier is going to be successful in aquiring the necessary financing with the latest credit crunch.
I said it first on this board....I just didn't know I would get this lucky to bang it out right on!
WHILE I'M SAD FOR THOSE AT FRONTIER WHO WILL BE FORCED INTO PAYCUTS, BENEFIT REDUCTIONS AND JOB LOSS, THIS WAS NOT ABOUT FEELINGS....IT WAS ABOUT BUSINESS AND WHO WOULD BE NEXT TO FILE/FOLD.
I took heat from others telling me, no look at this and look at that.....well the bottom line is that no matter how you want to spin it, nobody is going to give Frontier the funds to emerge from bankruptcy unless somehow they are lucky enough to spend three years in bankruptcy and ride out the recession in bankruptcy. Frontier got to where they are by luck, and a lot of shuck and jive. When did they place the order for the Airbus....hmmm after the United Airline Pilots pulled their summer of he!! in 2000. They were on the brink before the United Airline Pilots pulled their game playing, and due to WestPac raising the lease costs of the 737-300 and then moving from COS to DEN Frontier had another close call with death.
While Frontier didn't shut down today, I'm sure they will be either forced to shut down sometime during the fall, or winter unless Lufthansa pumps enough money into JetBlue for JetBlue to buy them, lock stock and barrell. But the question is there, is UA willing to give up TED to JetBlue for a handsome payout from Lufthansa as well. I'm sure the phone lines are busy between Chicago and Frankfurt today. Also, why did the CEO step down late last year unless he saw the writing on the wall. At $110 a barrel for oil, there is no way they can survive.
Also, IIRC Aloha filed Chapter 11, prior to converting to Chapter 7 a few days later and then grounding the fleet. And finally, the reason the bank is witholding the credit card funds I'm sure has nothing to do with the fact they are looking around and going, hmmm who may go next. We've gotten burned three times this month, lets not let it happen again. While the credit card companies may refund the money to their customers, they must wait in line to recieve pennies on the dollar at bankruptcy since their claim is not backed up by property, nor it is a perfected claim to go at a higher status than unsecured creditors, right above the stockholders.
After reviewing my list, and doing more research, I have to agree that MESA will be next, not Midwest. But then again it maybe a tie to who files first. If Midwest has operational disruptions similar to what AA has had this week or the credit card companies pull their money, I would have to divert back to Midwest since Mesa really has until the 18th of June on the convertable notes. Again, Midwest doesn't have much in the line of deep pockets unless Procter and Gamble took a gamble and kept them flying. Northwest would welcome decreased competition. I bet the Midwest people would really have wanted the AirTran deal if this were to come to fruition. I don't know that TPG and Northwest will keep them flying over this recession and the $110 a barrel for oil.
Well, those are my thoughts for today.
Who would give them money. Can you imagine anyone buying tickets on them for future travel?
whatkindoffreshhell
Veteran
Well said.
Same policy also applies to UA & US.
Maybe Tilton/Brace don't hit the lottery after all....
Travelpro72
Veteran
- Jan 30, 2005
- 4,964
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Maybe instead of all the big carriers consolidating we'll see all the smaller airlines either vanish by chapter 7 or be gobbled up. Getting rid of all these smaller carriers that are thorns in the sides of the legacies may be what we're seeing. As with any airline going under never say never. Keep your heads up Frontier folks. Your a great bunch of people. 
As for the comment about who would book on Frontier now.....thats a VERY good point. I as a consumer can say I'd certainly have my doubts.
As for the comment about who would book on Frontier now.....thats a VERY good point. I as a consumer can say I'd certainly have my doubts.
Aside from Southwest, what carriers would be able to absorb a similar action from their credit card processors without filing?
I would guess that similar action would put most of the small guys in Ch11, but I don't know about FL/B6/AS or the 6 major international carriers.
Well, AA & UA have $4-5 billion in the bank so they could absorb that short term although it would be a problem in the long-term possibly.
As for booking Frontier...past models would say no problem as people were used to airlines filing ch 11 and coming out ok. Problem now is that there have been a few recent and immediate failures that may bring about more caution among consumers. Could be interesting.
As for booking Frontier...past models would say no problem as people were used to airlines filing ch 11 and coming out ok. Problem now is that there have been a few recent and immediate failures that may bring about more caution among consumers. Could be interesting.
Aloha had filed for bankruptcy in Chapter 11, (reorg) a couple of days before converting to Chapter 7 (liquidation). Therefore, when you are dealing with an airline without enough capital to survive without 100% funding from the credit card company, which has been in discussions for several months according to an article in the Denver Businesss Journal, First Data had no choice but to cut funding down to limit the amount of money they would be exposed to when Frontier folds as they would become an unsecured creditor. Frontier does not have the financial funding and the fact is the company knows that. Furthermore, a bankruptcy filing is not something that you say on Wednesday you are not going to file, and then on Thursday you file. This has been in works for several days. Kudos for keeping it so close to the vest for Frontier.
So, lets do some math.....if they are now only funded at 45%, that means that First Data has reduced their exposure to a complete shutdown to 55% of future sales as of May 1st, not April 11th as Frontier claims. Cash/Cash Equivalents for FYE2007, (March 31, 2007) was 202,981,000. This means that if all cash represents future bookings, then First Data was floating to Frontier 202,981,000 and if Frontier was to close down they would be on the hook to their customers 202,9810,000. But, if they are now only going to supply Frontier 45% of that amount, then Frontier only stands to have cash of 91,341,450. That is dramatic. However, after reading through their financial report for 2007, if I was First Data I wouldn't float even the 45% on a going forward basis. I've never read such a gloom and doom financial report.
Now as for the eighteen months to reorganize under chapter 11, lets take their fleet size of 72 aircraft, 2 subsidaries and compare that to the three years for United Airlines with IIRC 28 subsidaries and 494 fleet size. Hmm, seems like somebody is looking to ride out the recession in bankruptcy. This leads me to think, and considering the filing in New York corts that JetBlue has to be doing some serious soul searching on how much money they need to buy them out of bankruptcy. Remove all senior managers, remove all duplicate managers at various stations and now you have a good foundation for the two to build together. JMO.
[topic="0"]http://denver.bizjournals.com/denver/stories/2008/04/07/daily72.html?ana=yfcpc[/topic]
So, lets do some math.....if they are now only funded at 45%, that means that First Data has reduced their exposure to a complete shutdown to 55% of future sales as of May 1st, not April 11th as Frontier claims. Cash/Cash Equivalents for FYE2007, (March 31, 2007) was 202,981,000. This means that if all cash represents future bookings, then First Data was floating to Frontier 202,981,000 and if Frontier was to close down they would be on the hook to their customers 202,9810,000. But, if they are now only going to supply Frontier 45% of that amount, then Frontier only stands to have cash of 91,341,450. That is dramatic. However, after reading through their financial report for 2007, if I was First Data I wouldn't float even the 45% on a going forward basis. I've never read such a gloom and doom financial report.
Now as for the eighteen months to reorganize under chapter 11, lets take their fleet size of 72 aircraft, 2 subsidaries and compare that to the three years for United Airlines with IIRC 28 subsidaries and 494 fleet size. Hmm, seems like somebody is looking to ride out the recession in bankruptcy. This leads me to think, and considering the filing in New York corts that JetBlue has to be doing some serious soul searching on how much money they need to buy them out of bankruptcy. Remove all senior managers, remove all duplicate managers at various stations and now you have a good foundation for the two to build together. JMO.
[topic="0"]http://denver.bizjournals.com/denver/stories/2008/04/07/daily72.html?ana=yfcpc[/topic]
CynicalResAgent
Veteran
Yeah, that was terrible timing. lol
actually I was refering AdAstera's statement - "to It never ceases to amaze me how anxious people are to call for the death of Frontier, even with every indication to the contrary."
Honestly, nobody predicted the credit card companies would reduce their access to their revenue.
I still think they could avoid liquidation if they find financing if they have a good plan. I also think their best plan would be to codeshare with WN to international destinations.
For instance, they fly from STL to Mexico right now (an a lot of other cities, albeit only on certain days). Well WN has a large presence here in STL. If F9 could coordinate their flight to allow connections from WN they could benefit each other. Keep in mind they have flights to Mexico from BNA, MDW, LAX, SLC and MCI. All cities with WN flights too.
IF WN and F9 reduced their competition in DEN and any overlapping flights at the same time were reduced yet both could funel people to the higher yield international and Lynx destinations and both turned their attention towards UA it might work.
I like F9, I wish them luck and would be sad to see them liquidate. I really wish them the best but honestly my prediction was not as bad as the Kramer guy (the hyperactive shouty yelling stock guy on some news channel) who was saying that Bear Sterns would not be in trouble telling people they'd be stupid to sell their stock..... the Daily show had a funny little segment about him.
Virgin America gets $100 million from investors:
http://online.wsj.com/article/SB1207962976...=googlenews_wsj
Are those investors sane?
http://online.wsj.com/article/SB1207962976...=googlenews_wsj
Are those investors sane?
