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Delta into (and out of?) refinery business

Delta into (and out of?) refinery business

Old Apr 3, 12, 7:49 pm
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Delta into (and out of?) refinery business

Could Delta Air Lines make a bid for ConocoPhillips refinery?

http://www.newsworks.org/index.php?o...llips-refinery

http://www.delcotimes.com/articles/2...8261554868.txt

Discuss.

Last edited by 3Cforme; Feb 2, 19 at 5:59 am
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Old Apr 3, 12, 7:54 pm
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Although it may be a significant cost to their business, I imagine the refinery business is not so quick to gain expertise in.
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Old Apr 3, 12, 8:10 pm
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Talk about your vertical integration...
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Old Apr 3, 12, 8:16 pm
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sooo.. the excess gasoline they produce... will be sold? monetize premium? double miles? MQM for gas tank top-up?
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Old Apr 3, 12, 8:20 pm
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People, April Fools day was last Sunday.
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Old Apr 3, 12, 9:56 pm
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Didn't actually click on the links, but assuming it's not an April Fool's day thing - this would be a monumentally terrible idea. Vertical integration only works when you can recognize efficiencies between two units - something that oil refining and air travel would not be able to do. So even if DL could consume jet fuel at cost, they would be sacrificing profits from one division for the benefit of another - a zero sum game. Even the MBA's down there in ATL must realize that...
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Old Apr 3, 12, 10:16 pm
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Originally Posted by azeckel View Post
Didn't actually click on the links, but assuming it's not an April Fool's day thing - this would be a monumentally terrible idea. Vertical integration only works when you can recognize efficiencies between two units - something that oil refining and air travel would not be able to do. So even if DL could consume jet fuel at cost, they would be sacrificing profits from one division for the benefit of another - a zero sum game. Even the MBA's down there in ATL must realize that...
I don't have an MBA, but if it costs $4/gallon to buy on the open/spot market and if costs you $3.50/gal to produce fuel yourself, didn't you just save $.50/gal. Plus you can sell the excess to others at a profit. Sure I can come up with a hundred reasons why it may be a bad idea for DAL to enter this market.
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Old Apr 3, 12, 10:19 pm
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Originally Posted by El Boocho View Post
I don't have an MBA, but if it costs $4/gallon to buy on the open/spot market and if costs you $3.50/gal to produce fuel yourself, didn't you just save $.50/gal. Plus you can sell the excess to others at a profit. Sure I can come up with a hundred reasons why it may be a bad idea for DAL to enter this market.
Sure, the airline division saves $.50/gal, but the refining division loses $.50/gal that it otherwise would have sold on the open market. Zero Sum.
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Old Apr 3, 12, 10:19 pm
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Originally Posted by azeckel View Post
Didn't actually click on the links, but assuming it's not an April Fool's day thing - this would be a monumentally terrible idea. ...
No, it's not an April Fool's joke

Originally Posted by azeckel View Post
...Vertical integration only works when you can recognize efficiencies between two units - something that oil refining and air travel would not be able to do. So even if DL could consume jet fuel at cost, they would be sacrificing profits from one division for the benefit of another - a zero sum game...
Ask someone in an integrated oil company (i.e., with exploration, production, and refining) and you will likely hear that refining is the necessary financial evil. The economics are not there right now. That is why so many refineries are for sale

Originally Posted by azeckel View Post
... Even the MBA's down there in ATL must realize that...
Why would you assume that?

If they have to finance a refinery purchase, do you suppose that baggage fees will go up?
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Old Apr 4, 12, 8:11 am
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I read about this. If this idea is so great, why haven't other airlines already figured this idea out and jumped on the idea?
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Old Apr 4, 12, 8:20 am
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I wonder how the insurance angle would work out for that....
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Old Apr 4, 12, 9:48 am
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Originally Posted by nypdLieu View Post
I read about this. If this idea is so great, why haven't other airlines already figured this idea out and jumped on the idea?
I'm sure there is a minimum scale required before the numbers could work out.

I would seem that Delta doesn't like being the on the customer end of intentionally constrained output
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Old Apr 4, 12, 10:30 am
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Originally Posted by StayingHomeIsBetter View Post
Could Delta Air Lines make a bid for ConocoPhillips refinery?

http://www.newsworks.org/index.php?o...llips-refinery

http://www.delcotimes.com/articles/2...8261554868.txt

Discuss.
"We do not comment on rumor or speculation," said Eric Torbenson of Delta Tuesday.

Guess now we know why they don't comment on the RBMA (or is it RMBA).

Anyways, DAL probably has the means to sustain such an activity because most airlines already trade actively to hedge their position.

The question is do they have the expertise to run the refinery.
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Old Apr 4, 12, 10:30 am
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Originally Posted by mother- View Post
I'm sure there is a minimum scale required before the numbers could work out.

I would seem that Delta doesn't like being the on the customer end of intentionally constrained output
Yeah, it's different when the shoe is on the other foot, isn't it?
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Old Apr 4, 12, 10:32 am
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And a horribly useless thread title. Please fix it.

-RM
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