Seeking SAF symphony: In conversation with Lufthansa’s Michael Nau
Michael Nau
Director of Sales and Sustainability
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Lufthansa
Ahead of the launch of PA Consulting’s report on scaling sustainable aviation fuels (SAF), we’re running a series of exclusive interviews with key stakeholders across the SAF ecosystem. This includes producers, airlines, airports, and investors from across the globe.
In this Q&A, we speak to Michael Nau, Director of Sales and Sustainability at Lufthansa, who is leading the cost reduction programme for Lufthansa worldwide for sales.
Is it fair to say that aviation’s right to grow is predicated on its ability to grow sustainably?
It's a good question. It depends on the geographical region. In Europe, I would agree with that, because of the mandated programme by the EU, also by the UK, and because some European countries are supporting it with incentives.
In Europe, sustainability is important. Crucially, customers want it, otherwise flight shaming is a risk. And corporate travellers especially want it. B2B travellers need greener tickets with less CO2 emissions because their companies have CO2 reduction targets.
For other parts of the globe, I have my doubts. I mean when you see what's going on in the US right now, it's one step back. Drill, baby, drill. The airlines will grow because kerosene will be cheaper. We’ll see lower ticket prices and increased demand. But is it sustainable growth? No.
In Asia Pacific, sustainability is picking up. Chinese, South Korean, and Japanese companies are buying SAF from us. So Asia Pacific is slightly lagging Europe, but they're on track.
Across the MENA region, I’m seeing a big change. I can see the commitment now from local players. They’re taking it seriously. They’ve realised they have to do something for their reputation to show it matters – and that this is the future.
So, it varies. And it makes sense that Europe would be leading the way. But if European Airlines are having to pay more and ticket prices go up, then passengers will just choose to travel with other airlines who aren't subject to those mandates.
What is the boardroom appetite to embrace SAF?
For the past two years, we’ve had an executive board member responsible for sustainability. And it shows. Sustainability is now in our DNA. All our higher management have it linked to their bonus. And all our key account managers – 720 worldwide – must discuss sustainability in every single customer meeting.
We have five strategic priories. One of those is sustainability. And one pillar of that is increasing the SAF share. In five years, by 2030, we want to be down by 50 percent on CO2 emissions compared to 2019. Every year we must lower it. And that is linked to our bonus – for me as well. Sustainability has well and truly arrived. It’s not only talk.
And to achieve this reduction, [among other focus areas] 23 percent is with new airplanes, nine percent with ops/efficiency; and 19 percent with SAF. So SAF is a major pillar. It has a big focus.
Does Lufthansa have a focus on a specific SAF technology or pathway?
We’re focusing mainly on HEFA, SAF made from used cooking oil. Why? Because of the price – around 2.5x higher than fossil kerosene. We know that HEFA is not the best or the cleanest SAF, but it’s the only that is currently payable for our customers.
From 2030 on, we will look to switch to power-to-liquid (PtL) and sun-to-liquid (StL), but at the moment these are around 50 times more expensive than fossil kerosene. We’ve discussed [adopting it sooner] with some strategic global customers, and it’s interesting because it's a one hundred percent clean hydrogen, but it's too expensive. So, we have spoken to the PtL and StL companies and told them by 2030 we need this price range. If they can do it, we’ll be in the game.
What have been the other major strategic decisions to make with regards to SAF?
We had to decide whether we wanted to be a PtL/StL producer, and whether we invest in such companies. In the end, we said ‘no’ to producing.
Why? Two reasons. First, we are not experts here. Others do it better. They have the facilities. Second, their financial power is much bigger. We would need a billion-euro level investment; that’s too risky for an airline. We can’t afford to have that level of investment if it turns out to be a mistake. Our expertise is flying from A to B, and it’s better to be focused on that.
What are the major barriers to scaling SAF?
Cost is the number one. In central Europe, the willingness to pay more for a flight with SAF is there if the ticket, compared to a normal ticket without SAF, isn’t higher than ten percent – to a maximum of 15 percent, which is already a challenge.
The second challenge is sourcing SAF. Demand and supply are not in balance. One year ago we were short of SAF. We struggled to get SAF at a reasonable price on the spot market. And this is a bit of a showstopper, because there is no hedging. So you cannot plan the price.
What services or offerings are you seeing drive uptake in SAF?
We’ve developed a capability where a corporate customer can decide precisely how much SAF they want. If they want to see an 18 percent reduction in their CO2 emissions from their corporate flights in 2025, and a 21 percent reduction in 2026, we can do this in the system. Our offering is flexible to their own CO2 reduction path. It’s tailor made to each company. This product will launch in September this year. It’s really cool.
What message would you have to other airline leaders looking at SAF?
Of course, other airlines are competitors, but not on this topic. I’m happy if competitors go in the same direction. It helps the industry. We all benefit. And if they have a high demand for SAF, then producers will produce more. We don’t compete on sustainability. Our competitor Is climate change, and the time we have.
Register to receive PA Consulting’s research
Michael was just one airline respondent to contribute to our forthcoming SAF research report, where we found that:
95 percent of airline respondents see SAF as crucial for aviation industry’s decarbonisation efforts
Yet 36 percent are not currently using SAF of any description
And just 11 percent see SAF as the primary focus of their decarbonisation strategy.