By Karen Jacobs

(Reuters) – Delta Air Lines Inc (DAL.N: Quote, Profile, Research, Stock Buzz) will buy a Pennsylvania oil refinery from ConocoPhillips (COP.N: Quote, Profile, Research, Stock Buzz) for $180 million, an audacious bid to save money on fuel costs by investing in a sector shunned by many of the biggest oil firms.

Atlanta-based Delta said the first ever purchase of a refinery by an airline would allow it to cut $300 million annually from jet fuel costs, which reached $12 billion last year. It said production at the refinery along with other agreements to exchange refined products for jet fuel would provide 80 percent 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 maximize 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, which is currently more than $2 billion a year for Delta and has been rising in the wake of U.S. refinery shutdowns, said Delta Chief Executive Richard Anderson.

“What we’re tackling here today is the jet crack spread, which you cannot hedge in the marketplace effectively,” Anderson told reporters during a phone briefing. “It’s the fastest single growing cost in our book of expense at Delta.”

By Karen Jacobs

(Reuters) – Delta Air Lines Inc (DAL.N: Quote, Profile, Research, Stock Buzz) will buy a Pennsylvania oil refinery from ConocoPhillips (COP.N: Quote, Profile, Research, Stock Buzz) for $150 million, an audacious bid to save money on fuel costs by investing in a sector shunned by many of the biggest oil firms.

Atlanta-based Delta said the first ever purchase of a refinery by an airline would allow it to cut $300 million annually from jet fuel costs, which reached $12 billion last year. It said production at the refinery along with other agreements to exchange refined products for jet fuel would provide 80 percent 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 maximize 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, which is currently more than $2 billion a year for Delta and has been rising in the wake of U.S. refinery shutdowns, said Delta Chief Executive Richard Anderson.

“What we’re tackling here today is the jet crack spread, which you cannot hedge in the marketplace effectively,” Anderson told reporters during a phone briefing. “It’s the fastest single growing cost in our book of expense at Delta.”

By Karen Jacobs

(Reuters) – Delta Air Lines Inc (DAL.N: Quote, Profile, Research, Stock Buzz) will buy a Pennsylvania oil refinery from ConocoPhillips (COP.N: Quote, Profile, Research, Stock Buzz) for $150 million, the most audacious move yet by an airline trying to save money on fuel costs.

Delta said the first ever purchase of a refinery by an airline would allow it to cut jet fuel costs — which reached $12 billion last year — by $300 million. It said production at the refinery along with other agreements to exchange refined products for jet fuel would provide 80 percent of the carrier’s fuel needs in the United States.

Delta will bring in a management team and outsource the trading operations at the 185,000 barrel per day Trainer, Pa., refinery. In the weeks leading up to the deal, analysts wondered how an airline could succeed at running a refinery experienced energy companies have shunned.

The deal will ease fears that the closure of several major East Coast refineries would cause a shortfall in gasoline or diesel supplies this summer. The governor of Pennsylvania has scheduled a news conference for Tuesday at Trainer, which has been idled since last September pending a sale.

Oil major BP (BP.L: Quote, Profile, Research, Stock Buzz) will supply crude oil to be refined at the plant under a three-year agreement, Delta said. BP and former refinery owner Phillips 66 will get a share of the gasoline, diesel and refined fuel to sell, in exchange for supplying Delta with jet fuel in other locations.

Delta said it expects to purchase to add to its earnings and expand margins in the first year of operations as it recovers its investment. In addition to the $150 million purchase cost, Delta will also spend $100 million to re-tool the refinery to expand jet fuel output, it said.

April 30 (Reuters) – Delta Air Lines Inc will buy a Pennsylvania oil refinery from ConocoPhillips for $150 million, the most audacious move yet by an airline trying to save money on fuel costs.

Delta said the first ever purchase of a refinery by an airline would allow it to cut jet fuel costs — which reached $12 billion last year — by $300 million. It said production at the refinery along with other agreements to exchange refined products for jet fuel would provide 80 percent of the carrier’s fuel needs in the United States.

Delta will bring in a management team and outsource the trading operations at the 185,000 barrel per day Trainer, Pa., refinery. In the weeks leading up to the deal, analysts wondered how an airline could succeed at running a refinery experienced energy companies have shunned.

The deal will ease fears that the closure of several major East Coast refineries would cause a shortfall in gasoline or diesel supplies this summer. The governor of Pennsylvania has scheduled a news conference for Tuesday at Trainer, which has been idled since last September pending a sale.

Oil major BP will supply crude oil to be refined at the plant under a three-year agreement, Delta said. BP and former refinery owner Phillips 66 will get a share of the gasoline, diesel and refined fuel to sell, in exchange for supplying Delta with jet fuel in other locations.

Delta said it expects to purchase to add to its earnings and expand margins in the first year of operations as it recovers its investment. In addition to the $150 million purchase cost, Delta will also spend $100 million to re-tool the refinery to expand jet fuel output, it said.

The refinery would be run by a leadership team headed by Jeffrey Warmann, who last ran Murphy Oil USA’s Meraux, Louisiana, refinery.

WASHINGTON (Reuters) – Weapons makers reported higher quarterly earnings this week, with cost cutting helping them maintain solid profit margins, even as defense budget cuts began to drive down revenues in services and other areas.

Industry executives said they would continue to squeeze out waste as the sector braces for another $500 billion in defense cuts that will kick in next January if U.S. lawmakers cannot find other deficit-cutting measures to avert “sequestration.”

The shares of Lockheed Martin Corp (LMT.N: Quote, Profile, Research, Stock Buzz), Boeing Co (BA.N: Quote, Profile, Research, Stock Buzz), Northrop Grumman Corp (NOC.N: Quote, Profile, Research, Stock Buzz) and Raytheon Co (RTN.N: Quote, Profile, Research, Stock Buzz) closed higher across the board on Thursday as the companies maintained or slightly increased guidance for the full year.

The S&P aerospace and defense index rose nearly one percent, with Lockheed shares peaking one percent higher at $92.24, its highest since September 2008, before slipping back to close at $91.70.

Executives said they would remain focused on cost-cutting, drumming up foreign orders, which tend to carry better profit margins, and expanding into adjacent markets.

Lockheed Chief Executive Bob Stevens, who announced on Thursday that he will retire at the end of the year, said his company had begun planning for how to deal with sequestration, but would continue working to ensure the measure was halted or “revised to a more sensible approach.”

Analysts welcomed the generally upbeat quarterly reports from defense companies, but said the companies would have to step up their efforts to maintain profit margins that ranged as high as 17.7 percent – the level reported by Raytheon at its integrated defense business.

By Karen Jacobs

(Reuters) – Two major U.S. airlines, US Airways and Delta, reported operating losses for the first quarter as fuel costs increased, but both cited solid demand ahead of the busy summer travel season and their shares rose.

US Airways Group (LCC.N: Quote, Profile, Research, Stock Buzz), which delivered a smaller loss than Wall Street estimates, cited “overall strength in passenger demand.”

Delta Air Lines (DAL.N: Quote, Profile, Research, Stock Buzz), whose loss after items was in line with analysts’ consensus estimates, said on Wednesday it expects profits for the current second quarter and full year despite higher fuel prices.

“Demand is strong, which is going to mean we’ll have ticket price increases,” said Ray Neidl, an aerospace analyst with Maxim Group.

“Fuel is somewhat stable right now and both airlines are doing a very good job in maintaining or even cutting their non-fuel” costs, he added. “It’s going to be a very good second and third quarter for the industry, I believe.”

Shares of US Airways rose 2.8 percent to $9.57 in morning trading, while Delta was up 1.3 percent to $10.62. The Arca Airline index .XAL gained 1.3 percent.

April 20 (Reuters) – The three main unions at bankrupt American Airlines said they have reached a tentative deal with US Airways Group intended to put pressure on a reluctant American to start merger talks with its rival.

The unions said they support a tie-up to preserve jobs that otherwise would be lost if American’s parent AMR Corp sticks to its plan to restructure as a stand-alone airline. American, the third-largest U.S. airline, so far has shunned merger interest from US Airways.

“We have reached agreements on terms sheets for collective bargaining agreements that would govern the American Airlines employees of the merged airline with US Airways,” the unions said on Friday in a statement provided to Reuters.

“We are pleased to confirm our support of a possible merger between our airline and US Airways,” said the unions, which represent American’s flight attendants, pilots and ground workers.

The unions said a deal with US Airways would save at least 6,200 American Airlines jobs that would have been shed under the company’s stand-alone strategy. American has said it wants to cut 13,000 union jobs, or roughly 15 percent of its work force, as part of an overall plan to save $1.25 billion in annual labor costs.

The company continues to pursue consensual deals on labor concessions. But, frustrated with the pace of negotiations, it has asked the U.S. bankruptcy court in Manhattan for permission to void labor contracts. A hearing on the matter is set for next week. The airline said on Wednesday it intended to cut another 1,200 non-unions jobs to reach its 15 percent goal.

Pilots at American Airlines are represented by the Allied Pilots Association. The flight attendants are represented by the Association of Professional Flight Attendants. The Transport Workers Union represents seven groups of ground workers at American.

By Karen Jacobs

(Reuters) – Southwest Airlines Co (LUV.N: Quote, Profile, Research, Stock Buzz) reported a narrower-than-expected quarterly loss pinched by high fuel costs but said demand was steady, sending its shares up more than 3 percent on Thursday.

The carrier, which acquired discount rival AirTran Holdings last year, said traffic and booking trends were solid for April even as oil-related price increases continued pressuring results.

“Assuming fuel prices stay about where they are, we don’t see some right turn in the economy, I think we have a good outlook for the balance of 2012,” Chief Executive Gary Kelly said during a conference call.

U.S. crude prices were trading at about $102 a barrel on Thursday; they peaked at $110 in March.

“Fuel has been behaving itself a little bit lately, (but) I wouldn’t count on that long-term going into the summer season,” said Ray Neidl, an airline analyst with Maxim Group. “But demand remains strong.”

U.S. airlines have merged, trimmed money-losing routes and raised ticket prices to return to stability after the 2008-2009 downturn. Rebounding corporate travel has also helped the industry, but rising fuel prices are always a threat.

April 19 (Reuters) – Southwest Airlines Co reported a narrower-than-expected quarterly loss pinched by high fuel costs but said demand was steady, sending its shares up nearly 4 percent on Thursday.

The carrier, which acquired discount rival AirTran Holdings last year, said traffic and booking trends were solid for April even as oil-related price increases continued pressuring results.

Southwest said it expects fuel costs including taxes to be in the $3.40- to $3.45-a-gallon range for the current second quarter, compared with $3.44 a gallon in the first quarter.

U.S. crude prices were trading at about $102 a barrel on Thursday; they peaked at $110 in March.

“Fuel has been behaving itself a little bit lately, (but) I wouldn’t count on that long-term going into the summer season,” said Ray Neidl, an airline analyst with Maxim Group. “But demand remains strong.”

Airlines have merged, trimmed money-losing routes and raised ticket prices to return to stability after the 2008-2009 downturn. Rebounding corporate travel has also helped the industry, but rising fuel prices are always a threat.

Fuel also squeezed Alaska Air Group, which reported a lower first-quarter profit on Thursday. American Airlines parent AMR Corp, which is operating under Chapter 11 protection, posted a wider quarterly loss, citing fuel and expenses tied to its reorganization. The first quarter is typically the weakest period for U.S. airlines.

By Karen Jacobs

(Reuters) – Rising fuel prices pushed major U.S. airlines into the red for the first quarter and could pressure results during the peak travel season, but most carriers are likely to be profitable this year, analysts said.

While grappling with high fuel costs, carriers have merged, trimmed money-losing routes, raised ticket prices, and added charges for luggage and food to revive profits after the 2008-09 downturn. A rebound in corporate travel has bolstered the recovery.

“The question becomes how profitable” will they be, said Savanthi Syth, an analyst with Raymond James.

Airlines have shown discipline over the past year in cutting back flights to match demand and are sticking with other winning strategies.

“It’s an industry that is committed to recouping fuel price increases and an industry that’s in a better position to recoup fuel price increases,” Syth said.

Big U.S. carriers will report first quarter results over the next few weeks, starting with Southwest Airlines Co (LUV.N: Quote, Profile, Research, Stock Buzz) on April 19. Analysts expect the biggest carriers to post losses. Southwest warned in early March that it would not post a profit for the period, citing high fuel prices.