Apr 052012
 

The only thing an oil refinery has in common with an airline is the ability to consistently lose money.

Okay, so we all know that airlines burn a lot of jet fuel, and that fuel competes with labor to be any airline’s number one greatest cost.  And if there is one thing the airlines have focused single-mindedly on, it is the need to cut costs.  Any costs, and all costs.

But does that mean it makes sense for Delta to buy their own oil refinery?  On the face of it (and this seems to be as far as Delta has considered) maybe it does make sense – cut out the middle man and ‘backwards integrate’ your business.

But it isn’t quite that simple.  And neither is it quite that sensible.

Indeed, when you read our analysis, you might be left wondering if this is all a delayed April Fools Day joke, served up later in the week for better effect.  But with stories coming from both Reuters and the NY Times, both indicating that Delta is very close to buying a closed down oil refinery that apparently no-one else wants – a refinery that closed down due to not being able to compete against other sources of petro-chemicals – one is left with a sense of wonder.

What on earth can Delta be thinking of?  Please read our full article about Delta Airlines Buying an Oil Refinery to fully understand the total lack of any good sense or business justification for this apparently pending purchase.

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