Delta is taking a novel approach to cutting its fuel costs. The airline is going to produce its own fuel in its own refinery. For sheer corporate swagger, you can’t beat it.
Show me an airline in the United States and I’ll show you a bunch of executives ready to jump out of an office window over the price of fueling their airplanes.
Yeah, I know, the airlines only pay half per gallon of what you and I pay at the pump. But you and I aren’t burning through billions — that’s right, billions — of gallons of fuel every year.
Fuel costs now take a bigger bite out of airline profits than wages and benefits. And the airlines all are desperate to do something about it, from replacing older airplanes and their gas-guzzling engines to tacking on one absurd add-on passenger fee after another.
Over in Europe, Ryanair is giving passengers thinner magazines to read on board and putting fewer ice cubes in their drinks. That’s how ridiculous things have become.
Comes now Delta Air Lines with a stunningly different approach. The company is buying its own oil refinery.
The first time I heard that Delta’s corporate heads in Atlanta were thinking about this, I thought it was a joke. It isn’t. By year’s end, Delta will be rolling its own.
Fuel trucks, that is.
This would be roughly equivalent to trucking companies buying up a chain of gas stations, or Amtrak buying a steel mill to lay down its own rails (which, in Amtrak’s case, might not be a bad idea).
You can find more details on this highly unconventional move in this Associated Press story via Yahoo! here.
For sheer corporate swagger, you’d have a hard time topping this one. Or you could take the glass-is-half-empty view and say that Delta is desperate. Either way, the airline is coloring way outside the lines.
Conventional wisdom says “stick to what you know.” Any time a business jumps with both feet into a venture totally outside its area of expertise, it’s taking a frightful risk.
Some of us are old enough to remember when PSA, the once highly successful Pacific Southwest Airlines, decided to branch off into the hotel business, one of several ill-advised moves that contributed to its demise.
And let’s be real: Delta knows as much about refining crude oil as I know about flying jumbo jets.
But if they hire the right people to run it, who knows?
Only time will tell whether this approach actually makes deep cuts into Delta’s fuel bill, but you can bet the rent that every one of its airline competitors will be watching with keen interest.
And if it shows any sign of making Delta seriously more profitable, we could see an Oklahoma-style land rush on oil refineries, courtesy of the airline industry.
What would really be cool would be for Delta to save so much money on fuel that it could afford to drop their airfares, and still be profitable.
Yeah, I know…in my dreams, right?
Whether this gambit ultimately succeeds or fails, you have to give props to Delta for thinking outside the box — or in this case, off the tarmac.