Full Breakdown
Southwest Airlines Tackles Jet-Fuel Volatility with West-Coast Shipment and Revised Profit Outlook
7/24/2026, 12:08:47 PM
Emergency Jet-Fuel Shipment to California
In May, Southwest Airlines chartered a cargo vessel to move jet fuel from Houston, Texas, to Los Angeles, California. The ship transited the Panama Canal and arrived on May 28 carrying roughly 12.6 million gallons of fuel. The airline used a waiver of the 1920 Jones Act—previously invoked by a presidential waiver in March—to bypass the requirement that domestic shipments use U.S.-flagged vessels.
Background & Context
U.S. jet-fuel prices have been highly volatile since the February conflict in which the United States and Israel struck Iran. Shipping snarls in the Strait of Hormuz and export restrictions by several countries amplified the supply crunch, especially on the West Coast, which relies heavily on imports. Southwest reported that its fuel expenses rose by nearly $900 million in the second quarter compared with the same period a year earlier, contributing to a $1.17-per-share reduction in adjusted earnings.
Data & Statistics
- Fuel consumption: Southwest used 564 million gallons of jet fuel in the most recent quarter.
- Financial impact: Second-quarter operating profit climbed to $285 million (up from $225 million) and net profit to $233 million, while revenue reached $8.4 billion, a 16 % increase year-over-year. Unit revenue also rose 16 % on flat capacity.
- Fuel price benchmarks: The spot price of jet fuel was $3.65 per gallon on July 22, after falling to about $2.81 earlier in the month. The forward market indicated an expected price of $3.70-$3.75 per gallon for the third quarter as of July 17.
- Earnings guidance: Southwest lowered its 2026 full-year adjusted-earnings target to $3.25-$4.25 per share, down from a prior floor of $4. The third-quarter earnings forecast was set at $0.50-$0.75 per share, below analysts’ consensus of $0.82.
- Capacity plans: The airline trimmed its full-year capacity growth to roughly 1 % (later cited as about 1.5 %).
Official Statements & Responses
Southwest’s CFO Tom Doxey highlighted the strategic purpose of the fuel shipment, emphasizing that it arrived “when supply was most constricted.” A Southwest spokesperson added that earlier concerns about West-Coast fuel shortages have since eased.
Conflicting Reports & Gaps
- Fuel price estimates: The spot price of $3.65 per gallon (July 22) differs slightly from the forward-market projection of $3.70-$3.75 per gallon (July 17) for the upcoming quarter. Both figures are presented by Southwest-related sources, reflecting a modest range rather than a single definitive price.
- Industry benchmarks: Other carriers cite varying average fuel costs—American Airlines expects about $3.75 per gallon, Delta projects $3.15 per gallon, and United forecasts a near-$6 billion fuel-expense increase for 2026. The spread underscores divergent hedging strategies and route mixes across the sector.
Verbatim Quotes
- “It brought like a week's supply to the West Coast at a time when when supply was most constricted ... when it was most at risk,” — Financial Officer Tom Doxey
What’s Next
Southwest expects to purchase jet fuel at an average of $3.70-$3.75 per gallon for the third quarter, based on the forward market as of July 17. The airline’s revised earnings guidance and modest capacity expansion indicate a continued focus on extracting higher revenue per seat while managing the ongoing fuel-price shock.
