Leading low cost airline Southwest Airlines (LUV) recently announced an agreement with Red Rocks Biofuels LLC to purchase low carbon renewable jet fuel, which is produced from forest residues, in order to help reduce the risk of widespread wildfire damage in the western part of the U.S. The agreement entails supply of about three million gallons per year.
While the company press release did not disclose the financial terms of the deal, we believe the new agreement will help Southwest Airlines work toward preventing global warming and pave way for utilizations of bio fuel at a larger commercial platform such as the airline industry.
Southwest Airlines is committed toward building awareness about the commercial use of alternative jet fuel in the aviation industry. The carrier is also a member of Commercial Aviation Alternative Fuels Initiative (CAAFI). Southwest Airlines has been functioning in tandem with bio fuel production companies to enhance development and deployment of alternative jet fuel for its fleet of aircraft.
Given the latest technological developments, and the cost-benefits of using alternative fuel over conventional fuel, Southwest Airlines expects this new fuel diversification deal to remain accretive to its financials over the long term. The blended fuel product will be used in Southwest Airlines' Bay Area operations with first delivery estimated in 2016.
Southwest Airlines currently sports a Zacks #1 (Strong Buy).
Other Stocks
Republic Airways Holdings Inc. (RJET) and United Continental Holdings, Inc. (UAL), with a Zacks Rank #1 and Allegiant Travel Company (ALGT) with a Zacks Rank #2 (Buy) are other stocks worth considering in this industry.
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