"Sell cheap fuel and profit- Delta Air Lines refining 101"--article

[N1atEcon]

could

Keep trying to spin it GL. If DAL was to sell deep fat fried turds on a stick for $5.99 you would be the first to eat one and tell us how yummy they are.

 

[General Lee]

I saw that part Gen.

The problem is you're almost 1 Billion in the hole. So even if you do realize a 100 million dollar savings per year....that's still ten years from NOW to make your first dollar. Not looking like a very good investment.

Huh? A billion in the hole? Where does it say that? It cost the same amount as buying a new 777 (stated by RA---what is that? $250 million?), there was a State credit of $30 million to get it running, and then Sandy interruptions, but that certainly doesn't equal close to $1 billion. Show me those numbers. And, most analysts seem to really like the idea, and those guys at CNBC really like it. That guy "Najarian" thinks RA is a genius. But, you and N1atEcon do not..... Oh..Kay.....



Bye Bye---General Lee

 

[General Lee]

Keep trying to spin it GL. If DAL was to sell deep fat fried turds on a stick for $5.99 you would be the first to eat one and tell us how yummy they are.

As I stated above, plenty of people like the idea, and the ones that do not probably don't really understand it. Buying the refinery could be beneficial two ways, for the refinery itself, or for the airline. Either way, it's a win, and as that Najarian guy on CNBC stated, the middleman on Delta's largest expense (gas) is GONE...

So, are you going to buy the deep fried turd? It might be at the LBB airport. Go check it out.


Bye Bye---General Lee

 

[nwaf16dude]

I saw that part Gen.

The problem is you're almost 1 Billion in the hole. So even if you do realize a 100 million dollar savings per year....that's still ten years from NOW to make your first dollar. Not looking like a very good investment.

Purchase and upgrades were about 250 million. Losses thus far around 100 mill. Hardly equal "almost a billion." Significant reduction in spot jet prices in the NE arguably attributed to trainer. Delta is driving the price down, so oil traders hate us, but "outside the oil box" thinkers think its brilliant. Jury is out. I'm not cheerleader, but I'm optimistic.

 

[waveflyer]

Why are you guys arguing about this?

I guarantee you every airline is watching this. If its a big winner, it'll get copied where it can, if it isn't- it won't. Delta shouldn't be hammered for taking the risk and seeing if it works.

 

[CFIT]

What does it tell you when an oil company sells a refinery because it wasn't making money?

Time will tell?

 

[General Lee]

What does it tell you when an oil company sells a refinery because it wasn't making money?

Time will tell?

You are obviously smarter than DL's management, and most of the CNBC analysts. You're FANTASTIC.


Bye Bye---General Lee

 

[Quack]

What does it tell you when an oil company sells a refinery because it wasn't making money?

Time will tell?

Time will tell; however, the difference between Delta and an oil company, is that an oil company is in business to make money and drive profits. Even though Delta owns the refinery, their underlying goal for the move was to reduce the cost of JetA, not to be a player in the oil industry. It's Risk vs Reward....no different when the folks at SWA out-thought the legacies and purchased huge fuel hedges that saved millions and millions of dollars for them. Time will tell, and hope for the industry's sake they get it right. Eliminating the middle men completely would help all of our airlines...

 

[jynxyjericho]

Time will tell; however, the difference between Delta and an oil company, is that an oil company is in business to make money and drive profits. Even though Delta owns the refinery, their underlying goal for the move was to reduce the cost of JetA, not to be a player in the oil industry. It's Risk vs Reward....no different when the folks at SWA out-thought the legacies and purchased huge fuel hedges that saved millions and millions of dollars for them. Time will tell, and hope for the industry's sake they get it right. Eliminating the middle men completely would help all of our airlines...

Vertical integration hu?

I don't want the wrath of Jenny Lee, but with stave off of peak oil for another decade or, does it feel like Delta is tripping over a dollar to save a penny by buying this oil refinery? Watch, oil will get so low 50 seaters will make a comeback. bleh.

 

[General Lee]

Vertical integration hu?

I don't want the wrath of Jenny Lee, but with stave off of peak oil for another decade or, does it feel like Delta is tripping over a dollar to save a penny by buying this oil refinery? Watch, oil will get so low 50 seaters will make a comeback. bleh.

Another good reason for the last contract to pass. A max number of 50 seaters allowed, 125. Even if oil prices were cut in half, only 125 allowed. (215 fewer than today)


Bye Bye---General Lee

 

[jynxyjericho]

Another good reason for the last contract to pass. A max number of 50 seaters allowed, 125. Even if oil prices were cut in half, only 125 allowed. (215 fewer than today)


Bye Bye---General Lee

Well there are other airlines Lee, I know that's strange to hear. 50 seaters can easily make a comeback at the other airlines with another 215 sitting mothballed. However, say the devil's name and he will appear. Never mind all that.

Like I say, my point was simply I'm worried that Delta is tripping over a dollar to save a penny, but I hope not for Delta's sake.

 

[BILL LUMBERG]

Shut up GL..

Quit pumping the last LA game

 

[scoreboardII]

Just wondering, does Coke own any part of Alcoa? Does Ford own any part of US Steel? I wonder why...

 

[redflyer65]

Just saw a memo where SW is considering a move to manufacture tires. Should be interesting.

 

[jynxyjericho]

God, who knows, maybe the airline will go back to owning everything instead of going "virtual". Well whenever they do, some young exec will sell it all off, reward the investors, burn the stock down, and get paid tens of millions while we go into bankruptcy again.

 

[KarmaPolice]

Just wondering, does Coke own any part of Alcoa? Does Ford own any part of US Steel? I wonder why...

Bad metaphor. Aluminum's price hasn't fluctuated as much as oil. Aluminum isn't the biggest cost to Coca Cola, just as steel isn't to Ford. Alcoa and US Steel are monster multinational corporations. Owning a piece of either wouldn't do Jack **** to the prices anyway.

It may turn out to be a bad move on Delta's part, but your 5th grade logic is pretty weak, and missing the point entirely. Academy grad?

 

[Quack]

Vertical integration hu?

I don't want the wrath of Jenny Lee, but with stave off of peak oil for another decade or, does it feel like Delta is tripping over a dollar to save a penny by buying this oil refinery? Watch, oil will get so low 50 seaters will make a comeback. bleh.

Vertical Integration? It's not as if they're selling the farm to get into the oil industry...simply a tactical move to help control appx 35% of they're overall costs. Easy to sit and monday quarterback the move, but at least they're trying to adapt a business model to fit the needs of the company. Do you really think that if airlines owned refineries that a barrel of oil cost would drop that much? No doubt it would drop, but I think you're exaggerating a little much. Besides, maybe then it wouldn't cost me $100 to fill up at the pump...

 

[Andy]

Sorry for the thread revival; I've been on vacation with family for a few weeks. Vacations away from work and work topics are a good thing.

Delta's Trainer refinery has been a success in reducing the JetA crack spread. A 'normal' refinery produces ~9% JetA as its final product. Delta was looking for mid-30s JetA for its final product; I've read it's 'only' running in the high 20s. Frankly, that's a huge success in reducing JetA crack spreads. The much higher percentage of JetA production vs other oil based products cannot be understated. This is a huge benefit for all airlines.

The problem with Delta being the only airline with a refinery is that all airlines (especially those that have large presence in the vicinity of Trainer - JetBlue, Yonited, US Scareways, American) benefit from the reduced crack spread. So to measure Trainer's performance by traditional profit/loss metrics is a bit flawed.
Bottom line: on paper, Trainer may appear to be a money loser, but the reduction of JetA crack spread will likely make it a moneymaker for Delta. For the rest of the airlines, they will freeride off of Delta's refinery investment.

It may turn out to be a bad move on Delta's part, but your 5th grade logic is pretty weak, and missing the point entirely. Academy grad?

Ouch. I resemble that remark. In my defense, I was trained, not educated at the Blue Zoo.
However, I was an econ major who had the audacity to challenge my instructors on the concept that running deficits was a good thing ... I countered with that was simply pulling demand forward. That, and my slothlike behavior, resulted in a GPA somewhere around 2.4. If the minimum wasn't good enough, it wouldn't be the minimum.

 

[scoreboardII]

Bad metaphor. Aluminum's price hasn't fluctuated as much as oil. Aluminum isn't the biggest cost to Coca Cola, just as steel isn't to Ford. Alcoa and US Steel are monster multinational corporations. Owning a piece of either wouldn't do Jack **** to the prices anyway.

It may turn out to be a bad move on Delta's part, but your 5th grade logic is pretty weak, and missing the point entirely. Academy grad?

I wasn't making a metaphor, and you might not want to cast to many "5th grader stones" if you don't understand the definition of metaphor. At best, you might consider what I stated a simile, however, since you didn't understand the basis for my question, you would still be wrong.

 

[PBRstreetgang]

Bill,

Getting rid if the middleman will result in more overall profit for DL. I don't know if that means profit at DL or Monroe Energy. Here is an interesting part of the above article:


"Having some say over the price of jet fuel in the region is particularly important for Delta, which has set out on an ambitious growth plan to increase its share of the New York City hub. Delta is the largest buyer of jet fuel in New York, as well as the country as a whole, making up 20 percent of all U.S. purchases, Anderson said.

The company took a $63 million loss from the refinery in the fourth quarter due to slower operations after Hurricane Sandy struck. Sandy's impact continued to be felt in January. But Bastian said earlier this year he expects the plant to turn a profit of $75 million to $100 million in the second quarter."



Bye Bye---General Lee

And they say SGU Kool Aid is potent. You are hitting the Everclear grade Kool Aid with a bowl of OxyContin spiced peanuts, but when you spend your days and nights in your moms basement hunched over a keyboard(or the plastic wife), pounding it like a monkey in a cage, it doesn't really matter.....