Such issues apparently did not factor into Delta’s thinking when the airline paid $150 million for the struggling Trainer refinery, which ConocoPhillips had idled six months earlier citing pressure from imports, weak demand and regulatory costs. The refinery, which started in 1912 as a wooden structure and has been rebuilt, shut down, restarted and expanded by a series of owners, including Sinclair, BP and Phillips Petroleum.
When Delta took over, global air travel was growing, refiners were exporting to Africa and Latin America, and a shale drilling boom was suddenly producing cheap domestic oil for refiners to process.
For roughly the list price of a wide-body aircraft at the time, Richard Anderson, then Delta’s chief executive officer, asserted that the refinery would reduce the company’s fuel expenses by $300 million annually, allowing it to more than recoup its investment in just a year. That math suggested other airlines would be foolish not to make similar purchases.
“Everybody was kind of content to watch what Delta did with it and if it made a whole lot of sense you might have seen others replicate it, but in this case that’s not what happened,” said Helane Becker, a managing director and senior airline analyst at Cowen, an investment bank.
While the refinery had some decent years, it never yielded the amount of jet fuel that the airline had originally hoped for relative to other fuels. Nevertheless, Delta has argued that the facility helps to blunt the effect of the volatile energy market and lowers jet fuel prices across the board by boosting supplies.
The refinery relied largely on crude shipped by rail from the Bakken Formation in North Dakota. But in late 2015, Congress lifted a decades-long ban on oil exports. That change encouraged companies to build pipelines that took Bakken crude more cheaply south for export or refining in Gulf Coast refineries.
Executives at Delta and its refinery declined requests for comment.
In a recent conference call, Paul Jacobson, the airline’s chief financial officer, said that the plant was operating “at break-even levels” after a steep April loss. In response to a question about whether the airline wanted to sell all or part of the refinery, he said nothing was out of the question.