The first ever long-haul test flight using 100% Sustainable Aviation Fuel (SAF) will be taking place today from London Heathrow to New York JFK. Operated by Virgin Atlantic, the transatlantic flight of a widebody Boeing 787 would represent an important step towards the goal of transitioning to the large scale use of SAF. Other flights have tested and successfully flown with 100% SAF, but these have only been on short-haul routes.
Even with this encouraging progress, there are still major obstacles to overcome, thus widespread 100% SAF deployment will take years. There are still outstanding technological questions about whether modifications to SAF properties and/or current aircraft will be necessary. Upgrades to the fuel infrastructure may also be necessary to support 100% SAF. Further obstacles include higher fuel costs and production bottlenecks.
The airline industry’s plan to meet its long-term decarbonization goals will heavily rely on SAF. Airline credit implications will be contingent upon how the increased cost of SAFs affects airline profits and air travel demand. Regulators are going to be crucial in deciding how quickly and how much decarbonization will cost. The impact on airlines will likely be comfortable if the shift happens gradually and the aviation and energy sectors keep investing in increasing production and cutting costs.
The industry is currently permitted to combine fuel with up to 50% SAF. This restricts the total amount of carbon reduction that using SAF could accomplish. This is mostly due to safety concerns about utilising 100% SAF, which are thought to result in problems such as fuel leaks from shrinking elastic tank seals. It would be beneficial for the industry to accelerate decarbonization without requiring significant capital expenditures if 100% SAF usage on current aircraft technology proved to be safe and viable without requiring improvements.
While utilising 100% SAF is a good thing, the industry needs to address the following additional significant SAF-related issues in order to facilitate broader SAF usage:
- Although SAF is the most practical way to decarbonize, it is currently costly to produce, and scaling the comparatively less expensive SAF variations presents additional challenges. SAF can be two to nine times more expensive than traditional kerosene-based jet fuel. Fuel costs make up a significant portion of airline operating costs, hence it is critical for the industry to lower SAF costs to allow for broader deployment without having a significant effect on ticket prices and/or airline profitability.
- SAF production has increased significantly over the past few years, growing from 38 million litres in 2019 to an estimated 300 million litres in 2022. However, in order to achieve the up to 10% SAF targets set by some major economies, including the US, Canada, the EU, and the UK, by 2030, a significant further ramp-up in investment and production is needed. The International Air Transport Association (IATA) estimates that by 2030, 23 billion litres of SAF will be required worldwide. The task at hand is extremely difficult in our opinion, especially when you consider the enormous demand for SAF over the next few years and the time it typically takes to create the SAF production infrastructure.
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