4Q2011 DOT profit margin

DAL 9.7%
B6 7.3%
AS 6.9%
CO 4.7%
WN 4.0%
US 3.3%
UA -2.7%
AA -13.4%


Cheers
George

The refinery has workers, they are all staying keeping their jobs, Union guys, and they have a TA...

Contrary to what you might hear, refineries aren't that capital intensive to upgrade. What is really killing refineries ironically enough is the crack spread. Most smaller refineries are unable to participate in the commodities markets to secure the crude supply and for a single day the outlay might be in excess of 200M well in advance.

Delta's benefit and what most of the analysts don't get, is that we are already buying the crude supply in the form of hedges. Delta is already participating in the risky side of the refining business...

Then if our hedge worked out we can take delivery = gain.
If our hedge is upside down Delta gains because with lower fuel cost airline profit increases...

Many more levels to that and much more nuanced...

Cheers
George

I'm not sure we would be introducing more jet fuel into the northeast. Aren't we going to use all the fuel we send there? We would have to get the gas from somewhere. My guess is our regular suppliers will start producing other types of fuel in their refineries. If they don't, then yes costs for competitors could be driven lower.

Denny

DAL stock is getting spanked for a "no-growth" Capacity Discipline strategy:

http://dl.dropbox.com/u/25953519/capacity-growth.jpg


Cheers
George

All I want to know is... Do we have flow-back rights at the refinery? Might be a good option for the NYC folks.

I don't see how Delta can make a refinery work.

They don't control the price of the crude oil coming in or the Jet-A going out. The only way they can compete with all the big oil companies is to be able to do it cheaper. I would be amazed if Delta, an airline, can do it cheaper than the experts in the field (Exxon, Conoco, BP, etc) who have been doing it for decades and have the established infrastructure.

Thats why a lot of these small refineries aren't operating. Both crude and Jet-A are commodities. You can't make a profit on the price of either, its solely operating costs. If the refinery isn't as cheap as a refinery elsewhere, its going to lose money and shut down no matter what the demand.

I had no idea the release holder/crossfeed reminder could be used to look at the compass.

Crack spread 20%

User of more fuel than some countries 10%

Hitting enter before doing research. priceless

The fact stands that if Delta does get the refinery up and running and it is successful, that is one more Jet-A producer on the market. There will be more competition and prices will lower because of that, or because of the decreased demand from Delta on the open market.

Either way, the Jet-A price will decrease. If the market responds by producing less Jet-A, I wonder if that will help or hurt Delta. They'll be making a more valuable product (due to the higher price), but also be paying a higher prices for the non-Delta produced Jet-A. My uneducated guess is that it'd reach an equilibrium where their total fuel costs are probably similar to pre-refinery costs.

Posting random numbers without a valuable counter-argument: TOTD.