Boeing strike forces Alaska to adjust capacity projections

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After warning yesterday that the Boeing machinist strike could impact its fleet and capacity, Alaska Airlines lowered near-term growth projections.

Delivery of six Boeing 737-800 aircraft scheduled for the fourth quarter is "uncertain and dependent on the duration of the strike. Our capacity expectations are also subject to change based on the timing of these aircraft deliveries," the all-Boeing 737 operator tells the US Securities and Exchange Commission (SEC).

The company expects to trim capacity between 7% and 8% in the fourth quarter, followed by 10% to 12% reductions in the first quarter of 2009.

Previous forecasts projected fourth quarter capacity to decline between 6.5% and 7% and first quarter capacity was expected to drop 10%.

Year-over-year capacity at Alaska is expected drop 8% in 2009.

The Seattle-based carrier holds firm orders for 21 737-800s and has options for 15, according to Flight's ACAS database.

A total 10 are slated to be delivered by April, Alaska VP finance and controller Brandon Pederson said during the Boyd aviation forecast conference on 6 October. He warns that "not having those airplanes would have a significant impact on our business".

Starting on 9 November, Alaska will nix low-demand flights on Saturdays and holidays and trim flights in high frequency markets including the competitive city pairs between Seattle and the San Francisco Bay Area and Seattle and Southern California. Typically one roundtrip a day will be cut on Seattle-California service, the airline says in a statement.

Alaska had built up its Seattle-California connections to maintain pressure on Virgin America, which entered the Seattle-San Francisco market on 18 March and the Seattle-Los Angeles market on 8 April.

In the winter, certain flights between Portland and the San Francisco Bay area will use sister Horizon Air's Bombardier CRJ-700s instead of Alaska's Boeing 737 aircraft.

Alaska is not the only carrier grappling with the Boeing strike as Southwest Airlines warns it is unsure about three 737 deliveries. The Dallas-based carrier already received 26 of 29 Boeing 737-700 aircraft this year.

"[We're] not sure when we'll get the rest because of the strike," Southwest CFO Laura Wright said during the airline's media day last week.

In addition to aircraft delivery concerns, Alaska expects to post a roughly $220 million third quarter mark-to-market loss on the value of its fuel hedging portfolio due to "the significant decline in crude oil prices since the end of the second quarter", the airline tells the SEC. But the company still expects to report a profit during the quarter.