Oct. 22--Delta Air Lines said Tuesday its refinery in Trainer, Delaware County, posted a $3 million profit for the three months ended Sept. 30.
It was the first quarterly profit since Delta bought the former ConocoPhillips refinery last year to keep supplied with jet fuel.
"We have a tremendous opportunity with the Trainer refinery," Delta CEO Richard Anderson told investors on a conference call discussing third-quarter financial results. "Importantly, the refinery's production has proven to be effective in keeping jet cracks in check, particularly in the New York harbor," he said.
The "crack spread" is the difference between the cost of crude oil and the selling price of jet fuel -- it's the price paid to refiners.
Airlines can "hedge" the cost of oil by entering into long-term future contracts. But they cannot hedge the crack spread, or the refiners' profit margin, which fluctuates based on supply, demand, and market trends.
"Our next step is to improve the refinery's profitability through lower-cost domestic crude supply from the Bakken field, increase jet fuel output, and operational initiatives to improve throughput and product mix," Anderson said.
Delta shares soared after the Atlanta-based carrier reported a $1.2 billion net profit, or $1.41 per share, excluding special items. That beat analysts' average estimate of $1.36.
Net income was $1.4 billion, or $1.59 per share, including $157 million in special items. The company said it returned capital to shareholders, with $100 million in share repurchases and $51 million in dividend payments.
Executives said bookings this fall and for the upcoming holidays have been strong.
The airline expects to set an all-time profit record in 2013.
Delta said corporate revenues were up 10 percent, led by the banking, financial services and health care industries "which all grew at greater than 15 percent," said Delta president Ed Bastian.
"The increase in all three industry groups is a result of Delta's commitment to the New York market," wrote airline analyst Helane Becker in a client note.
"As Delta continues to strengthen its relationship with Virgin Atlantic, we think they will continue to gain market share at the expense of United and American," Becker said.
Delta bought a 49 percent stake in Virgin Atlantic last December to form a joint venture and coordinate flights and fares between New York's JFK and London Heathrow airports. The aim is to go after lucrative business travelers between the United States and United Kingdom.
Delta said the recent federal government shutdown had a $25 million negative impact as furloughed government workers curtailed travel.
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Investors don't appear too worried about a possible financial hit from out-of-the-money fuel hedging contracts.
Third-quarter earnings are expected to be dismal. The chief culprits -- high oil prices and the skyrocketing cost of jet-fuel refining.
Sees revenue increase of $1 billion for quarter over 2009