Delta Airlines look to gain tighter control over fuel supply with refinery acquisition

Delta Airlines are to gain tighter control over their fuel supply by buying an oil refinery from ConocoPhillips for $180 million (£111 million).

The move is quite unprecedented for an airline, and if successful, it could prompt similar moves from other carriers. Delta is looking to tighten its control over their fuel bill, and it hopes to save $300 million (£185 million) a year in fuel costs, which were close to $12 billion in 2011.

Trainer refinery is located outside Philadelphia, US, and is the target of the airline’s swoop. Employees at the oil refinery will keep their jobs under the new investment, with the airline also investing an additional $100 million (£62 million) to improve the refinery’s ability to prDeloduce jet fuel.

If the project works out successfully, other oil refineries around the world could become the target of other airline carriers, as they contend with the rising cost of fuel. Many will also be conducting a biofuel analysis of the sites, with those that have bigger biofuel capabilities likely to be more popular as carbon taxes also add to the bill.

John Strickland, an aviation analyst, said: "It is an interesting piece of opportunism.

“Fuel bills can have a massive impact on an airline's ability to compete."

According to Delta's chief executive Richard Anderson, the airline had been considering the purchase for almost a year. ConocoPhillips was planning to close the refinery, which is why Mr Strickland suggested that the move could well have been about good timing. The location is also ideal, with the refinery serving Delta's major hubs at New York's John F Kennedy and LaGuardia airports.

Mr Anderson said the improvements to the refinery will start towards the end of the year, with the fuel savings starting to filter through by the start of 2013.

Posted by Claire Manning