And this!
Wow, what a week! The Dow Jones industrials dropped 2,271 points during the previous 8 trading days and Wall Street capped it off Friday with a wild session that left stocks with a widely mixed finish. Fifty-two economists surveyed by the Wall Street Journal now expect gross domestic product to contract in the third and fourth quarters of this year as well as the first quarter of 2009. This is the first time that survey forecasts for those periods have turned negative. If those predictions bear out, it would mark the first time US GDP has contracted for three consecutive quarters in more than a half century.
On the upside, U.S. benchmark crude fell almost 10% Friday to close at around $78 per barrel. ALK closed up $4.48 to end the day at $18.80 per share. The stock price ranged from a low of $12.89 to a high of $19.23 today on 1.7 million shares traded (1 million is the recent volume average). Recall that we closed at $18.19 on Monday, October 6, and then followed the broader market down this week along with the rest of the airline industry. So we're basically flat for the week, which is a better finish than our peers and the AMEX Airline Index. The primary reasons for this cited by market watchers are 1) lower oil -- which affected the entire airline industry, and 2) a strong rally in small-cap stocks -- which affected ALK disproportionately more than our large-cap peers. Another factor suspected to have played a role is short sellers covering their positions as the strong recovery in small caps triggered margin calls. Alaska's short interest has been greater than most of our peers lately, and a short squeeze probably added to today's price run up.
So, what does all of this mean for Alaska Airlines? Nervousness in the financial markets has certainly translated into a pull-back on travel. We have seen a slow down in bookings across our network this past week and several of our hotel partners have slashed room rates for our Alaska Vacations packages in an attempt to stimulate demand. While it's too early to draw conclusions, we are understandably more bearish about demand over the coming fall and winter schedule period. At the same time, the Boeing strike has already resulted in two missed deliveries and we expect another four B737-800s to miss their planned delivery dates between now and year-end. Four additional deliveries planned for Q1'09 will slip at least a day-for-a-day as the strike drags on -- impacting our April '09 schedule and possibly also impacting the summer 2009 schedule. As a result, we're having to pull down the schedule further starting October 26th. The following schedule reductions will be loaded into our Reservations system this weekend:
SEA-BOS (second daily trip canceled until spring)
PDX-SJD & PDX-PVR (canceled entirely)
SEA-DEN & SEA-SFO (each being reduced one daily frequency through April)
With all these variables it has been difficult to get final block hours upon which to base our pilot staffing for 2009, however one thing is clear -- the current outlook for block hours is shrinking from the plan we had even 30 days ago and the size of our pilot surplus is growing. That said, we're continuing to work with ALPA on voluntary programs including a reduced bid block program and other creative ways to work down the surplus. It appears certain, however, that even if these programs were wildly successful we will be unable to avoid a furlough under any circumstance given the magnitude of our over-staffing. Let me be clear. We will do everything possible to minimize involuntary furloughs and explore any number of programs to accomplish that goal. What we cannot allow is for endless discussions without closure to hold us hostage to moving forward with a plan to right-size and to do otherwise would be irresponsible. I have been working closely with Gary Beck, Bennie Johnson and Elizabeth Ryan to ensure no stone is left unturned and we'll be quick to action a recall if circumstances change or new voluntary programs come to fruition.
As of now, the early out program has generated interest from 132 pilots. The next step is to finalize paperwork to determine how many will actually go "final," a number which we expect before year-end. In addition, we have 20 pilots who have elected the enhanced leave of absence. Despite speculation that there might be nine furloughs in November, we have not yet issued furlough notice and are hopeful that an involuntary reduction can be avoided through December. Rest assured that all provisions of the CBA will be respected as we work through this process. Finally, I have written to our codeshare partner Korean Airlines advising them that we are in an over-staffed situation and asking for special consideration of Alaska pilots should they have a need for qualified B737 co-pilots. As soon as I have a response I will share it with those who may be interested in working abroad during our downsizing. At this time of uncertainty it is imperative that we communicate often and with specifics. Ask questions, stay informed and I will do my best to keep you up-to-date. Fly safely and have a good week.
Greg
