Audacious Delta becomes first airline to buy a refinery: Energy

[Reuters] Delta Air Lines Inc will buy a Pennsylvania oil refinery from ConocoPhillips for US$150-million, an audacious bid to save money on fuel costs by investing in a sector shunned by many of the biggest oil firms.

Swissport Fueling employee Daniel Berg disconnects the main fuel line after refueling this Delta AirLines jet at Phoenix Sky Harbor International Airport: Jeff Topping/Getty Images

Atlanta-based Delta said the first ever purchase of a refinery by an airline would allow it to cut US$300-million annually from jet fuel costs, which reached US$12-billion last year. It said production at the refinery along with other agreements to exchange refined products for jet fuel would provide 80% of its fuel needs in the United States.

The deal for the idled 185,000 barrel per day Trainer, Pa., refinery, which has puzzled analysts since it first surfaced last month, will come as some relief to politicians and officials, who had feared thousands of lost jobs and a potential summer spike in fuel costs if the plant was shut permanently.

And while the initial investment is no more than a wide-body jet liner, even including an additional $100 million to upgrade the plant to maximise jet fuel production, it will put Delta in the unique position of hoping that the recent rebound in refinery profit margins — normally an indication of added costs for a fuel consumer — doesn’t prove too fleeting.

While Delta will remain hostage to fluctuating crude oil costs, the facility would enable it to save on the cost of refining a barrel of jet fuel….

Read the full Reuters story at Energy…..

By Karen Jacobs, Reuters
May 1, 2012

 

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Indian Government permits Kingfisher Airlines, Spicejet, IndiGo to directly import aviation fuel

NEW DELHI: Three Indian carriers, which have been permitted to directly buy jet fuel from foreign sources, would together import almost 13 lakh kilo litres (kl) of the fuel at a cost of about Rs 5,780 crore for the present. 

The three carriers have been negotiating with leading oil marketing companies

The carriers which have recently received permission from the Directorate General of Foreign Trade (DGFT) under the Commerce Ministry, to import aviation turbine fuel (ATF) are Kingfisher Airlines, SpiceJetand IndiGo.

Air India, which has also applied for such an approval, is yet to receive permission to import ATF. The move will help the airlines to significantly slash its operating costs.

“All the three airlines have been permitted to directly import ATF,” a senior Commerce Ministry official told a reporter.

While InterGlobe, owner of no-frill airline IndiGo, got approval to import 7.15 lakh kl worth Rs 3,200 crore of jet fuel, cash-strapped Kingfisher has been allowed to buy five lakh kl worth Rs 2,233 crore. SpiceJet would import only 50,000 kl worth Rs 235 crore, the official said.

The three carriers have been negotiating with leading oil marketing companies and were hopeful of beginning fuel imports in due course, a source said.

Industry experts have claimed that a mix of taxes levied by state-run oil marketing companies and the state governments make jet fuel prices in India among the highest in the world.

Currently, fuel costs account for about 40 per cent of an airline’s total operating costs.

Read the full story from India’s ‘The Economic Times’….

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The Economic Times
22 APR, 2012

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Kingfisher, AI seek nod for jet fuel (ATF) import

Debt-laden Kingfisher Airlines (KFA) and Air India (AI) have become the first domestic carriers to apply for permission to directly import aviation turbine fuel (ATF) or jet fuel. Direct import of ATF is likely to bring down the operational costs of airlines by 10-15%. Both carriers had filed applications with the Directorate General of Foreign Trade (DGFT), government sources told Hindustan Times.

Air India & Kingfisdher seek to cut fuel costs

Till now airlines bought fuel from oil marketing companies. The Economic Survey tabled in the Parliament earlier this month had noted that airlines had been affected by high ATF prices because of high incidence of taxes and the decision to allow them to import ATF was likely to improve their operational economics.

The AI board on March 27 approved direct import of ATF and the airline would shortly appoint a service provider, who would source the supply as well as provide the necessary infrastructure for storage and distribution of the same for in-plane fuelling.

Indian carriers operate in an exceptionally high-cost environment. The single-largest element contributing to airline costs is ATF, which accounts for 40% of the operating cost of Indian carriers, against 20% for international carriers. ATF in India is priced, on an average, almost 60% higher than globally.

Original piece from Hindustantimes.com

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Tushar Srivastava, Hindustan Times
New Delhi, March 29, 2012

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