Posted on 03/04/2015 9:56:57 AM PST by thackney
At Delta Airlines' Philadelphia refinery, the local chapter of the United Steelworkers Union (USW) and Monroe Energy (a Delta subsidiary) have called in a federal mediator to resuscitate talks between the two parties in the hopes of averting the spread of the largest US oil worker strike in 35 years to the US east coast. National negotiations between Shell (on behalf of the oil companies) and the USW are set to resume Wednesday.
In April 2012, Delta acquired the Trainer refinery (located near Philadelphia in Delaware County, PA) from Phillips 66 through subsidiary Monroe Energy for $180 million . The refinery has since expanded production of jet fuel to supply Delta's operations in Boston and New York.
Calling in a federal mediator is unusual and indicates that the local USW chapter and Monroe Energy remain at loggerheads, according to local labor and company officials who spoke to Reuters news agency.
The local union chapter requested a federal mediator late last week, only days before its contract expired on Sunday. The leadership of the USW could decree a strike at anytime at the 185,000 bpd facility. Union members are currently operating per a rolling 24-hour contract at the refinery.
Only a few years ago, the USW and Delta worked jointly to help save the facility. Some of the points of contention involve concessions refinery workers granted in 2012 to help save the plant, Reuters reported.
USW and company talks occur simultaneously at the national and local level. The national negotiations address specific items such as wages and the use of contractors.
"We are hopeful that we will be able to resolve the outstanding issues soon, but it's fair to say that a number of local issues are affected by the National Oil Bargaining Pattern (NOBP), which Shell the industry lead negotiator and the USW, have not reached agreement on yet," Adam Gatusso, a spokesman for Monroe Energy, told Reuters.
The Federal Mediation and Conciliation Service has sent the mediator. Mediators have been sent to "multiple" refineries, a spokesperson for the agency told Reuters. However, he declined to provide specific numbers.
How Cheap Oil Has Delta Air Lines Jet Fooled
http://www.forbes.com/sites/christopherhelman/2015/01/21/how-cheap-oil-has-delta-air-lines-jet-fooled/
1/21/2015
In 2012 Delta Air Lines did something strange. It bought an oil refinery. No other airline owns a refinery. But Delta executives, led by CEO Richard Anderson, thought it was time to do something radical about the painful cost of fuel. Back then oil prices were stubbornly high–more than $90 a barrel. Its planes were burning the equivalent of 260,000 barrels a day, representing a third of total costs.
At the time, Delta figured, $2.2 billion of the $12 billion a year it was spending on fuel went to refiners as profit. By making jet fuel in the company’s own refinery, Anderson and his team figured Delta could keep some of that profit for itself. So they plunked down $180 million for an aging Phillips 66 plant in Trainer, Pa., near Philadelphia.
Two and a half years later, “this deal is even more idiotic now than it was then,” says Ed Hirs, an energy economist and lecturer at the University of Houston. Delta has sunk $420 million of capital into the refinery, which has generated roughly $100 million of losses. Is Delta at least getting cheaper jet fuel? Yes, it expects to pay about 50 cents a gallon less this year. But that’s only because oil prices have plunged, which has nothing to do with owning a refinery. Besides, the real test is to compare Delta’s fuel costs to other big airlines. Before the acquisition Delta was sourcing fuel for 9 cents a gallon cheaper than its peers. Its edge today: still 9 cents. Meanwhile, much of its rationale for owning a refinery has disappeared: refiners’ margins have declined, while American crude no longer sells as such a wide discount to imported barrels.
“Even if you can run the operation as well as anyone else, the opportunity cost of the fuel is still determined by the world market,” says Richard Langlois, professor of economics at the University of Connecticut. “It only makes sense if you can run the operation better than others–unlikely for an airline.”
excerpted...
I’ve seen many “brilliant” MBA educated execs make dumb decisions. Heck GM bought Saab in Sweden because the CEO found a new wife there, the business case was awful, LOL.
"At the time, Delta figured, $2.2 billion of the $12 billion a year it was spending on fuel went to refiners as profit. By making jet fuel in the company’s own refinery, Anderson and his team figured Delta could keep some of that profit for itself. So they plunked down $180 million for an aging Phillips 66 plant in Trainer, Pa., near Philadelphia."
How on Earth did such an arrangement ever clear the Trustbusters?
Refinery margins are tiny.
Buying ANYTHING that has UNION REPRESENTATION is SUICIDE.
Delta is now learning just that.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.