Delco refinery helps Delta to beat estimates

Delta Air Lines said Thursday that its Trainer oil refinery in Delaware County produced a $19 million profit in the third quarter, and is expected to have a $20 million profit in the current fourth quarter.

Delta, the first U.S. airline to report earnings, had Thanksgiving revenues up by 8 percent, and Christmas and New Year's bookings "look solid," company president Edward Bastian reported on a conference call.

Management said it has seen no change in booking trends due to the Ebola outbreak in West Africa.

Delta earned $357 million, or 42 cents a share. Excluding special items, the airline earned $1.20 a share, beating analysts' estimates of $1.18.

Fuel costs declined $23 million in the three months ended Sept. 30, driven by lower fuel prices and "improved profitability" at the former ConocoPhillips refinery, chief financial officer Paul Jacobson said.

The Trainer refinery, which Delta bought in 2012 for $150 million as a source of discounted jet fuel, will be "close" to profitable for the full year, the airline said. The refinery, run by Delta subsidiary Monroe Energy L.L.C., posted a $116 million loss in 2013.

"A key driver of the profitability was our domestic-crude initiative, as we processed 100,000 barrels per day of domestic crude during the quarter," Jacobson said. "We are on pace to achieve our goal of averaging 70,000 barrels per day for the full year, which should increase to 100,000 barrels per day in 2015.

"The refinery team is doing a fabulous job of running the plant and keeping it up and operational."

Jet fuel represents one-third of an airline's operating costs, and fuel prices per gallon have dropped 15 percent since Sept. 3, analyst Hunter Keay, with Wolfe Research L.L.C., said in a client update. "Our sense is management teams are still optimistic (though perhaps cautious now), revenue trends are stable."

Keay said a recent sell-off in airline stocks "feels irrational." Airline stocks have tumbled on investor fears of a possible drop in air travel. A second Texas nurse contracted the Ebola virus and flew this week from Cleveland to Dallas on a Frontier Airlines commercial flight a day before she was diagnosed.

Delta shares closed up 3 percent to $33.32.

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