Frontier Airlines Holdings, a U.S. low-fare carrier, filed for bankruptcy on Wednesday, citing an unexpected move by a business partner but vowed to continue operating normally.
The company said it sought government protection after its principal credit card processor unexpectedly said it would increase a holdback of customer payments which threatened to have a severe impact on its liquidity.
The company said it would continue operating normally through the reorganization, operating a full schedule.
Shares of Frontier plummeted nearly 73 percent this morning to 44 cents, from $1.57 at the start of trading.
To be clear, we filed for very different reasons than those of other recent carriers, and our customers and employees can be confident that we intend to keep on flying and providing outstanding service and products, said Sean Menke, Frontier President and CEO in a statement.
The company said it has performed well despite the rising cost of jet fuel and impact of the credit crisis in financial market. It noted that it had received record traffic and revenue in March.
The company said that its credit card processor had told the company it would start holding on to more funds on April 11.
The automatic stay provision of the bankruptcy code prohibits the credit card processor from increasing its holdback, and we are prepared to litigate this issue if necessary, the company said.
By filing for Chapter 11, we will now have the time and legal protection necessary to obtain additional financing and enhance our liquidity, the company said.