To a large degree, we have an analyst - Ray Neidl of Calyon Securities - and a credit card transaction processor - First Data - to thank for the plunge in the stock price. A few days ago, Neidl commented that, in his opinion, neither Frontier Airlines nor Air Tran had the cash reserves to operate beyond another year if fuel prices and the weak economy continued to besiege airlines. Shortly thereafter, First Data began to withhold money it normally forwarded to Frontier Airlines, since First Data did not want to be left unprotected and holding the bag for ticket refunds if Frontier folded. That move insured that Frontier did not have the cash to keep going and forced Frontier into bankruptcy. The fear is that a similar move by a transaction processor for Air Tran could have the same result. It would guarantee that Air Tran would be cash starved. This move by First Data is a great example of a self-fulfilling prophecy. Air Tran is a well run airline, but people like Ray Neidl of Calyon and outfits like First Data could bring it to ruin. It makes me angry. I am continuing to hold shares, although I have reduced my holdings over the past few months.
Many of the company failures, such as Thornburg Mortgage, are the result of creditors demanding cash or withholding funds from companies in order to cover their bottom line on more risky investments elsewhere.FuskieWho honestly doesn't expect to see any airlines recovering in his lifetime...
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