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DL Refinery article

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General Lee

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Aug 24, 2002
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Delta-owned Trainer refinery posts profit
By Linda Loyd, Inquirer Staff Writer
Wednesday, October 23, 2013

Delta Air Lines said Tuesday its refinery in Trainer, Delaware County, posted a $3 million profit for the three months ended Sept. 30.

It was the first quarterly profit since Delta bought the former ConocoPhillips refinery last year to supply itself with jet fuel.

"We have a tremendous opportunity with the Trainer refinery," Delta CEO Richard Anderson told investors on a conference call discussing third-quarter financial results. "Importantly, the refinery's production has proven to be effective in keeping jet cracks in check, particularly in the New York harbor."

The "crack spread" is the difference between the cost of crude oil and the selling price of jet fuel - it is the price paid to refiners.

Airlines can "hedge" the cost of oil by entering into long-term future contracts. But they cannot hedge the crack spread, or the refiners' profit margin, which fluctuates based on supply, demand, and market trends.

"Our next step is to improve the refinery's profitability through lower-cost domestic crude supply from the Bakken field, increase jet fuel output, and operational initiatives to improve throughput and product mix," Anderson said.




Bye Bye---General Lee
 
Hope it keeps up for you. It just rings of the Pan Am days in buying hotels to offer a more complete service, but in reality coming out of your core competency. Just wondering why Ford or Chevy don't buy oil refineries to fuel the cars they sell.
 
It's not even close to the same as Pan Am buying hotels. Its is more about having some control of a commodity that's is 40% of your operating cost.When you hear upper managers speak of the refinery they almost seem like just coming out even is ok. The crack spread is what they like to talk about.
 
The crack spread is what they like to talk about.
That's because it has the words "crack" and "spread" next to each other. :)

And yes it is even close. It's the exact same concept. If your comment was true, Ford and Chevy would own metal refineries and tire manufactures.

Look, if it's working, be happy, I'm fine, just pointing out that coming off your core competency is a risky proposition, and in the airline world, has not worked.

Even SWA was bit playing fuel futures instead of running an airline.
 
Hope it keeps up for you. It just rings of the Pan Am days in buying hotels to offer a more complete service, but in reality coming out of your core competency. Just wondering why Ford or Chevy don't buy oil refineries to fuel the cars they sell.

Remember, the DL execs aren't running it day to day, rather they have oil people running it. Monroe Energy (Monroe, LA was the old DL headquarters and where DL started. DL actually had yearly shareholder meetings there until the mid 90's) runs it.

Bye Bye---General Lee
 
Just wondering why Ford or Chevy don't buy oil refineries to fuel the cars they sell.

Well, they did once didn't they? I have vague memories of high school history teachers droning on about the "trusts" and the "trust busters". Didn't one of the car manufacturers have oil, rubber, steel, etc. companies under it's umbrella? Maybe that was standard oil I'm thinking of. I can't recall high school course work all that well. I was a bit pre-occupied with...well...other things. ;)
 
Well, they did once didn't they? I have vague memories of high school history teachers droning on about the "trusts" and the "trust busters". Didn't one of the car manufacturers have oil, rubber, steel, etc. companies under it's umbrella? Maybe that was standard oil I'm thinking of. I can't recall high school course work all that well. I was a bit pre-occupied with...well...other things. ;)

Try Sherman Antitrust Act (1890)...
 
Hope it keeps up for you. It just rings of the Pan Am days in buying hotels to offer a more complete service, but in reality coming out of your core competency. Just wondering why Ford or Chevy don't buy oil refineries to fuel the cars they sell.
UAL also did it in the 1980's by buying I believe Hertz and a hotel chain. Didn't they also change their corporate name to reflect this? Score, you are referring to vertical monopoly, this refinery deal is nowhere close.
 
There is significant operating costs associated with running an oil refinery and equipment replacement costs are high, the refining process is very hard and demanding on equipment and it only takes one or two pieces of equipment to malfunction to shut down and stop production either the crude or jet fuel process lines.
 
It seems to be working well now. Time will tell. But with qtrs like the last I think they can handle it. I am sure even though they showed only a 3 million profit, it payed off to the operation far, far greater than just the 3 mil.

Tail
 

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