We like to think that when we deposit a dollar at the bank, it goes into a big vault and we can pull out that same dollar at any time. But that¿s not how the U.S. banking system works. Banks take that money and invest it to make money themselves, so cash gets spread around. This, naturally, leads to a big risk: What happens if those investments go sour? Well, you¿d be out of luck. You can¿t get your dollar back.

The Federal Reserve doesn¿t like that scenario, so it prohibits banks from putting all the cash it has on deposit on the line. In fact, the Fed forces banks to keep a portion of their assets at the Federal Reserve itself, to make sure that some of your assets won¿t get squandered if the bank¿s bets go south. These are called ¿reserves,¿ (hence, Federal Reserve. Got it? Good), and usually amount to 10% of the total cash kept in checking accounts.

These reserves are never exactly 10%, and banks like to keep a little extra in reserve ¿ not, as you might think, to make you more comfortable that they¿re in good financial shape, but rather so they can take that excess and lend it to other banks and make money off it. (They¿re banks, they can¿t help themselves.) The rate at which they make these loans is called the Federal Funds rate, which is set by the Federal Reserve¿s Federal Open Market Committee.

When you hear people chattering about how the Fed cut or hiked interest rates, this is what they¿re talking about: the interest rate banks can charge for lending money from their reserves. This begs the question: If these are essentially loans between banks, why is the Fed Funds rate so important for the rest of the economy?

Well, simply put, because loans make the financial world go round. Bank A lends Bank B $10,000 at a Fed Funds rate of 5%. Bank B then lends out $10,000 to a small business at 7%. The small business then takes that money and expands the business and hires new workers. Now someone is employed, Bank B has made interest off the loan, and Bank A is the richer for making it all happen. It¿s perhaps overly simplistic, but you get the idea. When you want the economy to thrive, you make lending cheaper.

Of course, sometimes you don¿t want the economy to thrive. In fact, you might want it to cool down, mostly to avoid money flooding the system and causing inflation. In that case, the Fed raises interest rates, making it difficult to lend or borrow.

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Thursday, October 02, 2008

Frontier Airlines Reaches Tentative Long-Term Concession Agreement with Transportation Workers Union Leadership

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DENVER, Oct 02, 2008 /PRNewswire via COMTEX/ ----Frontier Airlines today announced that it has reached a tentative agreement with one of its unions for long-term wage and benefit concessions. Leaders of the Transportation Workers Union (TWU), which represents the airline's dispatchers, agreed to wage and benefit concessions through September 2012. The agreement will be presented for ratification by the union membership and for approval by the court overseeing Frontier's Chapter 11 case.

"I applaud the TWU leadership for recognizing the necessity of these concessions and working cooperatively with us," said Frontier President and CEO Sean Menke. "This is another very important step in our Chapter 11 reorganization process, helping us to meet the cost targets required by our business plan."

"The TWU appreciates the joint effort made in achieving this restructuring agreement," said TWU Local 540 President David Durkin. "We hope that this will be the first step in achieving agreements with the other groups which will allow Frontier to exit bankruptcy as quickly as possible."

Frontier continues to negotiate to obtain long-term concessions from its other two unions: the Frontier Airline Pilots Association, which represents Frontier's pilots, and the International Brotherhood of Teamsters, which represents Frontier's mechanics, tool room employees, aircraft appearance agents and material specialists.

About Frontier Airlines Holdings, Inc.

Frontier Airlines Holdings, Inc. is the parent company of Denver-based Frontier Airlines. Currently in its 15th year of operations, Frontier Airlines is the second-largest jet service carrier at Denver International Airport, employing more than 5,000 aviation professionals. Frontier Airlines' mainline operation has 56 aircraft with one of the youngest Airbus fleets in North America. Frontier Airlines' mainline operations offer 24 channels of DIRECTV(R) service in every seatback along with a comfortable all-coach configuration. In conjunction with a fleet of ten Bombardier Q400 aircraft operated by Lynx Aviation (a subsidiary of Frontier Airlines Holdings, Inc.), Frontier offers routes to more than 50 destinations in the U.S., Mexico, Canada and Costa Rica. In November 2006, Frontier and AirTran announced a first-of-its-kind integrated marketing partnership that offers travelers the ability to reach more than 80 destinations across four countries with low fares aboard two of the youngest fleets in the industry. For more in-depth information on Frontier Airlines, please visit its Web site at http://FrontierAirlines.com.

SOURCE Frontier Airlines Holdings, Inc.

http://www.frontierairlines.com

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