Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Garrett Chase – Barclay’s Capital
Garrett Chase – Barclay’s Capital
If you take literally what you said about the trends progression through the quarter in terms of what happened in September on the volume side, sounds like September was a pretty bad month, probably down double-digit in air, and mid single-digits in ground, is that the case and it feels like the fourth quarter guidance on the domestic volume while its not good, it certainly looks good relative to what that September comment would suggest, can you give a little color there?
Kurt Kuehn
If you look at what we said on our last earnings call, May and June both were fairly sluggish and we saw those two months down a couple of percent, that trend basically continued through July and August and then in September that rate of decline more then doubled and so we did see slower trends especially starting the second and third week of September.
And basically that pace has continued through October so far. The good news is we do see some stability in that but the bad news is it does generate then our best guess of volume growth of 4% for the fourth quarter. Clearly the fourth quarter will be heavily dependent on the Christmas holiday and it anybody’s guess exactly how that comes out, although frankly we do think that people will be conservative this year.
Garrett Chase – Barclay’s Capital
I understand there’s a lag, but the fuel surcharge component is going to come down dramatically as I think you mentioned, what kind of impact do you think that’s going to have? Do you think you’ve seen more of the volume weakness already because the surcharges were so high?
Kurt Kuehn
We’ll certainly the surcharge had a dramatic effect on shipping behavior. We do know that it did cause additional pressure on our premium products and the significant amount of trade down into the deferred and the ground products.
Right now at least fuel has come down dramatically and we’ll see where it goes from here but if the conditions continue we’re hopeful that there’ll be some benefit both on the premium products picking up a little more and also we’ll get some benefit in the fourth quarter from the two-month lag.
Scott Davis
We built our guidance for the oil to be in the mid 80’s, so there’s maybe a little bit of an upside there.
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