What triggered Frontier Airline’s bankruptcy filing?
Question/Comment: I would like to have a better understanding of what triggered Frontier Airline’s bankruptcy filing. How do credit card processors do business? Why would they suddenly change the rules so drastically? Was it a sign of lack of faith in Frontier, or of consumers’ credit, or what?
Paul Solman: I don’t know much about this, but it seems to fit the pattern we’re seeing in so many industries these days: they’re operating close to the bone. First Data, the huge company that processes the ticket sales – which are all by credit card these days – saw that fuel costs were skyrocketing, consumer demand was nose diving, and that similar discount airlines were crashing. So it decided to hold back more of the cash from ticket purchases. Operating with little cash on hand, Frontier suddenly couldn’t make its payments (to suppliers, lenders, whomever) and had to file for bankruptcy protection. A lack of faith indeed.