SAF is a game-changer for industry emissions, but ramp-up is taking time

Summary:

• Google search analytics for the topic of 'Sustainable Aviation Fuel' show that interest in the subject turned up sharply around mid-2020, and has only grown since.
• CAPA-Envest Sustainability Benchmarking & Rating Report shows that SAF accounted for a bare fraction of a percentage of airline fuel use.
• SAF implementation in the industry is also highly uneven, both in terms of which airlines are committing to alternative fuels and where they are operating.
• A handful of airlines are leading SAF adoption - with full service/network airlines taking a leading role.
• SAF is a game-changer for the industry emissions, but ramp-up is taking time, and realities leave the industry open to criticism.

SAF uptake remains low; adoption is being pursued by a small minority of airlines

The latest edition of the CAPA - Centre for Aviation-Envest Sustainability Benchmarking & Rating Report, released in late Nov-2023, shows that SAF accounted for a bare fraction of a percentage of airline fuel use.

Furthermore, adoption is being pursued by a small minority of airlines.

The CAPA-Envest report demonstrates that SAF implementation in the industry is also highly uneven, both in terms of which airlines are committing to alternative fuels and where they are operating.

A handful of airlines are leading SAF adoption

The 2023 edition of the CAPA-Envest Sustainability Benchmarking & Rating Report examined the use of the usual aviation fuel and SAF use across 114 airline groups and individual airlines, covering their most recent full financial or calendar year - collectively, these airlines/groups accounted for more than 75% of global passenger traffic handled (for 2022).

However, only 30 of these airlines/groups reported some degree of SAF use over their last reporting period. While some of the remainder may have used SAF in some form, this was not reported in public-facing documents.

CAPA-Envest Sustainability Benchmarking & Rating Report: declared SAF use

Source: CAPA - Centre for Aviation & Envest Global.

Within this small number of airlines that have adopted SAF, use was concentrated even further.

Three large airline groups accounted for 56% of disclosed SAF use, but only handled 11.2% of reported traffic.

Similarly, the 10 largest airlines when measured by SAF consumption accounted for 89% of SAF use, but only 43% of reported traffic.

Full service/network airlines taking a leading role

Data from the CAPA-Envest report shows that SAF adoption is largely being led by full service airlines and network airlines.

LCCs - which operate under a model where fuel typically accounts for a greater proportion of costs than for full service airlines, and therefore have greater exposure to the high costs of SAF - are less likely to show substantial SAF efforts.

Full service and network airlines accounted for 93.7% of publicly declared SAF use detailed in the CAPA-Envest report, while they accounted for 84.1% of total aviation fuel use.

There are some exceptions to be noted: a group of what might be labelled 'progressive' LCCs.

Five of the LCCs covered in the report - Southwest Airlines, JetBlue Airways, Norwegian Air Shuttle, Cebu Pacific and Wizz Air - had some reported SAF use in 2022.

While Wizz Air and Cebu Pacific had comparatively small SAF programmes in 2022 (with use around 100,000 litres), Southwest Airlines, JetBlue Airways and Norwegian have more expansive SAF programmes.

These airlines are matching many full service rivals in terms of SAF usage, both in volume and in share of total fuel use usage.

It should be noted that LCCs serving as subsidiaries in a wider airline group are also pursuing SAF adoption. This includes airlines like JetStar Airways (Qantas Group), Scoot (Singapore Airlines Group), Transavia (Air France-KLM) and Vueling (IAG). However, quantifying their actual SAF usage is difficult, because these groups often fail to split out SAF usage by their individual units.

Full service and network airlines look set to continue to spearhead SAF adoption in the near term. According to data from ICAO, as of Dec-2023 full service airlines and large network airline groups accounted for a 66.9% share of reported SAF offtake agreements (with identified purchase amounts).

Global SAF: offtake agreements (current percentage share of declared purchase amounts)

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Source: CAPA - Centre for Aviation.

By contrast, independent LCCs account for just a 14.5% share of announced offtake agreements - this comes despite LCCs operating a 32.2% share of global seats for the same period.

These agreements have ramped up in the last few years, including a record in 2022.

Given the scarcity of production capacity, these are typically multi-year supply relationships (some extending up to two decades). Full service airlines are staking out aggressive positions now, to ensure that they have supply in the future.

European airlines pushing forwards on SAF adoption

Large European network airlines have been among the fastest to adopt SAF, particularly airlines which have some level of state interest, or once held a 'flag airline' role.

Given European attitudes around emissions and sustainability, along with their public visibility and status, these airlines are under considerable pressure - whether from the public, governments, stakeholders or financial interests - to pursue rapid adoption of SAF.

Air France-KLM Group was the standout in terms of SAF usage, with airlines across the group consuming more than 50 million litres in 2022. In terms of SAF as a proportion of total fuel use, Air France-KLM's usage was approximately five times above the industry average.

The other two large European airline groups - Lufthansa Group and IAG - were the second and third largest users of SAF globally.

With these large airline groups in the van, European airlines are driving SAF adoption. European airlines accounted for 65.4% of globally reported SAF use documented in the CAPA-Envest report.

Reported SAF, use by region

Source: CAPA - Centre for Aviation, Envest Global, company reports.

Also making notable progress are the three large US network airlines - Delta Air Lines, United Airlines and American Airlines.

These three airlines reported collective SAF use of more than 27 million litres between them - approximately 71% of all reported SAF use by commercial airlines in North America.

Asia Pacific airlines are significantly underrepresented for their SAF use in the CAPA-Envest report.

Just eight regional airlines reported SAF use in their last reporting period. Two airline groups, ANA Holdings and Qantas Group, accounted for 84% of reported regional SAF consumption. For both of these airlines SAF usage accounted for about 0.22% of total fuel use, which was approximately double the global average.

Elsewhere in the Asia Pacific, Air New Zealand and Singapore Airlines are rolling out SAF programmes, with usage at around 1000 tonnes.

There is a range of Asia Pacific airlines with SAF programmes that are more modest, including Japan Airlines, Cebu Pacific and China Airlines Group.

SAF is a game-changer for the industry emissions, but ramp-up is taking time

Most estimates of lifecycle emissions reductions for SAF range from 75% to 90%, compared to fossil fuels. The airline industry is counting on rapid expansion of SAF production to support its ambitions and targets for emissions and sustainability.

Even with SAF being priced at somewhere between 2.5 and 3.5 times that of the historical aviation fuels, IATA noted in early Dec-2023 that "every drop" of SAF that was available in 2022 and 2023 was purchased and used by airlines.

Global SAF production, SAF and jet fuel prices

Source: ICAO, IATA and CAPA - Centre for Aviation.

The airline industry association IATA projects that around 600 million litres of SAF were produced in the production year 2023 (approximately double that of 2022). Volumes are forecast to more than triple in 2024, with IATA projecting output of about 1.875 billion litres.

This means that SAF accounted for a little less than 0.2% of total industry fuel consumption in 2023.

If SAF volumes grow in 2024 as forecast, then SAF may reach approximately 0.5% of total fuel consumption for the year.

SAF realities leave the industry open to criticism

Aviation has set itself some substantial environmental targets, including zero-emissions growth relative to 2019 and cutting its emissions by 50% (relative to a 2005 baseline) by 2050.

These will be an incredibly challenge to achieve.

Although airlines have a commercial imperative to minimise their fuel burn (and thus emissions), traffic growth continues to run well ahead of efficiency improvements - meaning that emissions will only continue to grow.

Transitioning the industry's energy base away from fossil fuels and towards SAF is the path that has been set for sustainable aviation.

Although future emissions reductions scenarios for the industry vary wildly, SAF is expected to account for anywhere from 50% to 80% of industry emissions reductions over the next 25 years.

Google search analytics for 'Sustainable Aviation Fuel' topic

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Source: Google.

Although SAF uptake is rapidly growing, and airlines are committing billions of dollars to multi-year purchase agreements, the present low levels of use and the narrow range of adoption lend themselves to accusations of 'greenwashing'.

Critics argue that although industry is marketing its SAF achievements and future commitments, this is just a veneer that is being applied by airlines to give the appearance of sustainability. There are also unresolved questions about SAF themselves, which further opens the industry to criticism.

It is uncertain whether the advertised levels of emissions reductions from SAF are being achieved in the real world. Feedstock availability and quality are also pressing issues. There are concerns about secondary environmental impacts, with feedstocks being grown as cash crops and potentially displacing land used for food production.

With the levels of public attention that SAF has been generating, the industry needs to improve its communication and messaging around expectations concerning adoption of those fuels. The transition to SAF is going to be long, difficult, and expensive, and the industry needs to be more vocal in owning up to this.

The alternative is to reduce flying - or to not fly at all.

Although that may be acceptable to some on the fringes, the reality is that people are rarely willing to give up new their freedoms - and the COVID pandemic has shown that the freedom to travel is more important than ever.