Sustainable Aviation Fuels (SAFs): Changing the aviation industry, and its economics.
The aviation industry is keen on bringing down the carbon footprints to achieve a sustainable environment and meet the stringent regulatory standards on emissions. Adoption of sustainable aviation fuels such as e-fuels, synthetic fuels, green jet fuels, biojet fuels, hydrogen fuels is one of the most feasible alternative solutions with respect to socio and economic benefits when compared to others, which contributes significantly to mitigating current and expected future environmental impacts of aviation. In addition, airlines across the entire aviation industry are expanding their commercial fleets, due to the rise in air travel these large and growing fleets are propelling the demand for the sustainable aviation fuel as a near to midterm solution for reducing greenhouse gas (GHG) emissions.
- SAFs are being considered more: Sustainable aviation fuels are being considered more by those in charge. As challenges brought by the pandemic still are being mitigated, industry leaders are searching for solutions to new problems.
- SAFs still need developments: While sustainable aviation fuels are being considered more for the future, there is still a lot of progress to be made in developments.
- SAF may become the future norm: Sustainable aviation fuels, when their full potential is reached, may come to replace traditional fossil fuels. There is still a long road ahead for these changes, however, in the long run, SAFs may prove to be necessary for the industry to incorporate, especially as environmental concerns loom.
What is SAF?
Sustainable aviation fuel (SAF) is the main term used by the aviation industry to describe a nonconventional (fossil derived) aviation fuel. SAF is a biofuel used to power aircraft that has similar properties to conventional jet fuel but with a smaller carbon footprint. Depending on the organic materials used to produce such, SAF can reduce green-house gas emissions much heavier than any conventional fossil-fuels. The U.S Office of Energy Efficiency & Renewable Energy mentions that some sustainable aviation fuels have a net zero or even negative greenhouse gas emissions.
Some examples of the organic material and biomass that can be used to create sustainable aviation fuel are algae, oil seeds, corn grain, and much more. The International Air Transport Association (IATA) goes into detail of how Sustainable aviation fuel consists of three key elements:
- Something that can be continually and repeatedly resourced in a manner consistent with economic, social and environmental aims, and conserves an ecological balance by avoiding depletion of natural resources.
- It is a fuel for aviation with an alternative feedstock (raw material from which fuels are produced) to crude oil. In this case nonconventional or advanced fuels and includes any materials or substances that can be used as fuels, other than conventional, fossil-sources (such as oil, coal, and natural gas). It is also processed to jet fuel in an alternative manner. Feedstocks for SAF are varied; ranging from cooking oil, plant oils, municipal waste, waste gas, and agricultural residues — to name a few.
- Fuel means jet fuel that meets the technical and certification requirements for use in commercial aircraft. The International Civil Aviation Organization (ICAO), a United Nations specialized agency, in some cases uses ‘Alternative Fuels’ as its terminology, and it is defined as ‘any fuel that has the potential to generate lower carbon emissions than conventional kerosene on a life cycle basis’. ICAO also uses the term ‘sustainable aviation fuel’.
Why is SAF being more invested in?
SAFs are being more looked into as there has been an increased need for not only a solution to a nonrenewable resource, but to make operations more efficient as well. SAFs are being invested heavily as new advancements and developments for the industry are laying the groundwork for a greener and more sustainable future. Some of the reasons that sustainable aviation fuels are being more invested in are as follows:
Can be renewable, easier to obtain than oil drilling: according to the U.S. Environmental Protection Agency. An estimated 1 billion dry tons of biomass can be collected sustainably each year in the United States, enough to produce 50–60 billion gallons of low-carbon biofuels. SAFs will potentially be able to be fully manufactured with the use of biomass which can be considered a renewable energy source. There is also the fact to consider — given the current regulatory environment — that drilling for oil may be an entirely more complicated process than it would be to break down biomass to base fuel off of. As SAFs are becoming more attractive, some players in the industry may, eventually, find that the cost of generating sustainable aviation fuel may be even to or less than the cost of obtaining oil by drilling.
Private charter sector investing more: The private charter sector has seen its own boom in economics that is not shared by some of the other segments of the industry. The pandemic brought about a new set of obstacles and need for privacy that the private segment was able to leverage and even benefit during these challenging environments. Business travelers and more affluent travelers sought to stay safe during the pandemic, they started using private flights more while there was a virtual shut-down of the airline industry. For those who have the opportunity to do such, private charter flights are much more favored instead of public airlines. Private travelers and those working within the private charter segments are creating an increased demand for new developments in aviation that could make operations less costly, more efficient, and environmentally sustainable. More about how the private charter segments are seeing an increase can be read in our article ‘Air Travel: A Shift From ’Public’ to Private?’
Pledge for Net-Zero emissions: The United States has set a goal to achieve net-zero greenhouse gas emissions from the aviation sector by 2050 and SAFs can potentially provide a helping-hand in reaching those goals. SAFs can reduce the lifecycle carbon reduction of some aircraft by up to 80% compared to the traditional jet fuel it replaces. SAF will play a really important role in meeting the aviation industry’s carbon reduction targets, however, it is important to note that the use of sustainable aviation fuel alone cannot solve the industry’s need to reduce reach net-zero.
Need for better efficiency: Following the outcomes of the pandemic, it is evident that the aviation industry needs to be at the better helm of efficiency. Some sectors can benefit more than others, specifically those that operate on larger scales, such as commercial airlines. Profit margins have not been the most positive prospect in recent years for these sectors and these businesses are having to look to improve their own efficiency to stay afloat while still recovering from COVID related setbacks that are now coupled with a foreseen inflationary economic environment. More on this topic can be found in our article ‘Why are Margins so low in the Airline Industry?’.
SAF and the Private Charter Segment
As mentioned above, the private charter segment of the industry is seeing its own set of circumstances in this challenging time. For these businesses there is actually an increase in operations with other business travelers and more affluent consumers. The private charter sector is investing more into new developments in the industry, as those travelers are also interested in finding ways to fly privately while being environmentally sound. Some of the ways that sustainable aviation fuel is influencing the private charter segment are mentioned below:
Private Flyers seeking to be more environmentally friendly: While some private flyers are not too particular about their emissions, some new entrants in the market are extremely concerned about being able to fly privately while still being environmentally friendly; Finding a green solution is something the industry is serious about. The National Business Aviation Authority (BAA) committed to achieving carbon-neutral growth in international emissions by 2020 — aided by the fact that, in 2014, manufacturers succeeded in developing supersonic private aircraft that run on biofuels, which only marked the start of the sector’s move towards cleaner travel and a more sustainable future.
Rising popularity: “There’s an abundance of new entry into the market,” says Ian Moore, chief commercial officer for VistaJet, in a Worth Newsletter. “During 2020, VistaJet saw an increase of 29%in new members, year-on-year. Pre-pandemic only around 10% of people who could afford to fly private did. Now, 71% of our new incoming requests are from passengers who haven’t regularly used our business aviation solutions before.” The rising popularity in the private sector is calling for increased operations and resources needed for such. While prices are already high for fuel and other necessities, SAFs and other developments may be able to help the private sector meet their increased demand.
Industry-Wide influence: NetJets — the world’s largest private aviation company, which accounts for around one in seven private jet takeoffs and landings in the U.S. on any given day — is inspired by other areas of the industry and aims to pioneer the private jet industry’s journey for sustainability. “As sustainability becomes an issue of increasing importance for consumers, it’s important to NetJets that we’re leading the industry in this category,” says Pat Gallagher, its president of sales, marketing and service. With that aim in mind, the company launched its Global Sustainability Program in October 2020, prioritizing SAF investment along with offsetting corporate and consumer carbon emissions.
Flight Schools and Sustainable Aviation Fuel
Flight schools have been at the benefiting end of the pilot shortage that was accelerated with the pandemic. As demand for pilot training has increased flight schools operations and the need to expand or increase such. More about this topic can be found in our article ‘The Pilot Shortage — A Challenge for Airlines, Possible Boom for Flight Schools.’. Some examples of how flight school are looking to use SAFs are below:
Increasing operations while increasing efficiency: Flight schools, similar to the private charter segments, are seeing their own outcomes from the pandemic. They have been fortunate to be the beneficiary of the increased need for pilots in the private sector. These new developments in recent times give flight schools a better means to increase operations and efficiency at the same time. SAFs may give flight schools the ability to increase operations in that fueling aircraft may be less costly and easier to obtain, when the development of sustainable aviation fuel reaches its full potential. Flight schools would be more willing to purchase more aircraft, expand operations, and can profit more, if key aspects in operations are being used more efficiently and effectively. Lowering the costs of fuels for the flight schools is one way to realistically reach these goals.
Training made easier: Flight schools are seeing better ways to train pilots that have more effective results, with online tools and advanced technologies, some aspects of pilot training are able to be made easier. SAFs will help make flight training easier as costs that focus on providing fuel can go towards other developments in operations, as SAF could, in the long-term sense, help flight schools and pilots save money. This in turn, reduces the cost of flight training as a whole! When flight schools are using the best developments in the industry; SAFs and the implementation of new technology can make training easier by saving pilots time, money, and effort so they can focus on finding the right instructors that will work with them, their schedule, and plan. When using the latest developments and software, the training process is so much easier.
Boom in demand for pilots: Unlike the airlines, flight training institutions have more opportunity to bounce back and flourish from setbacks related to the pandemic. Individuals try to take advantage of what they believe are opportunities to become commercial airline or corporate pilots. This has led many flight schools to see an increase in the number of student pilots. This is amplified by the practice of the regional airlines to offer signing bonuses to attract new pilots.Some pilot training institutions will increase their capacity by gaining more resources such as aircraft and facilities to meet the Increased demand for pilot training. This is where SAFs are able to greatly aid this segment of the industry, SAFs may be able to save schools and pilots money and increase operational efficiency so more individuals may be inclined to seek training if it is made more cost-effective and efficient. More information about this topic can be found in our article ‘The Pilot Shortage — A Challenge for Airlines, Possible Boom for Flight Schools.’.
New flight schools emerging in the market: One of the primary costs for any business in the aviation industry is going to be fuel cost. Fuel costs have been rising and are sometimes what makes people reconsider when purchasing new aircraft, creating a flight school, or even fly for their own leisure. When SAFs reach their full potential, they may be able to offset the extremely high prices for fuel, so much so that those looking to start new business in the industry will be more interested with better conditions surrounding cost of operations and efficiency.
Airlines and SAF
Airlines are typically going to be the main subject when it comes to an absolute need to lower cost and improve efficiency. Improvements to operations in airlines are not easily as adaptable as flight school or private charter segments as airlines operate on a much larger scale and implementation of new standards take a lot of time. While the timeline for airlines to start using SAFs at their full potential is much more prolonged than other aspects of the industry, the prospective benefits of such are exciting. Some of the ways that SAFs are necessary and can help the airline segment are mentioned below:
Governments demand lowered emissions: The White House said it was targeting 20% lower aviation emissions by 2030. At the climate talks in Glasgow, the United States, as a coalition of countries, announced the “International Aviation Climate Ambition Declaration,”. That declaration, according to a draft seen by Reuters, acknowledges that the United Nations’ International Civil Aviation Organization (ICAO) is the appropriate forum for addressing emissions from international aviation and includes commitments to push ICAO to adopt an “ambitious long-term aspirational goal” and support SAF development. The U.S. goal of net-zero GHG emissions by 2050 is supported by an analysis by the FAA. Recently, Airlines for America, an industry trade group representing Delta Air Lines (DAL.N), United Airlines , American Airlines (AAL.O) and others, committed to working with the government to achieve net-zero carbon emissions by 2050. More of this is mentioned in our article ‘Technological Advancements Shaping the Future of Aviation‘. SAFs are going to be a key factor in helping aviation emissions reach this lowered target, especially in the airline industry.
Improved efficiencies: Airlines may see positive effects that are associated from using and implementing the use of sustainable fuel alternatives to traditional fossil fuel. The wider use of SAFs is going to give greater ability to airlines to focus efforts on other essential areas of operation, making the entire operational efficiency as a whole more effective. Lowered emissions would give the ability for aviation businesses to operate more efficiently and use those cost saving matters in other areas that made need such.
Change in operations: SAFs may seem like a minor change to make once this alternative is ready for its full commercial use on a large scale. However, there may be a larger scale change needed to transition to this new method of fueling aircraft. For example, SAFs may change the amount of fuel a single aircraft needs to go a certain amount of distance. While SAFs are going to be more environmentally friendly, they may not give larger aircraft the ability to move at greater speeds and distances, some flights may need to have added stops and opportunities to refuel. The use of SAFs will increase efficiency and save cost overall, but there are the adverse effects to this like a change in operations that are not easily adapted.
How will SAF change the economics of the aviation industry?
There is real commitment from the industry to reduce carbon emissions, but governments also need to create the right policies to accelerate the growth of SAF. Increasing production requires long-term policy certainty to reduce investment risks, as well as a focus on the research, development and commercialization of improved production technologies and innovative sustainable feedstocks. Some of the ways the SAFs will influence the economic side of the industry are as follows:
Cost of production of SAFs: As a result of the varied components required for scaling SAF production — additional research and development, developing feedstock supply chains and building new manufacturing facilities — market costs for SAF are expected to be higher than its fossil-based competition for years to come. Strong demand signals and policy-driven actions are needed to reduce overall costs and, over time, efficiencies of scale and technology maturation will cause prices to drop significantly. Production costs vary significantly by pathway. It is worth noting here that this might have the adverse effect of raising the price of food, as more land area is used for SAFs rather than farming edible foods.
Long term hope: Flying Magazine says that in the long term SAFs does offer a hopeful prospect for the industry. It projects SAF prices will eventually trend downward as demand rises, opening the door to “price-competitive” SAF offtake purchase agreements between producers and airlines. Keep in mind that companies have been refining conventional aviation fuel from petroleum in some form since the early 20th century, which means the some industrial infrastructure to produce it has been in place for generations. With existing facilities at scale, conventional fuel prices are more attractive because it costs producers less money to refine conventional fuel than it does to make SAF. If you factor in CO2 taxes, experts project that the total cost of using conventional fuel in the coming decades might get so ugly that SAF might end up being a slightly more competitive alternative.
Governmental Incentives: Could government programs and policies do anything to make SAF prices more attractive? A bill currently being considered in Congress called the Sustainable Skies Act would create a federal SAF tax credit for SAF producers who blend the fuel as a way to kickstart SAF production. “This tax policy remains the most effective method to incentivize the production of SAF,” said a statement from National Business Aviation Association president and CEO Ed Bolen. “NBAA is determined to work with all stakeholders to make a blender’s tax credit a reality.”
Rising cost in airlines, and passenger: Until SAFs are fully adopted and reach scale economy, airlines that choose to use SAF will likely pass higher fuel costs on to passengers. A few airlines have already started down that road. Air France, KLM, and Transavia have introduced a SAF surcharge between 1 and 12 Euros for flight in and out of France and the Netherlands. However, passengers who are concerned with environmental efforts, and many do, are willing to pay this overhead cost as the industry is making advancements toward a more sustainable future.
The Future of Aviation
The future of the aviation industry is at the cross-roads of change with some exciting new developments. While there are hurdles and obstacles that can be foreseen, some new advancements in the industry are bringing hope amid the challenges recently faced. In this climate, the concerns are to ensure that a sustainable future can be achieved.
While focus may be on the immediate drawbacks that each segment faces, it’s important to also remember the ways that a better tomorrow is being prepared. The aviation industry is no stranger to adversity, however, each time we prevail.