Another Possible Risk Factor for U.S. Airlines: Credit Card Holdbacks
Skift Take
In a typical liquidity crisis, credit card processors might institute holdbacks on airlines, so they wouldn't receive fare revenue until after a consumer flies. But this is no ordinary crisis.
Facing a rough financial situation in 2008, Frontier Airlines wanted to ride out its troubles without filing for bankruptcy. But after its card company processor delayed the period between when Frontier sold tickets and when the airline received money, it gave up, seeking Chapter 11 protection within days. The airline told the court it could not lose access to almost half its revenue for weeks or months.
Since, U.S. airlines haven't faced many credit card holdbacks, though Virgin America was briefly subject to one about five years ago. Most U.S. carriers have been on solid financial footing, allowing the system to work as intended. Usually, consumers buy a ticket and an airline gets paid right away, with the credit card processor assuming travel will take place.
But these are unusual times, and there's some concern that, with airlines burning cash and canceling flights, credit card processors may increase holdbacks on U.S airlines. Instead of giving
