Delta Air Lines buys refinery in effort to save money on jet fuel

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May 3, 2012

(Wall Street Journal; April 30) -  Delta Air Lines said April 30 it reached an agreement to buy a refinery complex near Philadelphia in an effort to cut the carrier's yearly jet fuel costs by $300 million. The nation's second-largest airline will purchase the Trainer, Pa., facility from Phillips 66, a refining and marketing business spun off from ConocoPhillips. Under the deal, Delta would become the first U.S. air carrier to buy a refinery.

The airline intends to invest $150 million to acquire the complex, and expects to receive $30 million in Pennsylvania state-government aid to help preserve jobs at the site. The company plans to spend $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 BP.

Delta said production from the Trainer refinery, as well as agreements to exchange gasoline, diesel and other refined products for jet fuel elsewhere, will provide 80 percent of the airline's jet-fuel needs in the U.S. Delta said under a three-year agreement BP will supply the crude oil to be refined at the facility, which was idled last year and has been up for sale. Delta will exchange gasoline and other refined products from the complex for jet fuel from Phillips 66 and BP elsewhere in the U.S. through multiyear agreements.

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