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High traffic and strong March sales are not enough to make Frontier Airlines soar. The budget airline, like many others, is filing for bankrupcy--but this time, cautious creditors are thrown in the mix.

On Friday, Frontier Airlines (nasdaq: FRNT - news - people ) announced it filed for Chapter 11 in the U.S. Bankruptcy Court in New York. Frontier is just the latest in an increasingly long line of airlines to see its fortunes decline during the current economic downturn, although the particulars of its case are unique.

Frontier shares plummeted 66.9% on Friday's news, or $1.05, to 52 cents in late-afternoon trading.

Frontier's chief executive Sean Menke said the airline saw record traffic and sales in March, contrary to the trend of decreasing consumer demand seen elsewhere in the industry. He attributes Frontier's lack of liquidity not to surging fuel prices but to its principal credit card processor.

First Data, one of Frontier's creditors, informed the airline it will significantly increase its "holdback" of receipts and proceeds from ticket sales starting April 11, limiting the airline's liquidity. Wells Fargo (nyse: WFC - news - people ) has Frontier's largest general unsecured claim. Susan Stanley, vice president of public relations at Wells Fargo, told Forbes.com that the bank did not have any exposure to the airline but was acting as a trustee for “various securities and other transactions involving Frontier Airlines.” She did not specify the nature of those transactions.

Bankruptcy code dictates that the Denver-based airline's filing forbids First Data from increasing its withholding of funds, securing time for the airline to reorganize its finances while continuing its operations.

Frontier said it would maintain its business throughout the process, including flights, honoring reservations and refunds "as usual," rewards programs, providing employee wages and benefits, and paying its suppliers.

Friday's bankruptcy filing "came as no surprise," said Calyon Securities analyst Ray Neidl, "though it happened more quickly than we expected." Neidl added that tough competition in Denver from United Airlines (nasdaq: UAUA - news - people ) and Southwest Airlines (nyse: LUV - news - people ) will prove the demise of Frontier.

"This is not a troubled airline," countered Michael Boyd, an independent airline industry consultant in Englewood, Colo. Boyd argued that Frontier is a victim of "gossip and innuendo in the media." He explained that credit card companies withhold certain amounts of cash to protect themselves.

Various media outlets predicted that Frontier would file for bankruptcy, causing Wells Fargo and other financial institutions to "get squirrelly about airlines," and increase its holdback, Boyd said. "It's like cutting off an artery to the brain" and "could knock down any airline."

Neidl conceded that Frontier "maintains a very modern fleet," which could be used as collateral during its bankruptcy.

Boyd argued that Frontier's line of aircrafts indicates good management. As fuel prices rose, Frontier sold off aircrafts used in flight routes that were no longer profitable to fly, such as longer flights to destinations such as Guadalajara, Mexico.

Routes with discretionary travelers meant decreased demand and the flights became too expensive to operate, Boyd explained. While other airlines would have held on to those aircraft and tried to find places to fly them, Frontier smartly sold them.

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