Southwest Airlines chartered a cargo ship to transport jet fuel from Houston to Los Angeles in May, marking the airline’s first such maritime fuel shipment, according to comments made by Chief Financial Officer Tom Doxey to CNBC. The vessel traveled through the Panama Canal and arrived May 28 carrying approximately 12.6 million gallons of fuel at a time when supply constraints and pricing pressures affected West Coast markets. For context, Southwest consumed 564 million gallons of jet fuel during the most recent quarter.
The West Coast has historically depended more heavily on fuel imports compared to other U.S. regions. Prices surged and became increasingly unpredictable following military action involving the U.S. and Israel directed at Iran in February. The airline subsequently reported that fuel expenses climbed nearly $900 million in the second quarter compared to the prior year period. To facilitate the shipment, Southwest obtained a waiver of the Jones Act, a 1920-era statute mandating that cargo transported between U.S. ports must utilize American-flagged vessels. President Donald Trump granted this waiver in March as fuel prices escalated rapidly in the weeks following the onset of regional conflict and related maritime disruptions in the Strait of Hormuz.
Multiple nations implemented export restrictions on fuel supplies this year due to concerns about domestic availability, though a Southwest representative indicated these worries have since moderated. Jet fuel represents airlines’ second-largest operating expense after labor costs. Prices declined during late spring and early summer months but subsequently increased as Iran-related tensions resurged during the month. United Airlines, which operates more international routes than any other U.S. carrier, announced it would employ the most current available fuel pricing for quarterly projections given the extreme volatility in markets. United reported a $575 million increase in third-quarter jet fuel costs, representing a $1.12 impact to adjusted earnings.
U.S. carriers have progressively eliminated fuel hedging strategies over approximately the past decade, when domestic supply abundance maintained downward pressure on prices. In the current environment, airlines have moderated capacity expansion plans, contributing to higher ticket prices. Industry leaders reported this month that passenger demand remains robust despite elevated fares, which carriers expect to persist.
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