Delta Air Line’s much-maligned hope to purchase an East Coast oil refinery hinges on the aid of two important partners: JPMorgan and Big Oil.
In recent weeks, say people familiar with the matter, Delta has been in advanced discussions with ConocoPhillips about the possibility of buying its Trainer, Penn. refinery for more than $100 million. Those talks, which CNBC revealed on April 4, are part of a master plan hatched by Delta management to tamp down soaring jet-fuel costs by bringing the refining process in-house.
How they’ll do that, however, is a complex question.
To make the deal successful, Delta will have to somehow refine its own jet oil at a price level cheaper than what it could get on the open market. Since jet fuel accounts for 36 percent of the airline’s costs and is only rising alongside world crude prices , which were trading at around $119 per barrel Tuesday morning, achieving any sustainable discount would be a win — and yet would not be guaranteed.
Delta shares are down about 6 percent since the news first broke.Page 1 of 4 | Next Page