Two and a half years later, “this deal is even more idiotic now than it was then,” says Ed Hirs, an
energy economist and lecturer at the
University of Houston. Delta has sunk $420 million of capital into the refinery, which has generated roughly $100 million of losses. Is Delta at least getting cheaper jet fuel?
Yes, it expects to pay about 50 cents a gallon less this year. But that’s only because oil prices have plunged, which has nothing to do with owning a refinery.
Besides, the real test is to compare Delta’s fuel costs to other big airlines. Before the acquisition Delta was sourcing fuel for 9 cents a gallon cheaper than its peers. Its edge today: still 9 cents. Meanwhile, much of its rationale for owning a refinery has disappeared: refiners’ margins have declined, while American crude no longer sells as such a wide discount to imported barrels.
On that score it worked. It did moderate jet fuel prices for Delta–but also for every other airline flying out of New York and Philly. For that altruistic move, maybe Delta ought to pass the hat:
In 2012 Delta invested $180 million to modernize the plant–which generated a $63 million loss. In 2013 it added $52 million in fresh cap ex–with a $116 million loss. Late that year company president Ed Bastian said the refinery had experienced some “teething pains.”