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L1329II
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Any Airlines Owning Refineries?

Thu Mar 16, 2006 2:57 pm

Just a thought but have any airlines looked at purchasing or do any now own thier own refineries? If any do happen to own would it be easier to control thier own fuel costs?
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mirrodie
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RE: Any Airlines Owning Refineries?

Thu Mar 16, 2006 3:02 pm

I would not be surprised if one of the airlines based in the middle east did have a link to a refinery.
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planetime
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RE: Any Airlines Owning Refineries?

Thu Mar 16, 2006 3:37 pm

Quoting L1329II (Thread starter):
Just a thought but have any airlines looked at purchasing or do any now own thier own refineries? If any do happen to own would it be easier to control thier own fuel costs?

Emirates going by the way they are ordering  Smile
 
masseybrown
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RE: Any Airlines Owning Refineries?

Thu Mar 16, 2006 4:10 pm

AA tried it 30 years ago. They bought some crude production capacity as well. They lost interest as soon as the Carter crisis was over.
 
Trvlr
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RE: Any Airlines Owning Refineries?

Thu Mar 16, 2006 4:42 pm

Kind of the other way around, but Gazpromavia is a subsidiary of the Russian oil & gas company Gazprom.

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scalebuilder
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RE: Any Airlines Owning Refineries?

Thu Mar 16, 2006 8:44 pm

Quoting L1329II (Thread starter):
If any do happen to own would it be easier to control thier own fuel costs?

I couldn't find anything evidencing ownership interest in any refinery or oil producing facility.

I do know however that airlines use hedging against increases in fuel prices. It may or may not pay off as protecting yourself against price increases isn't free either.

In an environment where prices increase steadily over time, a hedging strategy can be very effective.
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Zkpilot
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RE: Any Airlines Owning Refineries?

Thu Mar 16, 2006 9:01 pm

LOL!!!! they should!!! Officially EK has nothing to do with refineries etc etc... but in reality there is little or no tax in UAE, why? because of the oil! Thats how they can afford lots of planes, and less wages coz wait for it... the staff don't have to pay tax on their earnings! If other airlines around the world didn't have to pay tax I'm sure they would all be ordering lots of aircraft!
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Jet-lagged
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RE: Any Airlines Owning Refineries?

Thu Mar 16, 2006 9:11 pm

Hmmm. Well, even if they owned refineries, as the price of crude rose, they would still suffer. So, they would need to own access to production fields.
 
L1329II
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RE: Any Airlines Owning Refineries?

Thu Mar 16, 2006 11:45 pm

Quoting Jet-lagged (Reply 7):
Hmmm. Well, even if they owned refineries, as the price of crude rose, they would still suffer. So, they would need to own access to production fields.

Which crude as done exponentially in the last 24 months. The issue here at least in the US isnt neccessarily crude prices but refining capacity. I was thinkning that if the airlines grouped together and created thier own refining capabilities specifically for jet fuel it would be possible to curb alot of the high prices.
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PanHAM
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RE: Any Airlines Owning Refineries?

Thu Mar 16, 2006 11:52 pm

You should always do the business you know best. On the commercial side, even if an airline would own a refinery, it would run for many reasons under a separate corporation, and the airline would still be their customer. On short supply and high demand, the refinery would treat the airline like any other customer, or would suffer losses because they surrender yields they could have made otherwise.

Now, where do you want your losses, on the airline or on the refinery side?

Besides the fact that a refinery is as capital intensive (we are talking billions) as an airline and they could simply not raise the cash to own one. They have a hard time owning aircraft, at least the carriers in the US.

The question should be - can/should an Oil company own an airline. The answer is obvious.



.
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masseybrown
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RE: Any Airlines Owning Refineries?

Fri Mar 17, 2006 12:37 am

Quoting PanHAM (Reply 9):
You should always do the business you know best.

That was AA's exit line when they got out of the oil business. They never discussed gains or losses, but it was apparently a more difficult business than they expected. IIRC, they had a partial interest in a refinery and a number of stripper wells in TX and OK.
 
JohnJ
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RE: Any Airlines Owning Refineries?

Fri Mar 17, 2006 12:55 am

Not an airline per se, but the bulk of the aviation fuel used at the Memphis International Airport is supplied by direct pipeline from Valero Energy's Memphis refinery about 5 miles away. And I suspect the bulk of the aviation fuel consumed at MEM is consumed by FedEx - so at the very least Valero has an extremely important captive customer with FedEx.
 
prebennorholm
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RE: Any Airlines Owning Refineries?

Fri Mar 17, 2006 7:40 am

Quoting L1329II (Thread starter):
Just a thought but have any airlines looked at purchasing or do any now own thier own refineries? If any do happen to own would it be easier to control thier own fuel costs?

Refineries don't control fuel costs.

You could "control" fuel costs by getting hand on some cheap crude oil. Then you can get cheap jet fuel either by buying your own refinery to refine it, or by paying a refinery to refine your crude oil.

In either case you would then have to find a way to get rid of those 90-98% (depending on crude quality) which cannot be refined into jet fuel. You will need people to buy the gas, LPG, diesel fuel, heavy fuel oil, alphalt and what else comes out of the refinery.

It will also be most adviseable that you run an extensive chemical industry so you can produce lubricating oil, plastics, fertilizer, pesticides, basics for the paint industry, etc. to make your refining economics profitable.

My company runs a few dozen refineries around the world. We could not run ONE refinery, no way. Nobody can run just one refenery. It would be a total economic disaster just as if Boeing designed an A380 clone and sold 5 copies. Running refineries safely and efficiently these days is one of the most advanced and complicated industries out there.
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Daleaholic
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RE: Any Airlines Owning Refineries?

Fri Mar 17, 2006 8:02 am

I believe Richard Branson was talking about opening his own refineries so he can get the fuels for his aircraft at dirt cheap prices, thus making running costs lower. Seems like a good idea until you take into account initial cost, maintenance, paying employees, the chances of finding oil.
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