Sustainable aviation fuel costs more but consumers willing to pay: IATA

Sustainable aviation fuel’s main challenge relates to volume rather than airlines’ desire to use it, and consumers will be willing to pay the extra costs associated with its uptake, the director general of the International Air Transport Association told CNBC Friday.

“I think quantity is the main issue at the moment,” Willie Walsh, who was speaking to “Squawk Box Europe” on Friday morning, said.

“We used about 100 million liters of sustainable aviation fuel in 2021 — that’s a very small amount compared to the total fuel required for the industry.”

Looking ahead, Walsh said airlines had ordered 14 billion liters of SAF. “I think that addresses the issue of whether airlines will buy the product,” he said.

Walsh noted this was happening even though the price of SAF was “about two and a half times the price of jet kerosene. When you factor in the cost of carbon, you’re looking at maybe … twice the price of kerosene.”

While there appears to be some demand for SAF, meeting it is another question entirely and its road to dominance in the sector looks to be a long one.

With “appropriate government policy support,” IATA says it expects to see SAF production hit 7.9 billion liters by 2025, which would meet just 2% of the overall fuel requirement. By the middle of the century, the trade association says production would jump to 449 billion liters, or 65% of the sector’s needs.

The environmental footprint of aviation is considerable, with the World Wildlife Fund describing it as “one of the fastest-growing sources of the greenhouse gas emissions driving global climate change.” The WWF also says air travel is “currently the most carbon intensive activity an individual can make.”

Although the European Union Aviation Safety Agency says there’s “not a single internationally agreed definition” of sustainable aviation fuel, the overarching idea is that it can be used to reduce an aircraft’s emissions.

In terms of content, aircraft maker Airbus has described sustainable aviation fuels as being “made from renewable raw material.” It’s stated that the most common feedstocks “are crops based or used cooking oil and animal fat.”

There are major concerns in some quarters that an increased uptake of SAF could, among other things, result in significant deforestation and create a squeeze on crops crucial to the production of food.

For his part, Walsh said it was “critical” that the industry did not use feedstocks which compete with land use or food production. “All of the regulations in relation to the … longer term development of sustainable aviation fuels will guarantee that that’s not the case.”

On the subject of cost, Walsh — the former CEO of International Airlines Group — acknowledged this would be something passed on to the traveling public.

“Sustainable fuels are about twice what you’re paying for … the traditional jet kerosene, so it does represent a significant hike in the airline industry’s cost base,” he said.

“And ultimately, consumers will have to pay that, that’s far too much for the industry to bear.”

Long term, consumers would recognize this would be the case. “This is such an important issue. Ultimately, they will be willing to pay,” he added.