Sustainable Aviation in a Shifting Landscape – the View from Europe
Robert Boyle
Partner
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SkiesFifty
It would be easy to be pessimistic about the outlook for sustainable aviation, given recent policy changes in the United States and announcements by some oil majors indicating a shift away from investment in renewables.
Last month, IATA’s Director General Willie Walsh conceded that industry net zero plans were not on track and that targets would have to be reviewed. "We are going to have to revisit it, we are not making as strong a progress [on SAF] as we thought."(1)
At a global level, industry progress on fuel efficiency and SAF have both missed targets. In 2024, IATA estimate the industry burned 306 million tonnes of fuel, up 5% on 2019, pretty much equal to the growth in revenue passenger kilometres (RPK) over the same period. That means that fuel efficiency didn't change in five years, a big underperformance compared to IATA's 1.5% per annum goal. Deferred investment by airlines and problems in the aircraft supply chain have both contributed.
SAF volumes have also fallen short of targets. Less than a year ago, IATA forecast SAF volumes for 2024 of 1.5 million tonnes. Their latest estimate is that in fact only 1 million tonnes were used, representing only 0.33% of global fuel burn. Assuming SAF gives an 80% reduction in emissions, that's worth about 0.25%. Still a rounding error when it comes to achieving sustainability goals.
SkiesFifty is a global company—and we’re well aware that sustainability doesn’t look the same everywhere. While much of the recent media attention has focused on the United States, there are different perspectives, priorities, and paces of change around the world. China, for example, continues to accelerate its investment in clean energy, recently beginning construction on a new biomass SAF production plant in Guangxi which expects to process 300,000 tons of feedstock per year(2).
The story in Europe is also very different, with SAF blending mandates now in operation. In preparation, Neste has just completed upgrading works at its refinery in Rotterdam to produce up to 500,000 tonnes of SAF a year(3). Intra-regional flying is increasingly subject to full carbon charges as free allowances are phased out under the EU and UK ETS. For intra-regional flying, we estimate that carbon costs were levied on 69% of emissions in 2024, up from 56% in 2019.
Given the greater focus on sustainability by European governments, it is no surprise the headline sustainability statistics look better if one focuses just on Europe. We don’t yet have figures for emissions in 2024, but 2023 emissions were 6% lower than 2019 for almost exactly the same capacity flown. That’s a much better record on fuel efficiency than we saw at a global level. SAF uptake was also much higher, even before the 2% blending mandate kicked in this year. SAF volumes in 2024 hit 1.9% of all fuel usage at IAG and 1.3% at Air France – KLM, much higher than the global industry averages.
Even though many are ahead of the global game, Europe’s airlines are increasingly crying foul about the lack of a level playing field and casting doubt on the achievability of the 6% SAF target set for 2030(4). Earlier this month, the regional airline association A4E published a report calling out the threat to the competitiveness of EU airlines of escalating legislative and regulatory costs(5). Whilst environmental regulations were not their only complaint, the rising cost of complying with SAF mandates and the EU ETS are one of the key drivers of recent and projected cost increases.
Despite the financial pressures on airlines and the slower than hoped-for pace of SAF scale-up, the need for aviation to tackle its climate change impact has not gone away. If progress on aircraft technology and SAF is slower than previously planned, more emphasis will fall on the need for carbon offsets and removals. The global offset scheme, CORSIA, has now entered its voluntary phase, and airlines are having to face up to the need to source qualified credits in increasing volumes. And of course, CORSIA only targets carbon-neutral growth. If the industry still has ambitions to achieve net zero, more will need to be done.
In this more uncertain geopolitical and economic environment, only the best projects and technologies will attract the necessary capital to bring them to reality. Moving forward, the industry’s sustainability agenda will require coordinated effort across airlines, aircraft manufacturers, energy companies, policymakers, financiers, and technology providers. All players will need to look beyond the immediate uncertainties and retain a focus on the long-term.
At SkiesFifty, we believe that sustainability is not just an existential challenge for the industry; it also represents a generational investment opportunity for those who back the right projects and technologies. If you share our confidence, please come and talk to us so we can discuss how we can help drive the change together.
SkiesFifty is a global investment company with the dual objectives of accelerating aviation's journey towards net-zero emissions by 2050 while generating attractive returns for its investment partners. These include corporates from aviation, chemicals and other heavy industry and financial institutions. It is led by a unique mix of senior professionals from the worlds of aviation, sustainability, energy and investing. Its investment strategies focus on sustainable aviation fuel, carbon removals, alternative propulsion, ground operations greening, and materials recycling. For more information visit skiesfifty.com
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(1) https://aviationweek.com/air-transport/airlines-lessors/iatas-walsh-expects-airlines-re-evaluate-net-zero-target
(2) https://biomassmagazine.com/articles/topsoe-secures-first-saf-project-in-china
(3) https://www.ogj.com/energy-transition/article/55281060/nestes-rotterdam-renewables-refinery-begins-producing-saf
(4) https://aviationweek.com/air-transport/safety-ops-regulation/european-airlines-cast-doubt-2030-saf-mandate
(5) https://a4e.eu/publications/new-study-reveals-regulatory-costs-for-eu-airlines-soar-by-e15-5-billion-in-a-decade-threatening-competitiveness-and-connectivity-across-europe