Delta into (and out of?) refinery business
Apr 7, 2012, 9:21 am
#47
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<lol>
Bob H
Apr 7, 2012, 9:22 am
#48
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On the bright side, maybe running a refinery would take up so much management time that they would be distracted from their usual attention to screwing up Sky Miles.
And we could get a change in Anderson's pre-flight PR video... "Each day, I get to sit behind the desk of E. W. Marland..."
Apr 7, 2012, 8:08 pm
#50
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Apr 7, 2012, 8:53 pm
#51
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It shouldn't matter at all. If DL buys a refinery, that refinery becomes part of its operations and costs and revenues from it flow directly to the income statement. If the spread is really high, then DL would essentially suck profits out of the refining division to subsidize the airline. They would achieve the same financial results as selling jet fuel on the open market from the refinery and buying it at the same rate for the airline. The ONLY way it makes sense is if there is some synergy that would allow them to operate the refinery more efficiently than others in the market, thereby increasing their "crack spread". To me, I just don't see how operating an airline qualifies anyone to run a refinery.
It is a cheaper way to hedge.
Apr 12, 2012, 10:27 am
#52
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Forbes chimes in:
http://www.forbes.com/sites/stevesch...pmorgans-help/
BTW... if DL management is still breathing a sigh of relief due to having their FA union problems behind them, wait until they start dealing with the USW in a refinery context. They may get some concessions early on, in return for saving the refinery... but longer-term paybacks may be a PITA.
http://www.forbes.com/sites/stevesch...pmorgans-help/
BTW... if DL management is still breathing a sigh of relief due to having their FA union problems behind them, wait until they start dealing with the USW in a refinery context. They may get some concessions early on, in return for saving the refinery... but longer-term paybacks may be a PITA.
Apr 13, 2012, 6:07 am
#53
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Delta’s Oil Refinery Deal
Apr 13, 2012, 7:51 am
#55
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Apr 13, 2012, 8:35 am
#57
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Although the deal is not with Goldman Sachs, JP Morgan is obviously viewing DL as a muppet. At least somebody will make money off the deal but it certainly will not be Delta.
Apr 13, 2012, 9:37 am
#58
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Apr 13, 2012, 2:42 pm
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What bothers me is that the high oil prices we are seeing which the airlines are complaining about aren't because of lack of supply. It is because of things just like the inactive Conoco refining facility and the lack of a true policy by the government and to interfere in businesses and in new oil rigs and the like and refusing to build out new pipelines and other infrastructure needed. [snip]
It is an east coast refinery and is geographically located well for Delta. But we have a government that REFUSES to implement things like the Keystone Pipeline.
The question for Delta is can they make it work for them to reduce their existing fuel costs. Refineries turn raw fuel stock into finished materials.
And fuel comes from various locations but is cheaper and more efficient to pipe in.
It is an east coast refinery and is geographically located well for Delta. But we have a government that REFUSES to implement things like the Keystone Pipeline.
The question for Delta is can they make it work for them to reduce their existing fuel costs. Refineries turn raw fuel stock into finished materials.
And fuel comes from various locations but is cheaper and more efficient to pipe in.
One thing that is definite is folks in Northern border states that get their natural gas from Canada will get socked with higher natural gas prices. Oil sand processing uses a tremendous amounts of natural gas. That pipeline will pull billions of cubic ft of natural gas off the export market. That has real effects on heating and electrical production in the United States. Both of which Xcel energy is a major player in domestically. One has to ask will Xcel be laughing their way to the bank when the deal gets done (at the expense of consumer and US industry)?
We have more oil in North Dakota than we can transport today. One has to ask if the reason we don't hear nearly as much about that problem?
Delta is making an interesting gamble. It could be because of the junk credit status, but one has to wonder why JP Morgan would get into this as the money man.