Delta subsidiary purchases refinery

A subsidiary for Atlanta-based Delta Air Lines this week purchased a Philadelphia-area oil refinery, a deal that includes pipelines to serve the airline’s operations in the Northeast.

Monroe Energy LLC, which is owned by Delta, reached an agreement with Phillips 66 to purchase the Trainer refinery complex, located south of Philadelphia.

Delta noted in a news release announcing the agreement:

As part of the transaction, Monroe will enter into strategic sourcing and marketing agreements with BP … and Phillips 66.  The acquisition includes pipelines and transportation assets that will provide access to the delivery network for jet fuel reaching Delta’s operations throughout the Northeast, including its hubs at LaGuardia and JFK.

“Acquiring the Trainer refinery is an innovative approach to managing our largest expense,” Richard Anderson, Delta’s chief executive officer, said in a news release. “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.  This strategy is aligned with the moves we have made to build a stronger airline for our shareholders, employees and customers.”

In its release, Delta also noted:

After receipt of $30 million in state government assistance for job creation and infrastructure improvement from the Commonwealth of Pennsylvania, Monroe’s investment to acquire the refinery will be $150 million, and Monroe will spend $100 million to convert the existing infrastructure to maximize jet fuel production.  Production at the refinery combined with multi-year agreements to exchange gasoline, diesel, and other refined products from the refinery for jet fuel will provide 80 percent of Delta’s jet fuel needs in the United States.

“We expect the Trainer acquisition to be accretive to Delta’s earnings, expand our margins, and to fully recover our investment in the first year of operations,” Paul Jacobson, Delta’s chief financial officer, said in the release. “We look forward to closing this transaction and moving quickly to begin capturing its benefits.”

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