Should you pay more to fly?

Frontier Airlines' parent company has filed for Chapter 11 bankruptcy protection. The Denver-based, low-cost airline says that, as far as customers and employees are concerned, nothing will change. Bankruptcy will enable the airline to block a credit-card processor from demanding that it keep more cash on hand to cover possible refunds of customer purchases in the event it has to shut down. The airline has about as much debt as it has assets, says Bloomberg News. In a blog post on Monday, we cited a prediction that Frontier was one of the airlines most likely to be next at risk from economic pressures. The issue of cash came up in the comments on that recent blog post. Here's the skinny: Nationwide, banks are not lending much money to airlines (or to many other businesses) right now. And credit card processors and banks are requiring airlines to have a lot of cash on hand to handle sudden spikes in the cost of doing business, such as jumps in the price of oil or sudden groundings of many of their planes. According to Fox Business, "The average amount of cash on an airline’s balance sheet to cover expenses has risen from a historical level of 12% to more than 30%." A day after our blog post, Scott McCartney, travel editor of the Wall Street Journal, also named Frontier as a shaky airline. How to protect yourself? In the short term, you shouldn't worry about tickets you book on Frontier. But for flights departing this summer? Keep your eye on the news. One interesting idea from AirfareWatchdog is to "buy a back up ticket" that is fully refundable on a rival airline, such as United or Southwest. You'll need to be able to afford to buy two tickets, including an admittedly expensive refundable ticket. But right before your trip is about to depart, when it's clear that Frontier is still OK to fly, you can cancel the refundable fare. You'll probably still save money, because if Frontier collapses, the last-minute fares on United or Southwest could be astronomically higher than the refundable fare you've bought in advance as a hedge. (Update @ 11am ET:) Years ago, when an airline collapsed, other airlines would offer discounted last-minute fares for stranded fliers. But that has not been happening this year. For example, when several airlines collapsed last week, United and American said they would offer last-minute fares to stranded fliers that were below their standard full-fares at the last-minute. But the reality was different: They only handed out a limited supply of those discounted fares, and many people paid through the nose to book flights on those (and other) carriers. EARLIER How to handle upcoming cancellations.

Today, we've blogged about the American Airlines cancellations and the company's explanations. But more cancellations are likely in the months ahead, and not just from American. Through June 30, FAA inspectors will do audits on all U.S. airlines, checking that airplanes are in compliance with a "random sampling" of its rules. Airlines with older planes will be more heavily affected, according to the Associated Press. About a third of our nation's planes are more than 25 years old. In a separate matter, four airlines are being investigated by the FAA for failing to comply with regulations. Fines may be levied when the investigations end a few months from now, according to the New York Times. The FAA is under pressure to step up its surveillance after Congressional testimony uncovered what appears to be lax enforcement. The Transportation Department's inspector general said today that the agency's crackdown is long overdue. What should you do to prepare yourself for possible cancellations? Here are some tips: --If you bought your ticket online, you've probably signed yourself up automatically for updates from your airline. Be sure to check your email before you leave home for the airport. Make sure you're checking the correct email address, too, if you have supplied the airline with an email address for your secondary Webmail service, which you primarily rely on for online purchases and not your most urgent email. --Arrive early for your flight! Even if your flight isn't canceled, there's a danger that your seat may be given away to someone who is being re-accommodated from a flight that has, in fact, been canceled. --Consider signing up for Orbitz's Traveler Update service, in which travelers and experts share the latest news at airports and the best types of responses. (We recently blogged about the service.) --Print out and bring your airline's contract of carriage with you. Or save a copy on your laptop, assuming that you'll be traveling with one. In the case of long, involuntary flight delays and cancellations, you can refer to the airline's own policies to defend yourself: (In some cases, you may need to download free Adobe Acrobat software to be able to read these contracts.) AirTran Contract of Carriage Alaska Airlines Policy American Airlines Conditions of Carriage Continental Airlines Contract of Carriage Delta Airlines Contract of Carriage (subject to change soon, due to possible merger) Frontier Airlines Contract Hawaiian Airlines Contract JetBlue Airways Contract of Carriage Midwest Airlines Contract Northwest Airlines Contract Southwest Airlines Customer Service Agreement Spirit Airlines Contract of Carriage United Airlines Contract of Carriage US Airways Conditions of Contract Virgin America's Cancellation Rules (For more Virgin America policies, call 877-359-8474.)

At a press conference this afternoon, Gerard Arpey, the CEO of American Airlines's parent company AMR, apologized to his customers for the disruptions. American has canceled 922 flights today. "As of this moment, we have 123 aircraft in service, 10 awaiting FAA inspection," said Arpey. "We have had to make adjustments on most of the aircraft [to be in technical compliance with the FAA directive]....But our mechanics never found chafing of wires, which was the core issue. We believe our planes were always being flown safely. But because our planes were not in technical compliance, we had to [ground them]." By Friday night, American plans to have approximately 180 aircraft in service. By Saturday night, all 300 MD-80s are expected to be in service. A reporter asks: Who's fault is it? "It's my fault," says Arpey. "I run the company, so it's my fault...It's a complicated story that can't be reduced to a soundbite...But I take full personal responsibility....Our mechanics are absolutely not to blame....We're one of the few airlines that does all of its maintenance here in the U.S. (instead of outsourcing overseas)....Our mechanics have done exactly what they've been asked to do...We're going to hire a third-party to come in to [make sure our process is sound]." Arpey also said he did not fault the FAA. "The FAA has stepped up surveillance in the past month," says Arpey. "Their audit was something we didn't anticipate a month ago....I think they've always held the airlines to a very high standard. But we set a very high standard ourselves and we work with the FAA in a partnership with the manufacturer. We were the ones who went to the FAA and brought this issue to their attention and to the manufacturer's attention initially." Arpey says, "We're the largest operator of MD-80s in the world. The FAA came to us and Boeing and we came up with a service bulletin to address these issues. When the FAA began inspecting our aircraft, we raised some issues regarding this wire bundle in the wheel wells. The FAA then raised subsequent issues and so [our mechanics had to do the second inspection.]" Will you continue to fly MD-80s? Arpey responds that he has no qualms about the safety of the planes. But they guzzle more fuel than some other airplanes, and that might affect future purchase decisions. "This 38-page air-worthiness directive is quite complicated. The actual configuration in the wheel wells of these planes is different in different planes....In this latest review, in looking at the precise requirements of the FAA, we have brought in a third-party to identify if there have been any process problems. It's not black and white...People working in good faith can come to different conclusions about how to reach safety goals, and in this case, we failed to get it right [in the view of FAA auditors]." UPDATED at 2:37 ET: A reporter from the Washington Post disputes the CEO's claim that the document is 38 pages long, contending that the FAA document is only about 5 pages long, and that the "translation" by AA and Boeing is 38-pages long. The CEO admits that he misspoke and that the reporter is correct. [NOTE: A day earlier, another American Airlines official provided a correct, detailed explanation of the process. See a transcript at the Airline Biz blog. The CEO seems to have merely mispoken. A reporter from CNN asks, If the directive was ambiguous, why didn't you get clear instructions from the FAA first, so as not to have to do it a second time? "That was a failure on my part," says Arpey. "In this second round, there were issues about the direction of clips, the material that protects the wires, and related issues." A reporter asks, Can the traveler feel safe about how American interprets FAA requirements? "Yes, absolutely....We have a team of 1,000 of mechanicals, a robust aviation staff, ... and no one would put an airplane into service that they didn't think wasn't 100% absolutely safe."