-- 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.