Southwest Airlines shipped jet fuel from Texas to California by boat for the first time, with the vessel arriving in Los Angeles on May 28 carrying approximately 12.6 million gallons. CFO Tom Doxey said the Dallas-based airline hired the ship amid supply concerns and price volatility on the West Coast, where jet fuel markets are heavily reliant on imports. The shipment was enabled by a Jones Act waiver that President Donald Trump granted in March as fuel prices surged following US and Israel strikes on Iran in February.
Southwest Ships 12.6 Million Gallons via Panama Canal Route
The ship departed from Houston and traveled through the Panama Canal before arriving in Los Angeles. Doxey stated the cargo represented about a week's supply for the airline's West Coast operations at a time when supply was most constricted and at risk. For context, Southwest used 564 million gallons of jet fuel in the last quarter.
The airline utilized a waiver of the Jones Act, a 1920 law requiring shipments between US ports to be carried on US-flagged vessels. Trump waived this requirement in March as fuel prices were rising in the weeks following the start of the Iran war and shipping disruptions occurred in the Strait of Hormuz. Southwest said worries about supplies intensified as countries restricted exports this year, though those concerns have since eased.
Airlines Report Fuel Cost Increases Exceeding $500 Million
Southwest announced Thursday that its fuel expenses increased nearly $900 million in the second quarter compared to last year. Jet fuel prices spiked and remained volatile since the US and Israel struck Iran in February.
United Airlines, which flies more internationally than any other US carrier, reported a $575 million jet fuel increase for the third quarter alone in its July 15 report, representing a $1.12 hit to adjusted earnings. The airline said it is using the latest available fuel prices for its quarterly estimates due to market volatility. Prices eased in late spring and early summer but rose again as tensions reignited with Iran this month.
Carriers Scale Back Capacity Growth Plans
US airlines have abandoned fuel hedges over the past decade as the US had abundant supply keeping prices stable. This time, carriers have scaled back their capacity growth plans, which is also helping boost fares. Airline executives this month said demand remains strong despite higher fares, which they say are likely to stick.
FAQ
What did Southwest Airlines ship to California on May 28?
Southwest Airlines shipped approximately 12.6 million gallons of jet fuel from Houston to Los Angeles via a vessel that traveled through the Panama Canal. This was the first time the Dallas-based airline used a ship to transport fuel from Texas to California.
Why did Southwest Airlines need to ship fuel by boat?
Southwest hired the ship amid supply concerns and price volatility on the West Coast, where jet fuel markets are heavily reliant on imports. The shipment occurred when supply was most constricted following US and Israel strikes on Iran in February, which caused fuel prices to spike.
How much did airline fuel costs increase in the second quarter?
Southwest Airlines reported fuel expenses increased nearly $900 million in the second quarter compared to last year. United Airlines reported a $575 million jet fuel increase for the third quarter alone in its July 15 report.
