Southwest's Sustainable Fuel Push: Valero Deal Will Boost Chicago Midway Operations – Southwest Airlines (NYSE:LUV)

Southwest Airlines Company LUV Shares are trading lower on Thursday. The company announced a sustainable aviation fuel (SAF) supply agreement with a subsidiary of Valero Energy Corporation VLO.

This two-year agreement aims to deliver sustainable aviation fuel to Chicago Midway International Airport (MDW) and marks the state's largest announced SAF supply agreement.

Under the agreement, Southwest Airlines will purchase at least 3.6 million gallons of pure SAF – approximately 12 million gallons in total – for its operations starting as early as the fourth quarter of 2024.

The airline also has the option to purchase up to 25 million gallons of pure SAF (approximately 84 million gallons of blended) during the term of the contract.

The pure SAF is expected to be made from waste-based raw materials such as used cooking oil, animal tallow and corn oil.

This blended amount could represent up to 35% of Southwest's jet fuel consumption at MDW based on last year's consumption.

Specifically, Diamond Green Diesel, a joint venture between a Valero subsidiary and Darling Ingredients Inc. DARwill provide the clean SAF.

SAF requires collaboration across the entire value chain. This SAF volume will allow Southwest to increase access for corporate and freight customers to promote the use of SAF in its operations.

This week the company released a response to Elliott Investment Management's call for a special shareholder meeting.

“Elliott’s request for a special session is unnecessary and inappropriate given the extreme nature of Elliott’s demands. “The timing of Elliott's request to apparently assume board control appears designed to cause maximum disruption to the execution of Southwest's important business transformation now underway as we approach one of the busiest travel periods of the year approaching,” the company said in a statement.

Investors can invest in the stock through the following US Global Jets ETF JETS And ETF Opportunities Trust Cultivar ETF CVAR.

Price action: LUV shares were down 2.45% at $30.15 at last check on Thursday.

Image by Around the World Photos via Shutterstock

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