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Late last week, Frontier Airlines filed for chapter 11 bankruptcy. Unlike some of the recent airline shutdowns, Frontier IS still flying, much like Delta, Northwest, US Airways, and United did earlier this decade. But the real news nugget is Frontier’s stated reason for the timing of their bankruptcy filing. Not fuel prices, or competition. Credit cards.

In making the announcement, Frontier CEO Sean Menke stated that the Denver-based airline “filed for very different reasons than those of other recent carriers.” Indeed, Mr. Menke blamed the airline’s descent into bankruptcy on an “unexpected attempt” by credit card processor First Data “to start withholding significant proceeds received from the sale of Frontier tickets.”

Generally, credit card vendors turn over revenue to airlines from bookings in a matter of days. But in some cases, the companies hold on to a percentage of ticket receipts until customers actually take their flights. These so-called holdback policies vary, usually depending on the financial stability of an airline.

In Frontier’s case, the holdback rate went from 45% to 100%, effective May 1. Ouch.

For travelers, though, there are longer-term implications here: If airlines’ financial viability is a dance on a razor blade, and if accepting credit cards can create a risk of survival, then travelers are likely to see cash-payment incentives (or credit-payment disincentives), going forward.

European airlines have been charging a credit card surtax for some time, to dissuade customers from charging it. And a few months ago in the U.S., discounts were floated as a way of getting customers to pay by cash. And despite the fact that every airline has an affinity credit card that generates points in their loyalty program, Frontier’s bankruptcy is going to put more pressure on airlines to reduce the reliance on credit.

Just watch.

Related:
- Is there a backlash against credit cards brewing among U.S. airlines?
- Skybus shuts down abruptly, third scheduled U.S. airline to fold this week

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Reader Bruce applied for a US Airways Visa card, issued by Bank of America, looking to get the promised 25,000-mile bonus. He got a card that only offered 5,000 bonus miles instead, and he’s not happy.

U.S. Airways is handing out Bank Of America credit card applications that promise 25,000 bonus miles after first purchase, with a $50 annual fee. The problem is that in fact they switch the card when it issued to a lower level card which pays only 5,000 bonus miles after first purchase. Bank of America refuses to refund their fifty dollar annual fee if you use the card one time. But you don’t know about the switch until after the first purchase. This is nothing more then a bait and switch scam.
[…]
I talked to the bank a second time, and was told the following: You did not qualify for a “signature card” so we issued a lower ranked card which only gave you five thousand miles.
[…]
I escalated my complaint about the switch as far as I could go, and was basically told, “Tough.” I have had no response from U.S. Airways as to the problem.

I might also add, that the airline attendants push these applications very hard during the flight saying that they need the fifty dollars they get in order to live. U.S. Air does not pay them enough according to their statements on the flight.

Obviously, I can’t speak to the credit decision, but the bank should have been more forthcoming about the alternate card option. The 5000-mile card is offered alongside the 25000-mile card on the US Airways website, but nothing in the literature suggests that customers will be automatically downgraded if they fail to qualify for the Signature card. Maybe the downgrade was in the fine print of the paper application handed out on board, but I can’t find it online. That needs to be clarified, or the bank and the airline will find a lot more angry customers like Bruce.

Bruce also mentions that, when he received the card in the mail, he wasn’t actually told that the card he received wasn’t the one he applied for. The card featured the US Airways Dividend Miles logo, after all, so the confusion is understandable.

But one thing doesn’t check out here: The Signature card has a pretty steep $90 fee, not $50. Miscommunication? Misprint?

Bottom line: You need to watch the application literature like a hawk, both at the time of application and the time of card receipt. It’s sad, but we live in a “gotcha!” society, and you need to play lawyer before signing your name to anything that involves your finances.

Before you activate a new card and start using it, make sure that the card is actually the one you signed up for. If it’s not, you might politely decline. If you’re not sure, call the bank and double check.

Related:
- Reader mail: What kind of point-earning credit card is best?

Planning to rent a car in Mexico? Better make sure that card isn’t maxed out. Reader Paul writes in:

My wife and I have been to Mexico about a dozen times over the last 10 years, and about half of those times we have rented a car. In recent years I have seen information on various travel sites about the need for Mexican insurance when traveling in Mexico. I thought that this only applied to driving a personal car into Mexico, and not to rental cars; however, three weeks ago I came across a new twist:

Upon picking up a Hertz rental car at the Cancun airport (which, by the way, is the cleanest, friendliest, most efficient, of all Mexican car rental agency locations I have seen!) I was asked if I had insurance. I said, “Yes, I am covered by my VISA card for damage to the rented automobile.” The agent said, “Fine, but do you have Mexican insurance?”

I said, “No.”

Because I declined, the rental agency took a deposit (actually a “hold” placed against my VISA card) for $2,600 (26,000 pesos) to cover any potential damage!!

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Reader Sylvia asks:

I have an American Express blue card, but I want to get a different American Express Card that earns hotel points. Do I have to apply for a new card or can I just convert the card I have to the card that earns points?

Sylvia, I assume you’re thinking about the American Express Starwood or Hilton card. (aff) Unfortunately, in the case of American Express, you’ll need to apply for a new card, and then cancel the old one if you want the bonuses. This was confirmed to me over the phone.

The downside: Your credit score gets knocked a couple points for the new application, and depending on the creditor, the age of the account might get reset. (Older credit accounts are better than newly-established ones, for credit score purposes.) With Amex, they will likely keep your original “Member since…” date printed on the card, and not reset that to the new account’s start date, but you’ll likely get a new account number, which is what matters on your credit report.

If you’re deciding between the two Amex hotel programs, take a close look at the card terms to see which suits you better. Obviously, if you stay at one company’s brands more than the other, that creates an incentive. But if you’re brand-agnostic, the Starwood card may be the pick. The Hilton card is free, but the points aren’t very convertible. The Starwood card costs $45 a year (waived the first year), but the points can transfer to a laundry list of airline programs. So you have the airline backup, in case you decide not to use your Starwood points on hotel stays.

But either way you go, you’re going to have to re-apply.

Related:
- Reader mail: What kind of point-earning credit card is best?
- Use a credit card internationally? The banks owe you a refund.
- Reader mail: How can I upgrade flights using American Express?
- American Express Starwood Card (aff)
- American Express Hilton HHonors Card (aff)

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A short piece in Travel Weekly, the industry trade magazine, points to a potential problem for U.S.-based travelers and consumers:

[Travel industry financial-services bigwig Airlines Reporting Corporation] has been working on an incentive program that would reward travel agencies when corporate travel buyers switch from credit cards to cash when paying for airline tickets.

Under the plan, ARC would pay a rebate to ARC-approved travel agencies and corporate travel departments if they switched air accounts of $1 million or more from credit card to cash payment. The amount of the rebate would be less than the fee the airlines pay to credit card companies.

The plan reflects an ongoing concern among carriers about credit card merchant fees. Airlines see those fees as the next distribution cost that must be tackled, following on travel agent commissions and GDS costs.

Uh oh.

Bottom line: Airlines don’t want you paying with a credit card, since they give a small percentage of each sale to the credit card processing company. Naturally they’d love to keep that money.

Europeans, for example, are already accustomed to this. Take Ryanair, which charges 2.50 euros per flight per passenger if booking with a credit card. That adds up fast. Other airlines have less onerous policies, but there’s still a “convenience fee” added on for using plastic.

But credit cards aren’t just a convenience for shoppers. (And I’m not just talking about earning miles or points.) Credit cards carry important consumer protections that would be lost if airlines and agencies started preferring cash or debit. When there are schedule irregularities or airline bankruptcies, credit card companies can get you your money back. And cards come with insurance coverages that cash never does. (During our honeymoon, my Visa covered all our expenses when a tropical storm delayed our departure by a full day. Try getting that with cash.)

So as a consumer, and as a red-blooded American, I love my plastic. I’m not alone. It may be hard to get Americans to switch to cash, but it sure looks like the airlines are going to try.

Update: The ARC cash “discount” program has been shelved, for now. But the idea remains in circulation, even if this specific proposal didn’t work out at this time. “The airlines’ concerns included technical ones and ‘political issues,’ namely their relationships with credit card companies,” according to TravelWeekly. This is an idea that will come up again. Consider yourself warned.

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Upgraded: Seat pitch regulation?
Chris Elliott notes that European regulators are considering rules to require minimum seat pitch, though it’s not clear what that minimum would be. Some of the ultra-cheapo carriers have legroom below 30″, which is horrendous. (Skybus-esque, for an American equivalent.) The reason for the regulation? Deep vein thrombosis, or DVT, a.k.a “economy class syndrome.” Maybe they should invest in this guy’s airline seat design while they’re at it.

Upgraded: Free wireless calling
Looking to cut down on the cellphone minutes? T-Mobile (aff) customers can sign up to make unlimited free calls with a compatible cellphone, if they’re in range of a T-Mobile wireless HotSpot or if you enable your home or office wireless router to link up with your phone. Brilliant. I’m a T-Mobile wireless customer myself, and I’ve been extremely satisfied with their service, both in terms of their network and their customer service. A few years ago, when wi-fi was less common in hotels, I sometimes traveled with a router and plugged it into the hotel jack, creating my own in-room hotspot. With T-Mobile’s new service, I’d strongly consider carrying a cellphone-linked router with me once again.

Upgraded: Paris Wi-Fi
Another city goes wi-fi. This time, it’s Paris. David Ourisman reports on the new arondissements electroniques.

Upgraded: American Airlines to London… Stansted?!
With open skies a reality between the US and Europe, airlines have been announcing new and expanded routes across the Atlantic. American Airlines announced a route from New York-JFK to London-Stansted, the airport that Ryanair made famous. This is interesting, since it’s the first (corrected below) a major network flight between the US and the more obscure Stansted Airport. (Maxjet and Eos fly there, yes, but American’s use of Stansted is big.)
Update: Joe Brancatelli writes in to point out that American Airlines has actually flown to Stansted in the past, with a Chicago-O’Hare to London-Stansted flight that launched in 1992. So now, with Maxjet and Eos eating American’s premium-cabin lunch on the London route, American makes its (triumphant?) return. Thanks, Joe!

Downgraded: Check-in? (or is that Upgraded?)
Jared Blank picks up on Spanish airline Clickair’s promise to eliminate the need for check-in. No real details, but it reminds me of train service, where you get on and have your ticket punched by the conductor. I’m too tired to figure out how it might work, but first come, first served seating is nothing new, and “shuttle” flights have existed for years, so there’s no reason this couldn’t work on heavily-traveled, high-frequency business routes.

Downgraded: Alitalia
Could Alitalia be downgraded any further? Already plagued by bankruptcy, strikes galore, and general incompetences for years, the Italian flag carrier is killing its frequent flyer program. And from its ashes will be reborn a new program, but you’ll only keep your miles if you fly the airline twice in the first half of 2008. Gary Leff has the story. I share his disdain.

Upgraded, in theory: Designer airlines that may never fly
From a Newsweek article on how the ultra-rich are finding ways to burn through their substantial cash: “Brands like Versace, under new leadership, are moving beyond red-carpet dresses into areas like interior jet and auto design. Last year Donna Karan went a step further, researching the launch of a branded airline.” Donna Karan Airlines?? Would the name of that airline perhaps be DKJFKSFO? DKDFWPHX? Yeah, sure. The ultra-rich don’t fly commercial. Good luck with that venture…

Upgraded: American Express’ Starwood card
I’ve long been a proponent of the Amex credit card that’s linked with the Starwood Hotels program. Several e-mails in my inbox have alerted me to the recently upgraded bonus offer: Get 10,000 bonus points with first purchase, and (here’s the upgrade) 15,000 bonus points for charging $15,000 in the first 6 months. Nice bonus, if you can get it. Click here for the latest bonus offer. (aff)

Upgraded: Boeing’s 787
With much fanfare, Boeing rolled out its first 787 Dreamliner yesterday (on 7/8/07, har har har). The plane has a lot of potential to revolutionize air travel, and I’m excited at the prospect of actually flying in one someday. Sure beats the regional jets I’ve sat in lately… MSNBC’s photo page of the 787 rollout is here.

Speed round of Upgrades and Downgrades
Upgraded: Zeppelins! (Beware if Christopher Walken is on board.)
Downgraded: Airport showers at LAX.
Upgraded, as much as possible: Regional jets.
Upgraded: Latin America; Downgraded: Easter Island.
Downgraded: Traveling bulldogs.
Downgraded: Business class meals at the hands of a NYT food critic. Shocking.

It’s been a tough few weeks, so the posting machine has been running a bit slow. Time to clear some of the backlog:

Survivor: Skybus edition
Jaunted’s Mark Johnson played anthropologist in the airline world last week, doing some participant-observation onboard ultra-cheap negative-frills airline Skybus. The whole saga, with videos and pictures, can be found here. Photo above is Mark’s pic of a $9/hour Skybus flight attendant selling goods (on commission). Ah, the ubiquitous Toblerone, official chocolate of 35,000 feet. But ice wine? And those crew uniforms look remarkably like the folks in those hotels.com TV ads…

Bonus: Skybus is adding three cities to their roster. “Hartford/Springfield” — which is really Westover Metropolitan (CEF), 19 miles from Bradley (BDL). “Jacksonville/Daytona Beach” — which is really St. Augustine/St. John’s County (UST), a whopping 42 air miles from Jacksonville (JAX). And San Diego. Yes, it’s really San Diego. One out of three ain’t bad.

At least he didn’t threaten the flight attendants
The TSA reportedly detained director Mike Figgis for five hours at LAX, after he told security screeners that he was in town to “shoot a pilot.” What, LAX employees never heard the television-industry parlance of “pilot”? UPDATE: This never happened. Mike Figgis himself says it’s BS. But it’s a good story, I tells ya.

Arthur Frommer had better watch out
Latest competitor to Fodor’s, Frommer’s, and Lonely Planet? Borat!

Canadian citizenship for Kip Hawley?
Even though the Canadian government has created their own security lists, Canadian airlines are still using American no-fly lists. Will TSA Director Kip Hawley freedom baggies be far off?

I’d rather pay for my mortgage with miles
Gary Leff wants to pay his mortgage by credit card, so he can earn points. And it will soon be possible, via American Express and a small set of lenders, who take a $395 fee up front. Years ago, I checked out a rental apartment that let you use Visa to pay your rent. (I didn’t rent it.) The apartment sucked, but think of the miles I left on the table!

Villa livin’
Wendy Perrin has written a great guide to finding an affordable villa or vacation home. But the prices she mentions are still not ultra-cheap. I’m already a villa convert: In December 2005, my wife and I rented a small beachfront house in Anguilla. The house had its own pool, looked across the strait to the beautiful, mountainous island of St. Martin (or St. Maarten, if you prefer), and cost a little over $200 per night. It had no butler service, and, while comfortable, it wasn’t “luxury,” but it was amazing value.

Spend green to go green?
The city of Denver wants passengers to buy carbon offsets when they fly out of DEN. They’re setting up kiosks that let you buy offsets just like you might buy that Mutual of Omaha travel insurance. At the same time, Republican Congressmen are, perhaps ironically, championing a greater role for the federal government: regulating carbon offsets. Might not be a bad idea. I’m all for supporting the environment, but I’m suspicious of the offset idea. This skeptical op-ed in the Times of London doesn’t help.

Explosive curry
Explosive curry damages a Boeing 747. Say no more.

Boxers = Boeing, briefs = Airbus
Great moments in headline writing: “Hong Kong tycoon buys B787 jet after seeing passenger in underpants.”

Yes, that hamster is happy to see you
Jetlagged? Try popping a Viagra. After all, it works for hamsters!

Downgraded: Presidential security
The Secret Service is overburdened. So they’re bringing in the TSA! If presidential candidates look like they haven’t washed their hair, because their shampoo was confiscated, this will be why. God help us all.

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Reader VJ writes:

I’ve heard that there is an American Express card that automatically lets you upgrade your flights on a bunch of airlines. Is this true? How do I get such a card, and what does it cost? I couldn’t find anything on the American Express website.

Such a card indeed exists, but you won’t find an application anywhere on the American Express website. The card you’re looking for is the Centurion Card, also known as the black card.

The black is the ultimate bling credit card. It offers an unlimited credit limit and promises all sorts of “concierge” services and perks, such as personal shoppers at luxury retailers. It’s not even made of plastic anymore: it’s made of titanium. Seriously. Other banks might offer a “titanium” card like they offer a “gold” or “platinum” card. This is really made of metal.

Membership qualifications vary by country, but you’ve got to be a big spender, reportedly as high as $250,000 charged in a single year. You don’t apply: They invite. And it comes at a stiff price: The annual fee is $2500 (for U.S. cardholders; more in some countries, less in others). Not to mention the initiation fee, reportedly at $5000.

So why would anyone spend that kind of money to have a credit card?

To show off, mostly. But the upgrades you mention might be a reason.

For several years, American Centurion holders received mid-tier elite status in several airlines: (more…)

For years, banks quietly tacked on additional fees when travelers used their credit cards outside their home country. The fees were hidden, incorporated into the exchange rates, so the markup was hard to detect. The courts have spoken. Now, it’s time to get some of that money back.

Thanks to a class action lawsuit, you may be eligible for refunds of foreign credit card transaction fees for purchases and ATM withdrawals made abroad (including online) between February 1, 1996 and November 8, 2006. If the charge hit your account as a foreign currency, it’s eligible. How much can you expect?

Actual refunds will depend upon final approval by the court, and on the number of valid claims filed. Final approval is scheduled for Nov. 7 in New York. Plaintiff’s attorney Bonny Sweeney of San Diego tells me the refunds could range from 1% to 3% of your total transactions — or possibly more. “It will depend on the number of claims, when you used the card, and which credit card you used because the fees were different at different times,” Sweeney explained by telephone.

To get the refund, you’ll need to visit ccfsettlement.com and enter your information. That means you’ll need to pull out old credit card statements. (How many of us actually keep our credit card statements for ten years?! My wife mocks me for keeping ours for five or six years… I guess this is come-uppance.)

The practice of charging additional fees continues, but banks issuing cards in the United States are currently required to state the additional charge explicitly, as a separate line item on your statement. It’s just out in the open.

Not all cards are the same, so if you travel internationally a bit, try to find a card that minimizes the surcharge. For example, CapitalOne apparently doesn’t tack on extra fees besides the 1% that Visa International imposes. Most credit union-issued cards don’t add their own fees, either. This information is all in the cardholder agreement’s fine print, so be sure to read that carefully when you travel.

A good lay of the land of the foreign currency transaction fee issue can be found here.

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(via David Rowell)

Three offers that might help you if you’re looking to beef up your frequent flyer account.

(Don’t forget to spend some of those miles, too, you know… They don’t earn interest!)

1) Delta
Airlines have a bajillion partners through whom you can earn miles, and Delta is adding an incentive for you to spend your cash with Delta partners. Register here. Then, through May 31, you’ll get 5000 bonus miles for every set of 5 Delta SkyMiles partners you transact with, up to a 25,000-mile bonus.

2) US Airways
Reader Matthew points to this promo from online bank Netbank for new customers opening accounts:

4000 Dividend miles for opening a netbank checking account and keeping a minimum average daily balance of $500 USD for 1 month. Miles arrive 4-6 weeks after this. They have a similar promotion for their CD and money market products, but each requires more cash. Offers CAN be used in combination for a total of up to 13,000 miles. Not sure if miles arrive in lump sum or if they’re given over time.

Miles are not elite-qualifying, so you won’t hit Gold or Chairman’s Preferred any faster this way. But they’re still redeemable miles. (Thanks Matthew!)

3) United
This isn’t a new offer. In fact, it dates back to October. But I get asked about this semi-regularly, and the fact that it’s still ongoing amazes me. Chase is still offering the United Mileage Plus Visa with no annual fee for the first year, and with a whopping 25,000 bonus miles. If you’re looking for a Visa for your business, they have a 1-year no-fee card with 25,000 bonus miles for commercial accounts, too. See here for the latter card. Previously posted here in slightly greater detail.

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Upgraded: American Airlines’ fleet
American is boosting its delivery schedule of Boeing 737-800s, to replace the aging, gas-guzzling McDonnell Douglas MD-80s that make up half their fleet. The new planes will burn 25% less fuel.

Downgraded: Cash on Frontier Airlines
Frontier will no longer accept cash for onboard payments, beginning April 1. They join other airlines like ATA and Spirit in going cashless. Cash may be downgraded, but overall, and many will miss the choice of cash or plastic, but as an aficionado of credit cards (more miles! receipts!) this is fine with me.

Upgraded: European airline merger fever!
The open skies treaty’s passage on the European side of the Atlantic is sparking chatter of mergers and acquisitions. British Airways has expressed interest in bmi, Lufthansa is peeking around Iberia, bmi, and Alitalia, and Virgin Atlantic has supposedly been poking around the continent’s airlines as well. No trans-Atlantic mergers rumored quite yet.

Upgraded: Lufthansa lounges
Lufthansa is spending $130 million worldwide to upgrade its airport lounges, which are already pretty decent. U.S. airlines’ lounges, already a sad also-ran in the global lounge wars, will seem even more outdated and under-serviced.

Downgraded: Singapore Airlines’ frequent flyer program
It’s not just U.S.-based carriers who seem hell-bent on reducing benefits for their frequent flyers. The Global Traveller bemoans the latest changes in Singapore Airlines’ KrisFlyer program.

Upgraded: Luxury hotel brands’ geographic reach
Looking for a Ritz-Carlton or other high-end hotel? It’s getting easier. The luxe chains are spreading to second- and third-tier cities.

Upgraded: Regulation
Travel companies, from cruise ships to airlines, haven’t done a sufficiently good job of self-regulating, so here come the regulators! Beyond the PBOR, we’re seeing moves toward regulating the cruise industry as well as airlines. The pressure to re-regulate is snowballing.

Upgraded: Your stinky wardrobe
Brilliant! A charcoal garment bag that deodorizes your stinky clothes. (Via Dethroner)

Upgraded: Airport bathrooms
Coming soon to Raleigh-Durham Airport: Better bathrooms! Wider/longer stalls let you keep your stuff in sight. But this has me scratching my head: “Tilted mirrors will be placed above the urinals so men can keep an eye on computer cases even as they’re going about their business.” Won’t these mirrors provide others with a great show, too? I’ll settle for cleaner bathrooms, as a start.

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Buying anything on board domestic U.S. flights tends to involve an announcement of the mantra that flight attendants would appreciate exact change. With a few important exceptions, most American carriers stubbornly refuse to accept credit cards in flight.

Now, those exceptions that DO accept credit cards are increasingly going the other direction: Credit only, no cash.

ATA switched to all-credit for onboard purchases last year, and now Hawaiian Airlines is following suit.

American Airlines appears to be the most flexible: accepting both cash and credit at this point.

I prefer having the choice of cash and credit, but honestly, I’ll take credit over cash any day, if only for the receipt (and the miles…)

Related:
- American Airlines now accepts credit cards onboard