Delta Airlines 2014 Annual Report Download - page 71

NOTE 2 . SEGMENTS
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly
by the chief operating decision maker, or decision making group, and is used in resource allocation and performance assessments. Our chief operating
decision maker is considered to be our executive leadership team. Our executive leadership team regularly reviews discrete information for our two
operating segments, which are determined by the products and services provided: our airline segment and our refinery segment.
Our airline segment is managed as a single business unit that provides scheduled air transportation for passengers and cargo throughout the United
States and around the world and other ancillary airline services, including maintenance and repair services for third parties. This allows us to benefit
from an integrated revenue pricing and route network. Our flight equipment forms one fleet, which is deployed through a single route scheduling
system. When making resource allocation decisions, our chief operating decision maker evaluates flight profitability data, which considers aircraft type
and route economics, but gives no weight to the financial impact of the resource allocation decision on an individual carrier basis. Our objective in
making resource allocation decisions is to optimize our consolidated financial results.
Our refinery segment provides jet fuel to the airline segment from its own production and through jet fuel obtained through agreements with third
parties. Our refinery segment operates for the benefit of the airline segment.
Refinery Operations
Fuel expense is our single largest expense. In June 2012 , we purchased an oil refinery as part of our strategy to mitigate the increasing cost of the
refining margin we pay. At that time, global demand for jet fuel and related products had increased while jet fuel refining capacity had decreased in the
U.S. (particularly in the Northeast), resulting in increases in the refining margin reflected in the prices we paid for jet fuel. Our wholly-owned
subsidiaries, Monroe Energy, LLC, and MIPC, LLC (collectively, “Monroe”), acquired the Trainer refinery and related assets located near
Philadelphia, Pennsylvania, from Phillips 66, which had shut down operations at the refinery. Monroe invested $180 million to acquire the refinery.
Monroe received a $30 million grant from the Commonwealth of Pennsylvania. The acquisition included pipelines and terminal assets that allow the
refinery to supply jet fuel to our airline operations throughout the Northeastern U.S., including our New York hubs at LaGuardia and JFK.
We accounted for the refinery acquisition as a business combination. The refinery, pipelines and terminal assets acquired were recorded at $180
million in property and equipment, net based on their respective fair values on the closing date of the transaction.
The refinery's production consists of jet fuel, as well as non-jet fuel products. We use several counterparties to exchange the non-jet fuel products
produced by the refinery for jet fuel consumed in our airline operations. The gross fair value of the products exchanged under these agreements during
the years ended December 31, 2014 , 2013 and 2012 was $5.1 billion , $5.4 billion and $ 1.1 billion , respectively.
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