Delta Air Lines’ oil refinery investment losses concern sceptical investors and observers

Delta's exuberant purchase of an oil refinery near Philadelphia, Pennsylvania has been tempered during the last year as the losses at Trainer for 4Q2012 and 1Q2013 were close to USD85 million.

As 2Q2013 earnings reporting season nears, the carrier's investors will be carefully scrutinising Delta's results to determine if management declarations of a break-even performance of the refinery come to fruition.

Delta's rationale for purchasing Trainer in 2012 seemed cute. Through a smallish USD150 million or so investment (which has now risen to USD250 million), Delta was to gain some control in unruly crack spreads (refining costs) that accounted for USD2.2 billion of its total 2011 fuel bill of USD12 billion. In Apr-2012 Delta estimated that its crack spread cost per available seat mile jumped from USD0.41 to USD1.22 from 2009 to 2011. Part of the bet was on Bakken Shale crude being cheaper than Brent.