Delta’s 2012 Refinery Purchase Now Paying Off as Jet Fuel Costs Soar

Delta Air Lines' controversial decision to buy a Philadelphia-area refinery in 2012 is proving valuable as jet fuel prices surge faster than crude oil costs. While other airlines face mounting fuel expenses, Delta's Monroe refinery allows the company to keep refining profits in-house rather than paying outside suppliers.

A decision that seemed questionable twelve years ago is now appearing brilliant for Delta Air Lines as aviation fuel costs skyrocket amid ongoing conflicts.

Back in 2012, Delta made an unconventional move by purchasing an older refinery facility near Philadelphia. While most airlines simply purchase jet fuel from external suppliers, Delta chose to own the entire operation that converts crude oil into aviation fuel and other petroleum products.

The acquisition aimed to reduce fuel expenses but also attracted criticism as airlines faced mounting pressure to reduce their environmental impact.

Today, with aviation fuel costs climbing more rapidly than crude oil prices during wartime conditions, the profit margins built into airline fuel expenses are expanding – making Delta’s strategic investment increasingly valuable.

While other carriers face higher costs when the gap between crude and jet fuel widens, Delta continues paying market rates for fuel transferred from its Monroe facility to airline operations.

However, by controlling the refinery, the profits from fuel processing remain within Delta rather than flowing to external suppliers, the company explained to Reuters.

UNDERSTANDING THE FINANCIAL PRESSURE

Aviation fuel costs have surged dramatically in recent weeks, expanding what industry experts call the crack spread – the price difference between crude oil and refined petroleum products.

During the March 20 week, North American jet fuel averaged approximately $179 per barrel, while Brent crude traded around $110, based on International Air Transport Association data. U.S. spot aviation fuel prices reached even higher levels, hitting about $4.56 per gallon on March 20, equivalent to roughly $192 per barrel, according to Airlines for America.

For carriers purchasing fuel through standard market channels, this spread gets built into their costs. When the gap expands, airline fuel expenses can spike rapidly even when crude prices remain relatively stable.

Alaska Air Group CEO Benito Minicucci revealed last week that his airline consumes approximately 100 million gallons monthly, meaning each $1 increase in jet fuel adds roughly $100 million to monthly expenses.

THE REFINERY ADVANTAGE

While Delta hasn’t disclosed how much Monroe could offset current price spikes, company filings demonstrate material cost containment during periods of expanded refining margins.

According to Delta’s reports, Monroe reduced average fuel costs by approximately 23 cents per gallon in 2022, 10 cents in 2023, one cent in 2024, and four cents in 2025. Considering disclosed fuel consumption, these savings translated to roughly $785 million, $393 million, $41 million, and $171 million respectively.

Monroe produced $777 million in operating income during 2022, when refining margins jumped following Russia’s Ukraine invasion that disrupted global fuel markets.

Throughout history, Delta’s fuel cost benefits increased when refining margins expanded and decreased when they contracted.

Morningstar analyst Nicolas Owens explained the structure helps cushion refining margin spikes.

“When crack spreads widen, Delta is essentially paying itself the crack spread for that portion of the fuel,” Owens noted. “It does mute the impact of the fuel price spike for Delta.”

However, the refinery can become problematic when refining margins shrink. Delta’s documents show Monroe recorded a $216 million operating loss in 2020, when the pandemic devastated jet fuel demand and disrupted refined product markets.

COMPETITIVE COMPARISON

The advantage became apparent during the previous major fuel price surge.

Delta’s average fuel cost increased to $3.36 per gallon in 2022 from $2.02 in 2021, raising its annual fuel expense to approximately $11.5 billion, representing 24% of total operating costs, up from 20% in 2021.

United Airlines, in contrast, paid an average $3.63 per gallon in 2022, rising from $2.11 in 2021, pushing its fuel bill to roughly $13.1 billion, or 31% of total operating expenses, compared to 22% in 2021.

Fleet composition, route structures, and other variables also influence airline per-gallon costs.

COMPETITORS STRUGGLE WITH RISING COSTS

Minicucci said Alaska has been redirecting fuel supply away from the U.S. West Coast – including transporting fuel from Singapore to Seattle – because refinery margins there have pushed jet fuel prices approximately 20 cents per gallon higher.

American Airlines reported that elevated fuel prices added about $400 million to its first-quarter fuel expenses since its late January update.

United CEO Scott Kirby cautioned employees last week that jet fuel prices had more than doubled within three weeks and, if maintained, could add approximately $11 billion to United’s annual fuel bill – exceeding twice the airline’s best-ever yearly profit.

“At the moment owning a refinery is almost like a hedge,” said Denton Cinquegrana, chief oil analyst at Oil Price Information Service.

CHALLENGES AND LIMITATIONS

The refinery doesn’t eliminate Delta’s vulnerability to higher fuel prices. Refining profits can vary with market conditions.

The facility also creates regulatory expenses. Delta reported its costs for U.S. Renewable Fuel Standard compliance increased to $312 million in 2025 from $203 million in 2024.

During years of narrow refining margins, these compliance costs can reduce Monroe’s financial benefits.

DELTA’S STRATEGIC POSITION

Delta CEO Ed Bastian said last week that rising jet fuel prices added approximately $400 million to the airline’s fuel bill in March.

However, he emphasized the refinery provides a “meaningful hedge” on refining margins between crude oil and jet fuel.

“It’s not going to cover the crack entirely,” he explained. “But (it) gives us a fairly significant hedge.”

Bastian indicated Monroe’s profits should begin contributing starting in the second quarter.