Alaska's 2012 economic forecast: national insecurity, belt-tightening makes leaders cautious.

• Author: West, Gail
• Position: ECONOMY

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What will the Alaska economy look like in 2012? According to a number of business and government leaders, it will look relatively flat with the potential for a few bright spots. If, however, the State moves ahead with one or more of the big projects currently on the horizon, such as the Susitna-Watana Hydroelectric Project, the entire prospect for the economy could begin a decided upsweep and encourage both businesses and residents.

Alaska Business Monthly asked a number of business sector leaders for their take on the economy in 2012, here's what they had to say.

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Steven Hatter

Deputy Commissioner for Aviation

Alaska Department of Transportation & Public Facilities

AIRPORTS

Steven Hatter, deputy commissioner for Aviation in the Alaska Department of Transportation & Public Facilities, said two big national issues face Alaska's airports: bypass mail and essential air service. Both programs are currently facing serious challenges to long-term federal support.

"In this position, I've seen how critical a lifeline aviation is to Alaska," he said. "It's a $3.5 billion industry, and 10 percent of the jobs statewide are aviation related. As for our international airports, Ted Stevens in Anchorage is number five in the world for cargo throughput."

Alaska needs to be prepared to see fewer federal dollars coming in--through the U.S. Department of Transportation and Federal Aviation Administration. Hatter said nothing is firm yet, but it's a strong possibility given the nation's debt crisis.

"We need to spend what we do get as wisely as we can," he added. He went on to say his office is focused on making certain the State is not deferring maintenance to the point an airport would need new infrastructure before it really needs it. In the FY 2012 aviation plan funded by the FAA, the State has netted "about what we averaged over the last three years--at $205 million for capital improvements throughout the state," Hatter said.

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Joy Journeay

Executive Director

Alaska Air Carriers Association

AIR CARRIERS

The Alaska Air Carriers Association echoed Hatter's concerns about bypass mail and essential air service. Joy Journeay, the association's executive director, said the largest potential threat to air carriers statewide is the bypass mail issue. The U.S. Postal Service is the primary beneficiary, she said, "due to the reduced cost in handling parcel post that is directly inducted by the carrier and directly delivered to the customer."

In 2009, Journeay said, the aviation community saw a significant drop in tourism and recreational activities, but cargo and basic passenger travel statistics were slightly less affected by the economy. "Passenger service is a little more stable because aviation transport is the only means of access to 82 percent of Alaska's communities," she said.

Journeay added that her organization is working diligently with all of Alaska's delegation and the governor on parcel post, essential air service and safety issues.

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Margie Brown

President and CEO

Cook Inlet Region Inc.

ALASKA NATIVE CORPORATIONS

Margie Brown, president and CEO for Cook Inlet Region Inc., said there are some common issues facing all the Native corporations. One of those is the role of government in encouraging private development of natural resources. "We'd like to have a consistent timeline for permitting and know what hurdles will have to be overcome to move a project forward," she said.

Another major issue facing most corporations is the continuing challenge to the SBA 8(a) program. Although CIRI isn't heavily dependent on this program, several other corporations are.

One of the biggest issues facing the state is the declining oil flow through the pipeline. "At CIRI, we're watching the state's economic conditions carefully. We need a strong and robust economy for our current investments and for our shareholders," she said. "We know that smaller companies have been doing exploration, but we need the majors to stay and to work on their assets.

Brown added that a significant part of her job, and that of all her counterparts, is to be concerned about the long-term. "The calamity of the financial markets showed me we aren't immune in Alaska. It's critical that we diversify our portfolios." To illustrate, Brown pointed to NANA's acquisition of an oil services company that works in the Gulf of Mexico.

"We're making investments outside of Alaska," she said. "It's one way to diversify and protect ourselves against risk. It also shows that private capital goes where private capital is wanted. It's worrisome that we have private capital dollars leak out of Alaska."

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Doug Longacre

Senior Vice President

First National Bank Alaska

BANKING & FINANCIAL SERVICES

Alaska banker Doug Longacre, a senior vice president at First National Bank Alaska, said he expects to see the economy stay pretty flat unless one of the big projects comes through. "I think banks are a good barometer of the economy, and it's been fairly flat. A lot of people have been taking a 'wait-and-see attitude,'" he added.

"We do have an extraordinary interest-rate environment, one the nation and world hasn't dealt with before," Longacre said. "First National had a good year in 2011, but we're concerned going forward because there is so much relying on the petroleum industry in Alaska. We have a unique economy here, and we need to pay attention to what the drivers are."

One of the biggest issues facing banks today, he said, are the regulations coming from the federal government. "We're still trying to be profitable for our shareholders," he said, "but it's costly to comply with all the regulations handed down."

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