DENVER, Colo. – Unprecedented oil prices were cited as a key factor in last week’s Chapter 11 bankruptcy protection filing by Denver-based discount airline Frontier.
While Frontier is continuing to operate under Chapter 11 protection, four other airlines declared bankruptcy in recent weeks. Aloha, ATA, Skybus and Hong Kong-based Oasis have ceased service.
Although Chapter 11 suggests cash flow problems that are fixable, there was understandable concern in ski towns of the Rocky Mountains. Frontier’s new Lynx Aviation division is to begin flights from Denver International to Durango and then Aspen next week, followed in May by Jackson Hole. Frontier representatives said the bankruptcy filing will not affect the ski town flights.
Frontier’s problems had been months, probably years in the making. There were some unprofitable routes to Mexico. More recently, oil prices surged to $110 a barrel, more than triple the cost of only two years ago.
Sean Mencke, the president and chief executive of Frontier, seemed to be alluding to these background problems when he announced the flights to the ski valleys in February.
"People have been asking if this is the right time to start a project like this," he said then. "To me, it's the perfect time. We can move into markets with less competition and have more opportunity to feed connecting traffic through our hub — all with a very fuel-efficient aircraft that burns 30 per cent less fuel than a comparably sized regional jet. We believe Lynx will be a critical component as we focus on the long-term profitability of this company."
What tripped the company into the bankruptcy was what seems like a panicky demand from a credit-card processor. The company, worried about getting stung, wanted more rapid payment of money from transactions. Ironically, the demand may have had the opposite effect of what was intended, resulting in the bankruptcy filing.
Just days before the filing, one of Frontier’s Bombardier Q400 turboprops flew a trial route from Denver to Aspen. The plane accommodates 74 passengers. The Aspen Times noted that the test plane passed a jet from United Express on the way to Aspen — an unintended symbolic act.
Certainly, higher fuel prices have not stopped tourism and investment in vacation homes in mountain towns. But even those resorts that cater to the most wealthy people have price thresholds. Some of the talk in Aspen in recent months had been about how the new Lynx flights could force competing airlines to drop their costs. Even rich people take note of “sale” signs.
Will higher oil prices eventually affect the tourism and real-estate development of mountain towns? That’s the $110-per-barrel question.