From all reports it looks like Delta will be in the oil refining business as soon as next week according to this CNBC report. I blogged about this in my weekly Delta news roundup last week. The refinery in question is located in Trainer Pennsylvania.
This is truly an interesting move by Delta. Airline “people” are not risk averse or they would not be in the airline business. We all know that one of the biggest costs to run an airline is jet fuel. Fuel requirements are more or less a known variable, and every cent up or down in price can make a HUGE impact on profitability for an airline.
So is this a good idea? Time will tell. Delta is right now making money with more earning reports out soon. It is hard to make money in this industry and the margins in the refining business are also very thin and one of the reasons the Trainer facility was shut down last fall but Delta does not need to make as much money on this as a stand alone business since all they want is cheaper Jet Fuel.
Delta expect to save money, as much as 10%, by buying wholesale Jet Fuel by both making it and, in effect, trading the rest of the output from production for more Jet Fuel. Long term Delta’s NYC expansion / domination strategy and now this facility nearby could be brilliant or another way for airlines to lose even more money. The price of crude oil now will impact Delta good or bad even more!
So what do you think. I have set up a poll on the top right of the blog and will have some fun topics now and then where you can weigh in and give your feedback. Do you think it is a good idea for Delta to get into the oil refining business? Yes / No / Don’t know? – René
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