Delta Making Own Fuel Seen as Bid to Cut $32 Million-a-Day Bill
posted by neelackey 14 days ago under bradley associates madrid spain latest updates, delta making own fuel seen as bid to cut -32 milli
May 1 (Bloomberg) -- Delta Air Lines Inc. is bringing some jet-fuel production in house, breaking with U.S. carriers' reliance on outside providers, by acquiring a refinery that Phillips 66 had targeted for shutdown.
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. An airline-owned refinery is an experiment in the U.S. industry, said Ray Neidl, an airline analyst at Maxim Group LLC in New York. Atlanta-based Delta estimated the accord will save $300 million on its annual fuel bill, which was $11.8 billion last year, or about $32 million a day. "Nothing ventured, nothing gained," said Neidl, who has a buy rating on Delta shares. "Delta likes to try new things and I'm sure they studied this for months and ran the calculations. Nobody has done something quite like this before." Delta is buying the refinery in Trainer, Pennsylvania, through a subsidiary called Monroe Energy LLC, a nod to the airline's original headquarters in Monroe, Louisiana. Trainer will add to earnings, boost margins and allow the airline to recoup its upfront investment in the first year, Chief Financial Officer Paul Jacobson said in the statement. Delta fell 1.5 percent to $10.80 late yesterday in extended trading. Phillips 66 begins trading today after the pipeline- and-refining company's spinoff from Houston-based ConocoPhillips. The new company also will be based in Houston. » Delta Making Own Fuel Seen as Bid to Cut $32 Million-a-Day Bill |
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