Delta Airlines buys oil refinery to save money on gas

By Keith Laing - 04/30/12 05:32 PM ET

Delta Airlines is buying an oil refinery in Pennsylvania to help save money on gas, officials with the airline announced Monday.

Delta and other airlines have increased fares and introduced new fees to combat raising gas prices in recent years, but Delta CEO Richard Anderson said Monday that his company had reached an "innovative" deal to buy the Trainer refinery in Philadelphia from the ConocoPhillips gas company Phillips 66.

"Acquiring the Trainer refinery is an innovative approach to managing our largest expense," Anderson said in a statement released Monday.

"This modest investment, the equivalent of the list price of a new widebody aircraft, will allow Delta to reduce its fuel expense by $300 million annually and ensure jet fuel availability in the Northeast," he continued. "This strategy is aligned with the moves we have made to build a stronger airline for our shareholders, employees and customers."

Delta will pay $150 million to purchase the refinery through its subsidiary Monroe Energy, the company said. The airline will spent another $100 million to make changes to the refinery to facilitate jet-fuel production, and it will receive $30 million in assistance from the state of Pennsylvania, Delta said.

Delta Chief Financial Officer Paul Jacobson said in a statement that he expected the refinery to be "accretive to Delta's earnings, expand our margins, and to fully recover our investment in the first year of operations.

"We look forward to closing this transaction and moving quickly to begin capturing its benefits," Jacobson said.