Business

Delta Air Planning to Offload Oil Refinery in Pennsylvania

America’s biggest airline Delta Air is planning to sell its oil refinery located in Trainer, Pennsylvania according to sources who are close to the developments. It does not come as much of a surprise since last year Delta had tried to sell a part of the refinery. However, that attempt failed, and now the airline is willing to offload the refinery entirely.

In 2018, the company had intimated investment banks about their plans to sell a stake in the refinery, since they wanted to lower the risks of being in the highly volatile energy business. That turned out to be a misadventure as buyers were not willing to invest in an oil refinery in the East Coast. As many as four oil refineries have been shut down in the East Coast over the past decade. The location was only part of the problem. In addition to that, the cost of acquiring crude oil has gone up, and that was also seen as a factor behind Delta failing to sell a piece of the business.

Delta Airlines had bought the refinery with a view to producing jet fuel and reduce the costs of running the airline. It should be noted that jet fuel is the biggest expense for any airline and when it was acquired for $ 150 million in 2012, the refinery was producing 185,000 barrels a day. The refinery also produces diesel and gasoline, which are then sold at a profit. According to the airline, keeping the refinery open at the time was necessary since its closure would have meant an industry-wide rise in the cost of jet fuel. In the recent past, Delta had taken a far more pragmatic approach to the refinery and went on to produce more of the products that generated the biggest revenues. However, it seems, the airline is now going to be sold to the highest bidder.

The latest plan from Delta is to sell the entire plant. However, in addition to a sale, they want the buyer to get into a long-term agreement with the airline to purchase jet fuel that is produced by the plant.

Following the speculation, the spokesperson for Delta Airlines, Morgan Durrant refused to corroborate anything and redirected the interested parties towards the comments made by Paul Jacobson, the chief financial officer, last month. Jacobson had said, “We have continued with that process and have received some interest in having discussions with parties. There’s no update on the strategy broadly as we articulated. We’re looking for ways to enhance the value and the strategic value to Delta of the refinery through a partnership and those discussions can be complicated.”

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