One of the more interesting stories that came out today was the purchase by Delta of a CononcoPhillips refinery in Trainer, PA. CNBC reported that the deal will cost $180 million, although Delta will receive $30 million in subsidies from the Commonwealth of Pennsylvania.
According to the WSJ the Justice Department considers a market with a Herfindahl-Hirschman Index
score above 2,500 to be "highly concentrated." The paper went on to say that In 2010, the East Coast refining
market's score hit 3,255, against a nationwide one of 680, according to the
Federal Trade Commission. If Pennsylvania's Trainer facility had stayed idle
rather than be bought by Delta, the score would likely have surpassed 4,000,
according to the American Antitrust Institute.
I wouldn't necessarily say that refining is a core business associated with running an airline but it is certainly a core cost when it comes to the expensive jet fuel. I can understand to a degree how the deal would make sense for Delta but it is hard for me to see how they might manage and integrate it into their normal business operations.
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