Delta's success seems to stem from an innovative approach, both to the core competencies required to compete in the airline market-space, and through supply-chain optimization. In the spirit of strategic sourcing I will focus on the latter.
In April of 2012, Delta's wholly owned subsidiary, Monroe Energy LLC made an un-orthodox move to aquire an oil refinery in Trainer, PA for use in the airline's Northeast operations. With a spend of over $11 billion on fuel alone each year, the goal of achieving operating cost savings in this area has significant effects on the airlines ability to compete. This decision was criticized by many as naive, with many analysts predicting dire consequences for playing in someone else's sandbox. After all, what does Delta know about oil refinement?
Not surprisingly to some, Delta has come out on top in this endeavor, shipping Monroe's first batch of jet fuel on September 25, 2012, and realizing investment gains before the end of Q3, 2012. The ability to supply their own fuel has helped with negotiating activities as well, according to Monroe CEO Jeffery Warmann. Speaking at the Global Refining Strategies Summit, Mr. Warmann was confident in the impact.
"We've seen a number of different areas where we've been able to influence the jet fuel price to the advantage of Delta," Mr. Warmann said. ""We don't have to go beg, borrow or steal from various suppliers...If I can supply my own and don't have to take your jet fuel, that's negotiating."
Is your business' primary commodity refined jet-grade fuel?
Go to North Dakota.
Is your airline focused on the future, and positioning themselves to stand on superior footing in fuel-related negotiations?
You must work for Delta...