interesting deal, would likestudy the details
http://www.nytimes.com/2012/05/01/business/delta-air-lines-to-buy-refinery.html
what is so interesting about it?
this problably won’t end well for them…oil companies can’t run a refiner properly, what makes an airline any better? I mean, they had trouble hedging their cost, now they turn to being long a refiner, i guess that is interesting…
Hyundai owns some steel mills, which helps them reduce manufacturing costs. It’s a good hedge - if prices of the commodity go up or down, one part of the business loses money but the other part makes money.
Korean conglomerates are a different story…they own everything and everyone…korea capital culture is basically a few top guys own everything and they all have cross holdings…
I didnt think this stuff would be allowed, I dont’ think you can own the stuff upstream and downstream of your product. Otherwise Airlines could buy up oil E&P firms. Maybe even Royalty trusts/MLPs
thats why its interesting… i want to see the numbers/estimates
just take your average refinery, strip out the 3% margins they get, add it to delta (or subtract from fuel expenses) and add on 5% in operational cost to the refinery and you will have the likely result…
I don’t get it. Refineries are the least profitable part of the oil and gas chain, not to mention they’re buying a NE refinery that has to purchase expensive Brent crude. Now they have to operate the stupid thing (or pay somebody else to do it) and sell the output that they can’t use, which just so happens to most of it!
Another good future biz school case study.
They should just buy up oil assets instead?
they should hedge their exposure and focus on operation efficiencies and running an airline…