Delta is trying to buy an oil refinery
04-04-2012 | 04:47 PM
#23
Can't abide NAI
Joined: Jun 2007
Posts: 12,078
Likes: 15
From: Douglas Aerospace post production Flight Test & Work Around Engineering bulletin dissembler
04-04-2012 | 04:55 PM
#24
The Brown Dot +1
Joined: Jun 2009
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From: 777B
You have to understand how energy is bought and sold. Think of it like bringing your own wine to a restaurant and paying a corkage fee. But, your bottle chills in a cellar with 1,000 more bottles of the same vintage. When the Waiter pours your glass, you don't know or care where it came from. But, you know you are getting Jet A, same as you put in.
Oil from this refinery might be put in any jet, refilling a supply in say, Kennedy. Those barrels might actually be replenished in say, LAX. It is easier to transport on paper to where the actual supply is than send the oil to the point of sale.
Energy contracts are commodities contracts. Delta's just getting it's hands on a competitor that it can use to hedge its own crack spread and / or profit by selling refined Jet A. Since hedges don't use real Jet A, this actually has a more linear relationship to Delta's real cash flow.
What I find interesting that it is an example of vertical integration in a Company that's mostly managed the last decade by outsourcing its core operation.
Oil from this refinery might be put in any jet, refilling a supply in say, Kennedy. Those barrels might actually be replenished in say, LAX. It is easier to transport on paper to where the actual supply is than send the oil to the point of sale.
Energy contracts are commodities contracts. Delta's just getting it's hands on a competitor that it can use to hedge its own crack spread and / or profit by selling refined Jet A. Since hedges don't use real Jet A, this actually has a more linear relationship to Delta's real cash flow.
What I find interesting that it is an example of vertical integration in a Company that's mostly managed the last decade by outsourcing its core operation.
We keep having this discussion and IMO, DALPA needs to understand it so they NEVER enable it in the future:
Delta executives consider the core business of Delta to be selling Delta tickets, NOT providing safe air travel.
The codependence of DALPA has let/helped Delta outsource DALPA's core business.
Last edited by scambo1; 04-04-2012 at 05:07 PM.
04-04-2012 | 05:02 PM
#25
Gets Weekends Off
Joined: Jul 2010
Posts: 12,823
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From: window seat
While I think the refined fuel would be sold at full price 100% of the time rather than DAL getting any kind of "discount", the point of that would be when profits from the refining were at their highest, we would take those profits in and that would effectively be our hedge.
04-04-2012 | 06:24 PM
#26
:-)
Joined: Feb 2007
Posts: 7,339
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When I saw this, I immediately thought this would be a scam. Sell fuel at a huge markup to DAL, and they keep the profits for themselves in the holding company. This way they can shift DAL's profits away from the pilot group.
04-05-2012 | 04:47 AM
#28
veut gagner à la loterie
Joined: Apr 2008
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From: Light Chop
With a $12B fuel bill and a $2B pilot bill, I seriously doubt scamming the pilots is a part of this deal.
04-05-2012 | 04:56 AM
#29
The Brown Dot +1
Joined: Jun 2009
Posts: 7,775
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From: 777B
I agree, this refinery thing is a way to hedge fuel in a different way. However, I also think, if it goes through, it could be used as a black hole for money. This is not the reason for buying it, just something done as an afterthought.
04-05-2012 | 05:27 AM
#30
Gets Weekends Off
Joined: Jan 2008
Posts: 4,628
Likes: 15
From: blueJet
Broadway? Really?
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