Delta Airlines has purchased a refinery from ConocoPhillips in Trainer, PA, for approximately $250M (including planned upgrades). The refinery will supply over 75% of Delta’s fuel needs, and owning the refinery will cut an estimated annual $300M from the annual $12B fuel bill (approximately 2.5%).
If all goes according to that plan, the investment will pay back in less than a year.
This all comes as oil companies are in a number of cases looking to divest themselves of some refinery operations.
Strategy and risk management are often intertwined and can take you into some unconventional directions. There are several strategies Delta could follow to achieve savings on fuel – for many the acquisition of a refinery would be a bold step. With it will come new risks, but also new opportunities.