Chapter 641 2 Consecutive 3 Targets

"Is this old guy reminding me of something?"

Yang Cheng had no choice but to doubt that Richard Anderson, as one of the most successful CEOs in the history of Delta Air Lines, could not remain indifferent to the impending weakening of power.

After Yuanshan Capital took over Delta Air Lines, Gerald Greenstein will automatically step down as the chairman of the board of directors. Although he is still on the board of directors, his power is not the same as that of the chairman of the board of directors. Naturally, it is difficult to implement the two powers with the CEO. With the policy of separation, CEO Richard Anderson is bound to play under the framework reset by the board of directors, which is indeed unacceptable for him who is used to freedom.

That's why he euphemistically expressed his desire to follow the path of success to himself and Yuan Shan by going back to history and reminiscing about success?

Yang Cheng admits that he is using the heart of a villain. As for whether he has saved the belly of a gentleman, he doesn't know, but in order to ensure that his own interests are not damaged, he can only look at the problem cautiously.

The memory of Richard Anderson is still going on, and the reporters and friends in the audience listened very carefully. Most of them still have deep feelings for Delta Airlines. After all, they are people who travel by air all year round, and Delta Airlines is accompanying them Partners for many years, therefore, along with Richard Anderson's urging speech, unconsciously substituted into emotional emotions, "In addition to the full cooperation of employees, virtual mergers and vertical integration are how Delta Airlines came back to life. key.

Delta once distinguished itself in key areas such as asset management, international partnerships, and supply chain.

Innovation is a tradition at this company, and our goal is to achieve greater efficiency and greater control, which is reflected in the take-back of the flight booking system, where we no longer rely on third parties to manage data.

In the most important international aviation markets, we have achieved virtual mergers with powerful partners through stakes in leading airlines in Brazil, Mexico and the United Kingdom.

Since ZF regulations prevent airlines from acquiring foreign airline ownership through cross-border mergers and acquisitions, it is crucial for Delta to establish international cooperation through equity participation, which provides our customers with a truly global network. "

Speaking of this, Richard Anderson obviously paused, and glanced at Yang Cheng meaningfully, but Yang Cheng's expressionless and calm appearance really made him a little depressed.

In fact, Yang Cheng was already cursing in his heart, "Bastards, no wonder you all stopped me from acquiring Korean Air. So there is such a law."

Yang Cheng knew in his heart that he was harmed by his lack of experience, and he also blamed himself for making the decision without knowing it clearly in advance. Fortunately, the magic is one foot higher than the other. At the last moment, he gave up his absolute control of Korean Air. The only requirement is to buy shares and occupy the seat of the largest shareholder. The thief laughed, "Richard Anderson, I have written down this battle."

Richard Anderson didn't see the expression he wanted on Yang Cheng's face, and his depressed mood was palpable, but he knew he couldn't lose his composure and adjusted his mood in time. He coughed lightly and continued, "In the past few years, Delta The airline made what may be the most unusual move in aviation history—acquisition of the Trainer refinery outside Philadelphia.

Aviation fuel has always been the largest expense in the operating costs of airlines. At Delta Air Lines, this figure is particularly staggering, with a cost of up to 12 billion U.S. dollars per year. We hope to provide a stable supply of fuel for the company's global business and find the best practical method.

Previously, we had been using hedging, option strategies, and dynamic fares like our peers to insulate ourselves from oil price volatility, but a few years ago we decided to go a step further and instead of being controlled by oil producers, we Advance into the oil industry and gain control of the supply chain through vertical integration.

At the time, many refineries on the East Coast were facing closures, and the reduced refining capacity and consequent price increases made our costs even more expensive.

At first, we looked at a refinery in Louisiana,

It didn't turn out to be a good fit, but we took a different approach, brought its manager and some team members on board, started building in-house expertise, and then the Trainer refinery came into our sights.

During my tenure, Delta has insisted on not doing too much consulting, and we believe we know the business better than outsiders.

However, when we acquired the refinery, we hired consultants to help weigh the pros and cons, and finally concluded that if the refinery closed or was merged, our fuel costs would increase by 10%-15%; will decrease.

And most importantly, the purchase price of this transaction is reasonable, in the range of $150 million, which is about the same as the price of a new Boeing 787.

So, we decided to buy it, a move that caused an uproar in the aviation industry and the oil industry, but it also convinced us of our choice - if our competitors, refiners and oil cartel criticize us, it just means that we Made the right choice.

Since then, we have further expanded the oil team, bringing in several crude oil traders and the former president of Total Petroleum's North American subsidiary.

We also have a long-term charter of a ship to transport crude oil from the Gulf of Mexico to the East Coast, so that we can achieve self-sufficiency at a greatly reduced cost. Buying, refining and transporting fuel is also done more easily.

As a stand-alone entity, the Trainer refinery has posted razor-thin profits over the past two quarters. But the real advantage it gives us is the impact on price: Over the past two years, our average fuel cost per gallon has been 5-10 cents lower than the industry. "

Yang Cheng sneered again and again in his heart, it seemed that this old boy was determined to die, he really did one trick after another, first he veiledly criticized the acquisition of Korean Air, and then targeted himself for purchasing oil from Abu and Conrad. It's really well-intentioned to give negative teaching materials, but it's a pity that his words can fool reporters, laymen, but fool himself? There are no doors.

Long before the acquisition of Delta Air Lines was officially launched, Yang Cheng knew the fact that Delta Air Lines acquired an oil refinery in an attempt to reduce costs. However, did this oil refinery really reduce costs?

wrong! Big mistake! If Yang Cheng hadn't done a detailed investigation, she might have been deceived by Richard Anderson's rhetoric.

Prior to this, in the history of aviation, no airline had its own oil refinery, but in 2012, Delta Air Lines took the lead in breaking this vicious circle. Delta Air Lines executives under the leadership of CEO Richard Anderson believed that in the face of Time to do something radical about agonizing fuel costs.

During that time, the price of oil was stubbornly hovering at a high level - more than $90 a barrel, and the daily fuel consumption of Delta Air Lines aircraft was equivalent to 260,000 barrels of oil, accounting for one-third of the company's total cost.

Delta Air Lines calculated at the time that $2.2 billion of the $12 billion spent on fuel each year became the profit of the refinery. This made Richard Anderson and his team feel that if the company’s own refinery was used to produce aviation kerosene, Then, you can keep that part of the profit for yourself.

So they bought the Trainer refinery near Philadelphia, Pennsylvania, for $180 million (that's the real number, not the $150 million that Richard Anderson said in his speech).

Think that's all there is to it? wrong! In the following two and a half years, Delta Air Lines invested as much as US$420 million in the refinery, and the result was a loss of about US$100 million.

But a lot of people are going to say, at least Delta has cheap jet fuel, right? Not so.

Before buying the refinery, Delta's jet fuel supply was 9 cents a gallon lower than its peers, so what's the advantage today? Still 9 cents! Meanwhile, most of the rationale for buying a refinery has now evaporated: The price of oil has plummeted, and the refinery's profitability in producing jet fuel has gone from bad to worse.

This is the most real side, far from as beautiful as Richard Anderson said!

From an economic point of view: even if you run the business as well as others, the opportunity cost of jet fuel still depends on the global market, and only if you run the business better than others, you The acquisition is meaningful, but for an airline, such a request is a bit reluctant.

It's a pity that Richard Anderson didn't realize it, or they knew it but were unwilling to admit their fault.

What went wrong?

Basically everything is wrong!

The big problem, though, is that buying a refinery is simply not an ideal hedge against fuel price risk, so why? Because the real cost of jet fuel lies in the oil, not the refining process.

Metaphorically speaking, this mistake is like buying a bakery to protect against rising bread prices. If you really want to hedge the price risk of bread, you should buy a wheat field.

Also, if these guys want to insulate themselves against fuel prices, they should buy oil fields, which are now being sold worldwide thanks to the collapse in oil prices.

Of course, considering the experience of the Trainer project, it may not be a good idea to buy oil fields. In hindsight, Delta Airlines waited for the price of oil to fall, and then locked in the low price of jet fuel in the futures market, the result would be better.

But Richard Anderson's decision caused Delta Air Lines to suffer from an expensive burden, but judging from Richard Anderson's speech just now, he still stubbornly believes that this oil refinery is a very cost-effective investment. Also see it as part of an overall strategy - to proactively guard against volatility in jet fuel prices, rather than being a victim of wild swings in global energy markets.

It's just that, in Yang Cheng's eyes, such a deceitful idea is completely stupid, and it also strengthens his idea of ​​cleaning up after taking over Delta Airlines!

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