Delta Buys Oil Refinery

[Ansett]

Delta airlines to buy refinery to fight fluctuating fuel prices

Now that makes sense. Wonder if it would be viable for QF to buy Caltex and have cheap and stable fuel prices and sell to other airlines and make money. Qantas Diversification the name of the game.

 

[Justchecking]

Yes. Then they could rebrand Caltex as QFF Service Stations and people could earn extra bonus points when they fill up, WP status would be recognised with a J class only toilet on site, and complimentary lounge access in case you have to wait to pay... Oh wait! They're an airline and their business isn't actually in fuel. Sure Delta might now control a refinery but do they control the price of crude? No...ok then. I guess they've bought themselves another business to manage in which they may or may not have expertise. I wonder if they are now also going to acquire an aircraft manufacturer, an airline interior fitout's organisation and a sweat shop in China for making uniforms. I guess if you take this line of thinking further money could be saved everywhere by being an end to end airline operation...:shock:

 

[markis10]

Sure Delta might now control a refinery but do they control the price of crude? No...ok then. I guess they've bought themselves nothing.

Refiners control the cost of the end product - hence the phrase refinery gate pricing, hardly nothing. To quote Deltas CEO:

Jet fuel is the refinery product that garners the fattest profit margin, "and they're taking it from airlines," Delta CEO Richard Anderson said.

 

[SeaWolf]

I can kind of see the logic here. They wouldn't be the only business that has gone for very high levels of vertical integration. McDonalds is an example of another business that does similar. They own a lot of beef farms, abattoirs etc.

 

[markis10]

I can kind of see the logic here. They wouldn't be the only business that has gone for very high levels of vertical integration. McDonalds is an example of another business that does similar. They own a lot of beef farms, abattoirs etc.

I agree, China is doing a lot of this as well, just like Japan has with their tourist industry, control the business input costs by going further down the chain.

 

[Flying Fox]

Good creative thinking.

If they can secure themselves a better fuel price, why not, esp considering QF say that they fuel bill is some $5B pa (IIRC).

If they can sell fuel at a higher price to other airlines or sell excess production etc, they can use this business to bolster profits overall (ie. QFF to QF).

 

[whatmeworry]

From memory, I think half of QF's seat price is now tied to fuel. I don't know what the margin the refiners charge the airlines, but they make about 10% when they sell to motorists.

So if a airline could reduce their cost on fuel by 10% by cutting out the middlemen, well done to them and all the better for us travelers.

 

[el_rooto]

Historically vertical integration doesn't work fantastically. Here is a good opinion piece on the deal:

Delta

Also, haven't refiners been making terrible margins recently?