https://seekingalpha.com/article/4888396?gt=3da88a5cd14c59dd

 

Despite all that’s going on they still seemed pretty bullish at Velvet the other day. They acknowledged United cut back on their growth, but they were sticking with the more conservative 3.4% as planned. Said refinery was going to soften the blow. I think they still anticipate up to 1800 new hires this year.

All subject to change, obviously.

 

Tim is a major Delta fanboy. But, his isn't emotional or starry-eyed and will call a spade a spade. He brings data and common sense to the conversation so that take isn't surprising coming from him.

 

Tim is correct. Delta is in an enviable position with the refinery. It's basically a cheat code along the levels of SWA's fuel hedges way back into the 2000s. At current record crack spreads Monroe will generate over $1B in profits which will go straight to the Delta bottom line

 

How many millions of electrons/pixels have been wasted claiming the refinery purchase was/is the best/worst biz decision Delta ever made?

If nothing else it gives all the critics/admirers something to point at when times are good/bad.

Not a critique of trip’s observation,just a comment on how the pendulum swings on one event.

 

In 2012, Richard Anderson did something no airline CEO had ever done: he bought an oil refinery. The Trainer refinery outside Philadelphia, operated through Monroe Energy, cost Delta $250 million all-in.

The analyst community largely scratched their heads. Competitors did nothing.Thirteen years later, Monroe has quietly become one of the most valuable assets on Delta's balance sheet. The original target was $300 million in annual fuel savings, which technically meant the whole investment paid for itself before the ink was dry.

Over the years Monroe delivered, lowering our average fuel cost every single year it operated. In 2022, when Russia's invasion of Ukraine sent refining margins through the roof, Monroe generated $777 million in operating income in a single year. Against a $250 million investment.

Now the Strait of Hormuz situation is doing it again. Crack spreads are widening, jet fuel is spiking faster than crude, and every carrier without a refinery is eating it raw. United is warning that sustained prices could add $11 billion to its annual fuel bill. American revised its Q1 2026 cost forecast up $400 million. Meanwhile Ed Bastian is out here calling Monroe a "significant hedge" on the refining margin, with Monroe profits expected to start flowing again in Q2.
Cumulative savings are well past $2 billion at this point.

On a $250 million investment!

Southwest's fuel hedging program in the 2000s is the only comparable move in modern airline history, saving them billions while competitors filed for bankruptcy. But Southwest was trading paper contracts with expiration dates. Delta owns the infrastructure. When the hedges roll off, the pipes keep running.

Anderson called it the equivalent of buying one widebody. Turns out it was worth a fleet.

 

What you miss Trip is the decoupling of the old " ways"

Oil is going regional. You live in a nation that is a net producer you'll weather this fine.

You live in a net importing nation i.e. you have no production you're going to get hammered

The game board is changing you should pay attention to that. But if you are invested on our production side you'll do well

Many changes coming. RAND has some great pieces written about that changing paradigm

 

Why are we trying to sell it then?

 

AI much?

[MOD EDIT]

 

It's a common misconception that the US is a net exporter of Oil because the IEA numbers include natural gas liquids.

The US is a net importer of crude oil due to the refinery mismatch. The US produces primarily light sweet oil and it's refineries are configured for heavy sour crude produced in Canada, Mexico, Venezuela and the Middle East.

Refineries configured for Heavy Sour Crude also yield more Diesel and Jet fuel in its finished product mix.