"A new report from Reuters says that Delta Air Lines Inc. (DAL) is planning to sell gasoline and diesel. The sales are hoped to offset the losses incurred by Delta’s Monroe Energy subsidiary.
In 2012, Delta purchased a shuttered Pennsylvania refinery, according to The New York Times. The airline invested $250 million to purchase and convert the refinery for jet fuel production. Delta had estimated it would save $300 million per year on the cost of jet fuel.
The same year, Monroe reported a loss of $63 million. In 2013, Monroe lost $116 million. The refinery began operating profitably in 2014 and earned $96 million. This profit increased to $290 million in 2015. However, during the first nine months of 2016, Delta’s refinery lost $83 million, according to Reuters.
In response, Reuters reports that the refinery will increase sales by marketing gasoline and diesel. Currently, Monroe is swapping its motor fuel with Phillips 66 in return for jet fuel. That agreement is set to expire in 2017.
By selling gasoline and diesel directly, Delta’s refinery will be able to adjust its motor fuel production based on market conditions. By changing its output to maximize margins, Delta can increase profit, according to Reuters."

 

I have always liked this venture by Delta, if only because it showed a willingness to go a new route in trying to make our airline profitable.

 

It doesn't matter if the refinery posts a loss or a profit. Well, it does...but it's very minor.

The purpose of the refinery is to reduce crack spreads for jet fuel, which it has done. So if the crack spread is reduced by 0.03-0.04 per gallon and the refinery loses a few million dollars...Delta still comes out way ahead. Of course it also helps the other airlines but the bottom line is the reduction of the crack spread.

 

Delta also found they could control Jet A prices in the north east by tweaking output. Remember hurricane Sandy the refinery was off line and Jet fuel spiked. The refinery gives them lots of levers to pull. (they would say)

 

I've hated it. I'll be shocked if over the long term this turns out to have been a worthwhile effort.

 

Yep, exactly. And even by that article's numbers, its still around $374 million in the black anyway. If that doesn't even include the savings the airline gets from cheaper fuel, then its off the charts. But even if that is priced in, that's still not a bad deal. Fuel is going back up anyway as the OPEC cartel desperately flails around trying to balance bleeding out their competition with avoiding kingdom crushing austerity.

 

What is it that you have hated about it? It seems to be doing OK these first 4 years.

 

It's lost a lot of money overall. There is a reason not one other airline has followed our lead. We also inherited a huge environmental problem that could become very expensive.

 

I want to read some follow-up report 20-30 years from now. For every "Trainer is a huge hit" there is another "Trainer has been a disaster" counterpoint. Which press release should we believe?

Not that my opinion matters one whit, but if NOTHING ELSE, Trainer was actually an attempt by an airline to proactively address fuel costs and supply rather than just say (in perpetuity) "Gee we sure hope oil stays inexpensive."

 

United was considering it about a year ago, then their CEO change and then again due to medical issues. They will get back around to it because they are chasing Delta.