Delta buys Refinery in bid to lower fuel-jet costs image

Delta Air Lines Inc, the sixth-oldest operating airline by foundation date said Monday that it is buying the refinery near Philadelphia for $150 million from Phillips 66.

The world’s second-biggest airline will pay $180 million for the complex in suburban Philadelphia, according to a statement yesterday. Pennsylvania’s state government is putting up $30 million in assistance to defray the expense.

Under the deal, Atlanta-based Delta would become the first U.S. carrier to buy a refinery.
The company plans to spend a further $100 million to retrofit the plant to maximize its ability to produce jet fuel, and will enter marketing and sourcing pacts with Phillips 66 and London-based energy company BP PLC.

The Trainer refinery complex, located in Pennsylvania, produces more than 185,000 barrels a day. The acquisition also includes pipelines and transportation assets that reach Delta’s operations throughout the Northeast.

The deal for the idled 185 000 barrel per day Trainer, Pennsylvania, refinery, which has puzzled analysts since it first surfaced last month, will come as some relief to politicians and officials, who had feared thousands of lost jobs and a potential summer spike in fuel costs if the plant was shut permanently.

Delta CEO Richard Anderson said the deal marks “an innovative approach to managing our largest expense,” at “modest” expense.

Based on first-quarter earnings reports released in the last several weeks, Delta’s average cost of jet fuel per gallon of $3.11 was lower than that of rivals like bankrupt American Airlines parent AMR ($3.24), U.S. Airways ($3.27), United Continental Holdings ($3.34) and Southwest Airlines ($3.44).