Delta Buys a Refinery in Bid to Cut its Fuel Bill

By: Joshua Freed, AP
By: Joshua Freed, AP

-- April 30, 2012 -- (AP) -

Delta Air Lines said on Monday that it will buy a refinery near Philadelphia in the hope of slicing $300 million a year from its jet fuel bill.

Delta said a subsidiary will buy the Trainer, Pa. refinery from Phillips 66, a refining company being spun off from ConocoPhillips. Delta is paying $150 million, including $30 million in job-creation assistance it expects to get from the state of Pennsylvania.

Delta estimates the deal will cut its fuel bill by $300 million a year.

Delta said its subsidiary, called Monroe Energy LLC, will spend $100 million to make changes to the refinery to maximize the production of jet fuel. Even though Delta will make as much jet fuel as possible at the refinery, the oil refining process still produces other products such as gasoline and diesel fuel. Delta said it will exchange those other products for jet fuel, so in effect the Trainer refinery would cover about 80 percent of its U.S. jet fuel needs.

Delta burned almost 3.9 billion gallons of jet fuel last year at a cost of $11.78 billion. Fuel was 36 percent of its operating expense. Fuel has become the biggest operating expense for most airlines over the past few years.

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  • by Georgia Boy Location: Cairo on May 7, 2012 at 02:54 AM
    You'll have to admit, it would appear that is quite a deal for Delta. Spend half of what you will save annually on fuel costs on a refinery of your own. Novel idea. Wonder if it will REALLY save that much, however.
  • by Mike Location: Tally on May 1, 2012 at 08:00 AM
    Will they sell of the gas and diesel produced, or will the others say there is one less refiner on line, so we will have to charge you higher prices.
  • by Anonymous on Apr 30, 2012 at 02:08 PM
    "Fuel has become the biggest operating expense for most airlines over the past few years." So why do we always hear that increasing labor costs and benefits are said to be the reason airlines make no profit? Meanwhile, after the other airlines buy up their own refineries watch them all start selling diesel and gasoline at higher prices so their jet fuel will cost them even LESS money and give them MORE profit at the expense of drivers and air passengers.
    • reply
      by Anonymous on May 1, 2012 at 06:01 AM in reply to
      Jet fuel is closer to kerosene than gasoline or diesel. Government regulation, including TSA are major cost strains.
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