Southwest Airlines shipped 12.6 million gallons of jet fuel from Texas to Los Angeles via the Panama Canal this spring to mitigate supply shortages. The move, a first for the Dallas-based carrier, follows extreme price volatility and supply constraints triggered by U.S. and Israeli strikes on Iran in February.
The logistical gamble was born of necessity. As CNBC reported, Southwest Airlines hired a ship to transport fuel from Houston to California, where fuel prices are significantly higher and supply concerns have intensified. The shipment arrived in Los Angeles on May 28.
It brought like a week’s supply to the West Coast at a time when when supply was most constricted …
Tom Doxey, CFO of Southwest Airlines
The Jones Act Waiver and Geopolitical Volatility
Moving fuel between two U.S. ports usually requires a U.S.-flagged vessel under the Jones Act of 1920. However, Southwest utilized a waiver of this requirement granted by President Donald Trump in March. The waiver came as fuel prices soared following the start of the Iran war and subsequent shipping disruptions in the Strait of Hormuz.
The instability in the Middle East has created a ripple effect across the industry. While a Southwest spokesman noted that supply concerns have since eased, the financial impact remains stark. Southwest reported on Thursday that its fuel expenses increased by nearly $900 million in the second quarter compared to the previous year.
Industry-Wide Costs and Capacity Shifts
Southwest isn’t the only carrier feeling the squeeze. United Airlines reported on July 15 that jet fuel costs increased by $575 million, representing a $1.12 hit to adjusted earnings for the third quarter alone. Because prices have remained so volatile, United is currently using the latest available fuel prices for its quarterly estimates.
To manage these costs, U.S. airlines have largely moved away from fuel hedges—futures contracts used to lock in prices—a trend that began a decade ago when domestic supply was abundant. Now, carriers are scaling back capacity growth plans, a move that is helping to boost fares.
Airline executives indicated this month that demand remains strong despite higher fares, which they say are likely to stick.
West Coast Supply Dependencies
The decision to barge fuel from Texas highlights a structural vulnerability in the U.S. aviation network: the West Coast is much more reliant on imports than other parts of the country. For a carrier that used 564 million gallons of jet fuel in the last quarter, a single shipment of 12.6 million gallons serves as a critical, albeit small, strategic buffer.
The broader market remains fragile. While prices eased in late spring and early summer, tensions with Iran reignited this month, pushing costs back up. This volatility suggests that the “first-time” logistical maneuvers seen this spring may become more common if geopolitical instability continues to disrupt traditional fuel corridors.
