Read the excerpt below from an article titled “Delta buys refinery, becoming first airline to make own fuel” (Reuters, 5/1/2012). The more context specific your answers are the better.
a. What might be the value generating benefits of this vertical integration? What transaction costs might be reduced?
b. What costs might be created by this vertical integration?
c. What flaws do you see in Delta’s justification of this deal?
d. Can you identify something that has changed that would explain why Delta made this move whereas no airline has previously vertically integrated with a jet fuel refinery?
See link for reference: http://www.reuters.com/article/2012/05/01/us-delta-idUSBRE83T17P20120501
