Delta Air Lines' Refinery Bet Is About to Pay Off Again
Five years ago, Delta Air Lines (NYSE: DAL) made the unusual decision to buy a refinery, to protect against the risk of high crack spreads -- the difference between the cost of crude oil and the cost of refined products like jet fuel.
Many energy-market analysts thought Delta was making a big mistake, and that it didn't have the expertise necessary to run a refinery. Yet while Delta's Trainer, Pa., refinery has had its ups and downs, it has earned a good rate of return overall. Most importantly, it has proved effective at insulating Delta from fluctuations in crack spreads. In the wake of Hurricane Harvey, Delta is set to capitalize on its refinery bet once again.
When Delta bought its refinery in early 2012, the company estimated that it would contribute annual pre-tax profits of about $300 million. However, that proved to be an overly ambitious target.
Source: Fool.com
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