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URGENT Airline Will File For Bankruptcy Protection

August 27, 1986

DENVER (AP) _ People Express Inc. announced today that it has failed to find a buyer for its Frontier Airlines subsidiary and would file for bankruptcy protection for the troubled carrier.

People Express spokesman Russell Marchetta, confirming reports of an imminent bankruptcy filing, said discussions between People Express and other interested parties ″didn’t pan out.″

He declined to say whether the Newark-based company’s July 10 deal to sell Frontier to United Airlines for $146 million was still on.

Thomas A. Germuska, a United spokesman, said the Chicago-based carrier still has an agreement to buy Frontier but that the agreement would be harder to complete if Frontier is in bankruptcy.

Grounded since Sunday, Frontier has has been losing $1 million a day amid rumors that bankruptcy court loomed as the final option.

Donald C. Burr, chairman of People Express, said Tuesday that the parent company was exploring all alternatives.

The Frontier problem has ballooned into a major crisis at People Express, the discount airline created five years ago, and has complicated its own efforts to stay in business.

In over-the-counter stock trading this morning, People Express plunged 75 cents to $4.25 a share, with more than 357,000 shares traded.

United Airlines agreed last month to buy Frontier, contingent to reaching agreement with Frontier’s five labor unions, but talks between the pilots’ union and United have been fruitless.

Marilyn Mishkin, a spokeswoman for Frontier, said the carrier is losing $1 million a day with its planes out of service.

″That’s what it costs for leases and a whole combination of other things,″ she said. ″Absolutely no revenue is coming in to offset those costs. It’s not a situation that can continue for very long.″

Gov. Richard Lamm on Tuesday telephoned officials at United, Frontier and Air Line Pilots Association urging them to continue trying to resolve the deadlock.

Lamm also offered any services that might help find a solution to prevent bankruptcy proceedings.

″He encouraged them to try and stick with it and get a mutually acceptable agreement that will keep the planes flying,″ said Jennifer Gavin, a spokeswoman for the governor.

Jamie Lindsay, ALPA vice chairman, said he has heard that United and People were close to an agreement at a lower price. United already has paid People Express $58 million for some of Frontier’s assets.

People Express bought Frontier last November for $307 million and reported losses of $10 million a month for the first half of the year.

Mishkin said last Friday’s payroll was met but added that she didn’t know whether Frontier’s 4,700 employees will be paid Sept. 12.

Frontier, formed nearly 40 years ago and based in Denver, served 55 cities, including four in Canada, when it was grounded by People Express. It was the nation’s 15th largest air carrier.

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