Delta Air Lines’ investment in the mothballed Trainer oil refinery has been a “great success”, says president Ed Bastian.
“Let me be very clear, Trainer has been a great success for Delta,” he told investors during an investors day on 11 December.
Bastian cites the fact that jet fuel in the USA is now trading at a $0.05 to $0.10 discount to diesel, to which it traditionally traded at a $0.02 to $0.03 premium. This shift in the market only occurred after Delta began operations at Trainer in late 2012.
Delta saves $40 million per year for each one-cent drop in the price of jet fuel, says Bastian.
“When you do that math, it's considerable and it's well worth the $150 million [and] the capital investment that we've made in this refinery,” he says.
Further savings are expected as Delta sources more domestic crude oil for Trainer. A barrel of either Bakken, Eagle Ford or Permian Basin crude – all of which are sourced in the USA – cost about $2 per barrel compared to $3 per barrel of imported crude, says Bastian.
Delta has a target to source 50% of Trainer’s crude inputs from domestic sources in 2014, its chief financial officer Paul Jacobson told Airline Business in November.
Trainer is expected to post its first annual profit in 2014, says Bastian.
The refinery lost $73 million during the first half of the year and reported a $3 million profit in the third quarter.
Delta bought Trainer from Philips for $180 million in June 2012, though it benefitted from $30 million in incentives from the state of Pennsylvania.