Delta seeks to cut costs by producing own jet fuel

Delta Air Lines expects to recoup the cost of buying an oil refinery in fuel savings by the end of next year.

The US carrier is to buy the refinery outside Philadelphia from ConocoPhillips for $180 million.

The move is expected to save the airline $300 million a year in fuel costs, which reached almost $12 billion in 2011.

The refinery, which ConocoPhillips planned to shut by the end of the month if it failed to find a buyer, will be able to serve Delta’s hubs at New York’s John F Kennedy and LaGuardia airports.

Employees at the refinery will be kept on by the airline, which is to spend $100 million improving the refinery’s ability to produce jet fuel.

Delta chief executive Richard Anderson said the airline had been considering the purchase of the Trainer refinery for almost a year.

Improvements to the refinery will be made by the third quarter of the year, with Delta getting back the purchase price in fuel savings by next year, he said.

“Acquiring the Trainer refinery is an innovative approach to managing our largest expense,” said Anderson.

“This modest investment, the equivalent of the list price of a new wide-body aircraft, will allow Delta to reduce its fuel expense by $300 million annually and ensure jet fuel availability in the north-east [of the US].

“This strategy is aligned with the moves we have made to build a stronger airline for our shareholders, employees and customers.”

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