Jet fuel shocks usually hit airlines one way: straight in the income statement. That is what is happening across the US industry right now as a result of the ongoing conflict in Iran. The Wall Street Journal reports that US jet-fuel prices have roughly doubled from late February to today, reaching more than $4.80 per gallon. At that rate, Deutsche Bank analysts estimate airlines could face roughly $40 billion in extra fuel costs this year.

But Delta Air Lines has one advantage that nobody else in the industry can match. While it remains exposed to higher fuel costs and says its fuel bill will rise by about $2 billion in the second quarter, it also owns the Trainer refinery in Pennsylvania through Delta subsidiary Monroe Energy. At current prices, Delta says that the refinery will provide about $300 million of benefit in Q2, cushioning part of the same fuel spike that is hurting its rivals.

The result is unusual but simple: Delta is not escaping expensive fuel, but it is also making more money from the refining margin embedded within it, providing it with a distinct advantage over its competitors.

Fuel Nearly Broke Delta Once

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Delta’s refinery story really begins with two painful fuel lessons. The first came in 2005, when rising fuel prices helped to push the airline into Chapter 11. It wasn’t the only factor contributing to the bankruptcy — Delta also faced significant pressure at the time from low yields, high interest costs, and pension obligations — but the biggest factor was fuel prices that were running far above plan. In the first half of 2005 alone, Delta’s fuel expenses rose 56%, or nearly $700 million beyond budget.

What made the pain worse was how exposed Delta was. At the time, the airline said it had no meaningful fuel hedges or contractual protections that would reduce costs below market prices. When oil surged, Delta simply had to absorb it. Fuel became not just another line item, but a force that could overwhelm even a major network carrier.

The next lesson came shortly after bankruptcy, as Delta tried financial hedges for fuel, but those were hardly painless either. The airline later disclosed $1.4 billion of net fuel hedge costs in 2009 alone, largely from contracts bought in 2008 when oil was expected to keep rising, but didn’t. That left Delta’s leadership with a blunt conclusion: it did not want its destiny to be controlled by fuel prices again.

Richard Anderson, who was Delta’s CEO at the time, explained it very bluntly.

“We realized we had to do something to manage fuel-price swings better. And for what we paid, the refinery was a good deal. It was simply that we were not going to be controlled by fuel prices, and since then, the refinery has proven itself.”

Delta Buys The Trainer Refinery

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That thinking led Delta to the Trainer refinery, situated fifteen miles southwest of Philadelphia along the Delaware River. Originally built in 1925 by Sinclair Oil, the refinery changed ownership multiple times via BP and Tosco, before eventual owners ConocoPhillips shut it down in 2011 due to low profit margins.

This all coincided neatly with the rise of Jon Ruggles at Delta. Recruited by Anderson in 2011, Ruggles was leading an initiative aimed at overhauling Delta’s fuel procurement strategy, transforming it into something that resembled a commodity trading house and hedge fund rather than a passive price-taker. He famously funded the bonus pool for 80,000 employees at Delta in 2011 by making a single speculative trade in the heating oil market that earned more than $100 million.

Ruggles, upon hearing of the Trainer refinery shutdown, created Monroe Energy as a wholly owned Delta subsidiary, which bought the refinery and associated terminal and pipeline assets for $180 million. Delta’s own net outlay was roughly $150 million after state support, followed by another $100 million of spending to retool the plant to maximize jet fuel output.

The strategy was unusual, but not irrational. Delta was not trying to become a conventional oil company. It wanted to self-provide a large share of its fuel and reduce its dependence on outside refiners, especially in the Northeast. In its 2025 annual results, Delta said Monroe supplies about 200,000 barrels per day, equal to roughly 80% of Delta’s domestic fuel needs through direct production plus exchanges and sales.

Plenty of people thought the move was crazy. Analysts questioned why an airline would buy an old refinery that its previous owner was shutting down. The skepticism only deepened when the refinery lost money in its first full year. Even when profitable years followed, critics kept asking the same question: why take on a messy, cyclical, capital-intensive business so far removed from flying airplanes?

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The Crack Spread Is The Entire Point

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Trainer’s first decade under Delta explains why that argument from the skeptics never went away. In the early years, the refinery proved to be a very volatile asset, highly sensitive to the very market conditions Delta bought it to hedge against. In the first full year of Delta ownership, the refinery lost $116 million, and in subsequent years it swung wildly between profit and loss. All told, over the first 10 years, Delta came out ahead, but not by much. Then 2022 changed everything…

But before we get to that, there is a key concept to understand: the crack spread. This is the price difference between a barrel of crude oil and the refined petroleum products produced from it. The US Energy Information Administration (EIA) uses crack spreads as a rough measure of refining margins. Market shocks – such as the current crisis in the Gulf – will typically result in a rapidly widening crack spread, meaning that even as the cost of crude rises, the cost of jet fuel rises even faster. For airlines, that is especially painful because they buy the refined product, not the crude itself. But refiners, like Monroe Energy, actually make more money.

That is why owning a refinery helps. Every airline feels the downside of a widening crack spread as its fuel costs spike. Delta feels that, too, but Monroe also captures part of the refining margin on the other side. Delta is still exposed to higher fuel prices overall, but it just does not have to hand the full refining markup to outside suppliers. In effect, it is both a jet-fuel buyer and a collector of refining profits.

The advantage of this strategy became especially visible in 2022 after Russia invaded Ukraine. Almost overnight, crude prices surged to over $130 per barrel, and crack spreads widened to record highs over fears of refined product supply disruptions. Every airline felt the pain, but Reuters reports that Trainer helped reduce Delta’s fuel expense by $785 million that year, and generated $777 million of operating income.

That was the moment the hedge case became impossible to dismiss. In the right market, Trainer was not just interesting. It was materially protective. And only one airline in the world had that protection.

Now The Iran Shock Is Doing It Again

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Fast forward to today, and the current crisis, which began as a crude oil story, has quickly become an even bigger jet-fuel story as refining margins widened. At the start of the year, jet fuel was holding steady at around $2.50 a gallon, but it has since soared to more than $4.80 a gallon earlier this month. Delta said in its recent Q2 guidance that it is assuming an all-in fuel price of about $4.30 per gallon, leading its fuel bill to rise by about $2 billion this quarter.

Delta is not alone, of course — every airline is impacted by this. But crucially, Delta has a hedge with the Trainer refinery. Speaking to CNBC last week, CEO Ed Bastian said that the company expects the refinery to benefit Delta with increased earnings of approximately $300 million this quarter. Speaking to reporters, he said:

“We don’t know where fuel is going to go, but to the extent fuel stays elevated, that refinery will continue to help us.”

The geopolitical backdrop has turned even more volatile since those comments. The failed US-Iran talks over the weekend and the planned US blockade of the Strait of Hormuz caused oil to surge back above $100 a barrel. That matters because if crude stays high and continued uncertainty causes the crack spread to stay painfully wide, it spells trouble for US airlines.

Delta, crucially, is the only airline with an in-house refining cushion. So while it is still paying much more for fuel, it has a partial internal offset that rivals do not. That does not make Delta immune. It just means the same shock hurts it a lot less than it hurts everyone else.

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The Critics Are Silenced

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So what of the critics of Delta’s strategy? The case against Trainer was always easy to make. Airlines, critics argued, should not run refineries. Trainer was an aging industrial plant with operational risk, environmental exposure, regulatory costs, and heavy capital needs. Worse, skeptics said, if Delta increased East Coast jet-fuel supply, competitors could benefit from lower prices too, meaning Delta would absorb the risk while the rest of the industry got some of the upside for free.

Those criticisms were not baseless. The refinery has had ugly years, with uneven profitability through much of the nearly 15 years that Delta has owned it. In a weak-margin year, Trainer can feel less like a hedge and more like a headache. But moments like the current fuel cost surge change the tone. What looks eccentric in calm markets can look inspired in a shock, and a $300 million per quarter benefit that no other competitor has is invaluable in a crisis.

But who better to silence the critics than Delta’s fiercest competitor? United Airlines CEO Scott Kirby, who is never short on criticism where he feels it is warranted, was asked about the refinery strategy. His response? He effectively conceded that Delta gets a unique benefit when crack spreads are unusually high:

“Over the life of the refinery, you could say that the benefit is shared by everyone. But right now, with the crack spread so much higher…well they’ll get real benefit from the higher crack spread, and that will be unique to them.”

If Oil Prices Stay Elevated, The Numbers Get Big Fast

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The official oil outlook points to some easing later in 2026. The latest EIA forecast says Brent Crude should peak in Q2 and fall later in the year. But that view is now facing a major stress test after the past weekend’s failed talks and renewed shipping risk. In other words, the forecast may still say “down later”, but the fast-moving geopolitics are saying “not so fast.”

If Delta’s current refinery benefit were sustained at around the current Q2 pace, the annualized benefit could end up north of $1 billion. And the margin impact is real. Delta reported $63.4 billion of operating revenue and $5.8 billion of operating income in 2025, for a 9.2% operating margin. On that basis, $1 billion of refinery benefit would equal about 1.6 margin points and roughly 17% of 2025 operating income.

Delta will be hoping that fuel costs don’t remain elevated, but if they do, it does at least have a unique hedge. That is why this is more than an interesting side story. For an initial investment that was roughly the upfront cost of a single new Airbus A321XLR, the Trainer refinery is once again making a very strong case that it was one of Delta’s smartest long-term bets.