Frontier violated basic escrow rules

When Frontier Airlines declared bankruptcy, it mentioned higher fuel costs, less traffic and that its credit card processor was withholding more money for advanced ticket sales.

It appears that Frontier Airlines, and perhaps other companies, are ignoring the basic rules of accounting. In accounting, whenever a payment is received for future service, the money is to be placed into an escrow account. The money in this escrow account is not available until the sale is completed or for use to compete the specific sale.

Frontier Airlines seems to have violated this accounting rule and used the escrow money for day-to-day expenses.

The credit card processor becomes just another creditor in the bankruptcy proceedings. It is time government and the IRS started to review the accounting and handling of escrow accounts for all businesses so the money is not used for day-to-day expenses.

Jack McCabe

Batavia