Business

Delta “Close” to Buying Oil Refinery, Report Says

April 18th, 2012

Airlines continue to grapple with how to cover ever-increasing fuel costs and still turn a profit.

So far, that’s meant a barrage of small fare hikes. The latest tacked up to $20 to the cost of a Delta Air Lines round-trip ticket.

But the Atlanta-based carrier is reportedly about to try something unprecedented in the airline industry.

Reuters reports Delta has bid around $150-million for an oil refinery in Pennsylvania, where it could process its own jet fuel. The article cites anonymous sources close to the deal who say an announcement could come as soon as this week.

“It’s a clever idea,” says Rick Seaney, CEO of the website FareCompare.com. He says airlines want their costs to be as fixed as possible.

In the past, that’s meant fuel hedging.

“It’s gotten really expensive and they’ve been on the wrong side of hedges,” Seaney says. This gives them something more that they can hang their hat on.”

Seaney says if the idea works, it could shave up to ten-percent off Delta’s fuel bill. That’s no small amount, considering the airline last year paid nearly $12-billion to fuel its planes.

Delta spokesman Eric Torbenson says Delta can’t comment on the deal at this time.