Ratings unchanged at Delta following oil refinery buy

Source: Flightglobal.com
This story is sourced from Flightglobal.com

Delta Air Lines' ratings and outlook are not affected by the company's plan to purchase an oil refinery.

Standard & Poor's Ratings Services (S&P) says in a research note the carrier's "B" corporate credit rating and stable outlook remain unchanged in light of Delta's agreement to buy a recently closed refinery from Phillips 66 for $180 million ($30 million of which will be offset by assistance from the state of Pennsylvania).

The move could save Delta $300 million annually in jet fuel expense, according to S&P.

The ratings agency notes the move commits the airline to owning and operating a complex business "outside of its expertise, and one that can incur substantial unplanned costs related to environmental regulations, accidents, or other unforeseen operating problems". Still, the ratings agency does not see this as material to Delta's credit, given the airline's annual operating cash flow of about $4 billion and its adjusted debt burden (including leases and retiree liabilities) of $33 billion.

Delta expects to close on the acquisition in the first half of 2012.