On the heels of already-announced cuts in management salaries, it appears that Frontier Airlines is now telling employees that all employees are now looking at a mandatory pay cut through September.

Channel 9 in Denver posted today what it says is an internal employee memo from management at the airline.

In the memo, the airline says cuts in labor costs are necessary because,

“At this critical time when we are trying to secure DIP financing, we must show these potential investors and the creditors’ committee a viable business plan that will allow us to operate in this challenging environment of rising oil costs. They need to see that we are doing everything possible in relation to fuel costs and to improve Frontier Airlines Holdings, Inc. bottom line. Since we have entered bankruptcy, fuel has increased from $107/barrel to over $122/barrel. This represents an annual increase in expenses of nearly 75 million dollars. Unfortunately, these increases are no longer offset by fuel hedges as our hedging agreements became invalid when we entered bankruptcy.

Therefore, we need to make some significant changes to our cost structure in order to achieve a non-fuel cost per available seat mile (CASM) of 5.8 cents. We have aggressively been eliminating non-labor expenses as well as requesting cost reductions from our suppliers and vendors. Unfortunately, we cannot reach our CASM ex fuel goal by only reducing non-labor expenses. As a point of necessity, we are going to have to reduce our labor and benefit expenses very quickly. We recently announced pay cut reductions for the entire Frontier Airlines Holdings, Inc. officer group effective May 1. In addition, We are now asking that all employees also take a pay reduction through September 2008. At that time, we will review our financial situation and the market conditions again. We will also be suspending the 401(k) match for this period of time.”

According to the letter, both the pilots’ union and the dispatchers’ union (FAPA and TWU) have already agreed to concessions. The airline’s flight attendants are not unionized. The airline said that no agreement has been reached with the airline’s mechanics, who are represented by the Teamsters.

Ticker: (Nasdaq:FRNT)

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