Shall I assume from all your talk of not being a refining or petroleum expert that you won't be claiming that you were right if DL does manage to make the Trainer deal work? Or is all that double-talk reserved for when you're wrong, letting you can claim that you didn't say Trainer would be a success?
Jim
BINGO!
You are absolutely right that I won’t claim that ** I ** was right if the refinery venture works out because **I** didn’t come up with the idea and can’t validate if DL was saying the right thing or not.
What I can do – and will do – is say that if the refinery deal produces savings of the level DL says it will achieve, it WILL BE a game changer that will significantly change the competitive balance, just as WN obtained a competitive advantage more than 5 years ago with its hedges at a time when other airlines had none. Unlike WN’s hedges, though, the refinery deal has the potential to lock in DL’s advantage for many years.
If DL achieves its $300M in annual fuel savings, it will be less than 3% of its total fuel bill… hardly an earth shattering large percentage reduction. But when you factor in that net profits in the best years for the strongest US airlines have rarely exceeded $1B per airline per year, then a 30% increase in net profits is absolutely game changing, esp. when it comes in key highly competitive markets – and potentially involves supply issues which may significant affect DL’s competitors way more than any of us can understand now.
As for the ROI, note that the AUA refinery might be sold for a price 2X as high as what DL paid for Trainer even though the AUA refinery is only about 20% larger according to the article. Many analysts have said DL bought Trainer at the bottom of the market.
A look at this article shows that the whole refinery industry is in a global upheaval – and based on this article, Europe might be the hardest hit. But it is also far from certain that the supply of jet fuel on the market will remain constant and that DL could gain a supply advantage ON TOP OF a cost advantage derived from reduced transportation costs as well as better control of the refining process and maximization of jet fuel production, which is admittedly only one of multiple products for other refineries.
http://finance.yahoo...-124547391.html
What I have consistently harped on in this thread is that some people, you and some analysts and writers, jumped to the conclusion that this refinery deal could not work EVEN BEFORE the deal was announced and the details were known. You went so far as to say that a refinery could not produce jet fuel in the percentages DL has since said the refinery will produce.
Contrast that with what FWAAA and QA4 wrote – both of whom admitted their skepticism and questioning about how it can happen – but I don’t think either of them have said it can’t happen.
I never said I agreed 100% with anyone here, including Kev. I did say that Kev, like me, knows what he knows and doesn’t try to have answers to problems on which he isn’t an expert. I don’t really want to converse with a bunch of people who agree with me. I want to converse and debate with people who logically and rationally have defensible positions. I like diversity of thought and opinion – and anyone who is willing to participate in that type of interchange comes out stronger if they are willing to learn from others and not admit they
are right about everything.
There is a lot of wisdom in admitting one doesn’t have all of the answers and being willing to accept that – instead of being certain that one has all of the answers, even though everyone else knows that all of the data to make such a decision or conclusion cannot be known.
You might find it objectionable that I point out where others are wrong – or where I am right – but I find it objectionable that some people jump to conclusions and declare themselves right when they clearly have neither the data or experience to make that conclusion.
I’ve made that point sufficiently to say that I have no intention of holding you accountable for your statements saying the refinery cannot produce 30% or 52K bbls of jet fuel, plus or minus any reasonable number.
If you want to continue to argue that if Trainer doesn’t produce 52K bbls per day of jet fuel, that is your choice… but I never put my reputation on the line for that claim – because I don’t know if can be made or not.
I have said that DL, P66, and BP have all partnered in this venture so if DL fails to achieve it, they are all wrong – which I find very unlikely to occur.