Details on Delta TA
01-10-2015, 06:59 PM
#3181
Gets Weekends Off
Joined APC: Jul 2010
Position: window seat
Posts: 12,544
The refinery has lost money almost every quarter since we have owned it. It does no good to save 7 cents a gallon on jet fuel and lose 15 cents a gallon on the other products. There is a reason not a single other airline has followed our example. Between the purchase cost, upgrade costs and ongoing losses were down about a billion dollars.
That does not even get into potential long term environmental obligations.
That does not even get into potential long term environmental obligations.
We would have been hedged anyway, regardless of the refinery.
Yet we still saved that 7 cents and will continue to do so.
And the refinery should lose money. Always and forever. We didn't buy it to "make a profit". By definition any penny of "profit" that it could ever make would come out of the other pocket. Its "profit" or "loss" means absolutely nothing. The only thing that matters is the overall effect to the bottom line. You can't count hedges against it; that's ridiculous.
We have lower refining costs and more control of the supply of a bottlenecked high markup portion of the process. That's exactly what it was designed to do.
As for "long term environmental obligations" maybe you know something no one else does, but for now I'll assume they knew what they were getting into until proven otherwise.
01-10-2015, 07:23 PM
#3182
:-)
Joined APC: Feb 2007
Posts: 7,339
Isn't the refinery "crude neutral" though?
IOW it doesn't matter what crude is or what we gain or lose on hedges as that is separate from the refinery. Its purpose was to reduce the crack spread/refining costs, and nothing crude does effects that. To that end, isn't it still a success?
If lower oil prices result in lower fuel prices, won't that increase demand for fuel? Won't increased fuel demand result in more fuel needing to be refined? So flooding the market with cheap gas means you have to refine more gas. We now own and control that part of the bottleneck, and control it at a huge discount in our favor.
It was never designed to be an "oil hedge" or to "make a profit" it was done to lower risk and insure a reliable cheap supply. Hasn't it done that wonderfully?
IOW it doesn't matter what crude is or what we gain or lose on hedges as that is separate from the refinery. Its purpose was to reduce the crack spread/refining costs, and nothing crude does effects that. To that end, isn't it still a success?
If lower oil prices result in lower fuel prices, won't that increase demand for fuel? Won't increased fuel demand result in more fuel needing to be refined? So flooding the market with cheap gas means you have to refine more gas. We now own and control that part of the bottleneck, and control it at a huge discount in our favor.
It was never designed to be an "oil hedge" or to "make a profit" it was done to lower risk and insure a reliable cheap supply. Hasn't it done that wonderfully?
One interesting tidbit in the 2015 flight plan is Delta is limiting CapEx to $3 billion per year.
01-10-2015, 09:03 PM
#3183
Gets Weekends Off
Joined APC: Feb 2008
Posts: 19,599
Why did we lose 15 cents per gallon? Because of the hedges?
We would have been hedged anyway, regardless of the refinery.
Yet we still saved that 7 cents and will continue to do so.
And the refinery should lose money. Always and forever. We didn't buy it to "make a profit". By definition any penny of "profit" that it could ever make would come out of the other pocket. Its "profit" or "loss" means absolutely nothing. The only thing that matters is the overall effect to the bottom line. You can't count hedges against it; that's ridiculous.
We have lower refining costs and more control of the supply of a bottlenecked high markup portion of the process. That's exactly what it was designed to do.
As for "long term environmental obligations" maybe you know something no one else does, but for now I'll assume they knew what they were getting into until proven otherwise.
We would have been hedged anyway, regardless of the refinery.
Yet we still saved that 7 cents and will continue to do so.
And the refinery should lose money. Always and forever. We didn't buy it to "make a profit". By definition any penny of "profit" that it could ever make would come out of the other pocket. Its "profit" or "loss" means absolutely nothing. The only thing that matters is the overall effect to the bottom line. You can't count hedges against it; that's ridiculous.
We have lower refining costs and more control of the supply of a bottlenecked high markup portion of the process. That's exactly what it was designed to do.
As for "long term environmental obligations" maybe you know something no one else does, but for now I'll assume they knew what they were getting into until proven otherwise.
01-10-2015, 09:06 PM
#3184
Gets Weekends Off
Joined APC: Feb 2008
Posts: 19,599
Isn't the refinery "crude neutral" though?
IOW it doesn't matter what crude is or what we gain or lose on hedges as that is separate from the refinery. Its purpose was to reduce the crack spread/refining costs, and nothing crude does effects that. To that end, isn't it still a success?
If lower oil prices result in lower fuel prices, won't that increase demand for fuel? Won't increased fuel demand result in more fuel needing to be refined? So flooding the market with cheap gas means you have to refine more gas. We now own and control that part of the bottleneck, and control it at a huge discount in our favor.
It was never designed to be an "oil hedge" or to "make a profit" it was done to lower risk and insure a reliable cheap supply. Hasn't it done that wonderfully?
IOW it doesn't matter what crude is or what we gain or lose on hedges as that is separate from the refinery. Its purpose was to reduce the crack spread/refining costs, and nothing crude does effects that. To that end, isn't it still a success?
If lower oil prices result in lower fuel prices, won't that increase demand for fuel? Won't increased fuel demand result in more fuel needing to be refined? So flooding the market with cheap gas means you have to refine more gas. We now own and control that part of the bottleneck, and control it at a huge discount in our favor.
It was never designed to be an "oil hedge" or to "make a profit" it was done to lower risk and insure a reliable cheap supply. Hasn't it done that wonderfully?
01-11-2015, 03:25 AM
#3185
Straight QOL, homie
Joined APC: Feb 2012
Position: Record-Shattering Profit Facilitator
Posts: 4,202
01-11-2015, 04:18 AM
#3186
Gets Weekends Off
Joined APC: Apr 2008
Position: 757/767
Posts: 588
Other products does not mean hedges. Please review how much jet fuel you can get from a barrel of oil. The rest of that barral has to be sold. The refinery has so far done nothing but suck cash and the reduction in jet fuel prices in the NE has carried over to all airlines.
Delta's Traier refinery profit rising; airline stocks soar on falling oil prices
Delta said at an investor conference in New York that its Trainer refinery in Delaware County would produce a $75 million profit in the current quarter, helping to offset losses on the airline's fuel-hedge contracts.
Delta buys some of its fuel in advance, to hedge against higher costs. But when fuel prices dramatically decline, the airline is locked in and takes a hedge loss.
"Roughly half the hedge loss that we experienced this quarter is going to be offset by a profit at the Trainer refinery, as product cracks have held very strong, also attributable to the rapid decline in the crude input cost," chief executive officer Richard Anderson said.
"So we are looking at a hedge loss in the fourth quarter of $150 million, but we will generate a profit of about $75 million at the refinery," Anderson said.
Delta buys some of its fuel in advance, to hedge against higher costs. But when fuel prices dramatically decline, the airline is locked in and takes a hedge loss.
"Roughly half the hedge loss that we experienced this quarter is going to be offset by a profit at the Trainer refinery, as product cracks have held very strong, also attributable to the rapid decline in the crude input cost," chief executive officer Richard Anderson said.
"So we are looking at a hedge loss in the fourth quarter of $150 million, but we will generate a profit of about $75 million at the refinery," Anderson said.
The refinery, operated by Delta subsidiary Monroe Energy L.L.C., posted a $19 million third-quarter profit, a $13 million profit in the second quarter, and a $41 million loss in the first quarter this year.
How Delta Bought a Refinery and Wound Up Saving American and United a Ton of Cash
The profitability of refineries is measured by something called the “crack spread” — the difference between the cost of crude oil and the price of the refined product (in this case, jet fuel). For example, if a barrel of crude oil costs $US100 and the price of a barrel of jet fuel is $US150, the crack spread would be positive 50.
Since Delta bought the refinery in 2012, the crack spread for jet fuel in the U.S. has dropped roughly six points, yielding a savings of $US40 million dollars in fuel costs per point for the airline, Bhaskara told Business Insider. Based on his calculations, this change translates into annual savings upwards of $US240 to $US320 million for Delta alone.
Since Delta bought the refinery in 2012, the crack spread for jet fuel in the U.S. has dropped roughly six points, yielding a savings of $US40 million dollars in fuel costs per point for the airline, Bhaskara told Business Insider. Based on his calculations, this change translates into annual savings upwards of $US240 to $US320 million for Delta alone.
With a fleet of more than 700 aircraft, consisting mainly of older and less fuel-efficient planes, Delta benefits from the acquisition for obvious reasons. Delta’s big competitors, United Airlines and American Airlines, won’t reap the same savings.
But they will still save a lot. Bhaskara estimates that it could run into the hundreds of millions of dollars annually.
But they will still save a lot. Bhaskara estimates that it could run into the hundreds of millions of dollars annually.
Bottom line, Delta seems to be happy with Trainer. I don't see a scenario where Delta's fuel plan reduces profits to zero in 2016. That's not to say profits can't be zero in 2016 (though I wouldn't bet on it), only that it won't be the fuel strategy that does it.
01-11-2015, 05:01 AM
#3187
Gets Weekends Off
Joined APC: Jun 2010
Posts: 852
01-11-2015, 06:29 PM
#3188
Gets Weekends Off
Joined APC: Jun 2009
Posts: 5,113
Our wages are what it costs Delta to fly the leg on a current basis, and our profit-sharing represents deferred compensation for taking the airline through bankruptcy, and the merger. Just like the executives got stock options for being here, which are vested over some period of time.
Why would we be so stupid as to use deferred compensation to fund current wages?
"Monetizing" is what you do when the company is doing poorly, and you need to make a trade. Right now, it's (perversely) being used as an argument for self-funding a well-deserved wage increase.
This questionable argument was used with marginal effectiveness in C2012, but the bitter taste of buying our own increases lingers. I think it's a mistake to assume that people think of their PS as transient, or somehow "not real". Sleight-of-hands with the PS might be a gross miscalculation.
I've noticed a few guys floating trial balloons in the lounge. I deflated one as mercilessly as I could.
Why would we be so stupid as to use deferred compensation to fund current wages?
"Monetizing" is what you do when the company is doing poorly, and you need to make a trade. Right now, it's (perversely) being used as an argument for self-funding a well-deserved wage increase.
This questionable argument was used with marginal effectiveness in C2012, but the bitter taste of buying our own increases lingers. I think it's a mistake to assume that people think of their PS as transient, or somehow "not real". Sleight-of-hands with the PS might be a gross miscalculation.
I've noticed a few guys floating trial balloons in the lounge. I deflated one as mercilessly as I could.
Last edited by Sink r8; 01-11-2015 at 06:40 PM.
01-11-2015, 06:51 PM
#3189
Gets Weekends Off
Thread Starter
Joined APC: Oct 2009
Posts: 3,108
Our wages are what it costs Delta to fly the leg on a current basis, and our profit-sharing represents deferred compensation for taking the airline through bankruptcy, and the merger. Just like the executives got stock options for being here, which are vested over some period of time.
Why would we be so stupid as to use deferred compensation to fund current wages?
"Monetizing" is what you do when the company is doing poorly, and you need to make a trade. Right now, it's (perversely) being used as an argument for self-funding a well-deserved wage increase.
This questionable argument was used with marginal effectiveness in C2012, but the bitter taste of buying our own increases lingers. I think it's a mistake to assume that people think of their PS as transient, or somehow "not real". Sleight-of-hands with the PS might be a gross miscalculation.
I've noticed a few guys floating trial balloons in the lounge. I deflated one as mercilessly as I could.
Why would we be so stupid as to use deferred compensation to fund current wages?
"Monetizing" is what you do when the company is doing poorly, and you need to make a trade. Right now, it's (perversely) being used as an argument for self-funding a well-deserved wage increase.
This questionable argument was used with marginal effectiveness in C2012, but the bitter taste of buying our own increases lingers. I think it's a mistake to assume that people think of their PS as transient, or somehow "not real". Sleight-of-hands with the PS might be a gross miscalculation.
I've noticed a few guys floating trial balloons in the lounge. I deflated one as mercilessly as I could.
Well over 95% of our pilots want to keep our profit sharing or increase it.
The few pilots trying to sell reductions at Pub events and in the crew room are part of a coordinated effort by the new strategic planning chairman and his VC a long time cost neutral advocate.
We are in for a big fight. We can win but everyone needs to stay in contact with their reps and keep profit sharing off the table.
01-12-2015, 04:18 AM
#3190
Gets Weekends Off
Joined APC: Jun 2009
Posts: 5,113
I'm not sure how you can claim the 95% number, but I agree that a lot of people consider their PS to be their money. As such, they'll cast a very dim view of having it stolen, even under a "monetizing" euphemism.
I think most guys have been paying attention to company statements regarding returns to the various stakeholders, not just shareholders, and have noticed our ability to pay down debt, pre-fund pensions, invest in the product, AND demonstrate great largesse to investors. Most guys have also noticed the trend in Valentine's Day checks, and they're going to know immediately if they're getting the shaft instead of a sincere and financially meaningful expression of love and affection.
I think most guys have been paying attention to company statements regarding returns to the various stakeholders, not just shareholders, and have noticed our ability to pay down debt, pre-fund pensions, invest in the product, AND demonstrate great largesse to investors. Most guys have also noticed the trend in Valentine's Day checks, and they're going to know immediately if they're getting the shaft instead of a sincere and financially meaningful expression of love and affection.
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