Originally Posted by
lolwut
Without a distribution network, theres no way this Jet A will be used to fuel (many) Delta airplanes.
Delta will still have to use middle men. Buying from different sources across the country/world. So, in essence, this has nothing to do with their airplanes and they're just getting involved in the oil refining business. Doesn't make much sense to me... Delta is an airline, they know about flying airplanes.
Why not just invest in an oil refining company instead of buying an actual refinery and trying to act like you know what you're doing in a completely different industry?
Just like in their heyday, SWA was more of an oil trader that happened to fly airplanes. This could be a very very interesting turn of events in that even though we would be refining the product, it wouldn't necessarily have to be used in our jets, but would instead be used as a similar hedge to what SWA used when they were so successful. We sell the refined product at retail, and buy at wholesale. This has great potential IMHO. And as the CNBC article said, if DAL can gain a consistent .05 per gallon cost advantage over everybody else.. that's HUGE. I actually find this pretty exciting.
Back of the napkin math follows: DAL spent (Adjusted) for fuel in 2011, $11,757 (million). That averaged $3.05/gallon. IF.. DAL were able to save that $.05/gallon that CNBC mentioned, it would only take 6 months in fuel savings to pay for the whole deal. (The $100 million for the refinery + the $90 million for the upgrades) Now.. that does not take into account the day to day operations of the facility, but even if one assumes a $.01/gallon savings with the remaining $.04 going to refinery operations it still seems like a pretty good investment. Any thoughts?