When Air New Zealand last summer dropped its 2030 climate impact reduction target, it underlined the challenges even the most progressive airlines face in building momentum in meeting their longer-term commitment to cut carbon emissions.
In mid-2022, the airline had been among the first to commit to a science-based target to reduce carbon emissions by the end of this decade. That envisaged a near 29% reduction in carbon intensity by 2030 against 2019 levels.
This was to be achieved through a multi-faceted approach, focusing heavily on the adoption of new aircraft technologies and sustainable aviation fuel (SAF).
LONG-TERM COMMITMENT
The 2030 target marked a clear staging post on the carrier’s journey to net-zero emissions by 2050. However, two years later, and while remaining committed to the long-term goal to be net-zero by mid-century, Air New Zealand dropped it.
Meeting such decarbonising ambitions always included a leap of faith by airlines, in that the required ramp-up of SAF production and new technology development was largely beyond their control. But even the part airlines thought was within their control – the ability to operate more fuel-efficient aircraft – turns out to be harder to achieve as well.
Air New Zealand cited the wider policy and availability issues regarding new aircraft and fuels development as factors in its decision. Significantly, however, chief executive Greg Foran flagged that it had “become apparent” that potential delays to its fleet renewal plans posed an additional risk to the target’s achievability.
The carrier is far from alone.
Airline leaders remain braced for aircraft availability issues to continue, be it due to delivery delays, engine or spare part issues, and increased maintenance times – in part extenuated by the operation of older aircraft.
That has already had an impact on the age of the existing fleet. Global airline association IATA estimates the average aircraft age for the in-service fleet has crept up to 14.8 years. This compares to an average of 13.6 years over 1990-2024. At the same time, it points to a record delivery backlog of 17,000 aircraft.
“It’s now got to the stage where… airlines are being forced to retain aircraft that they don’t want to operate,” says IATA director general Willie Walsh.
Not only does the use of less-efficient aircraft impact airline profits, but also the sector’s ability to meet its environmental aspirations. IATA says that, excluding the positive impact of airlines operating higher load factors, that the industry’s fuel efficiency was unchanged last year. That compares to annual improvements of between 1.5-2% recorded between 1990 and 2019.
“Manufacturers are letting down their airline customers and that is having a direct impact of slowing down airlines’ efforts to limit their carbon emissions,” says Wash.
While fleet renewal provides a near-term – as well as an ongoing way – for airlines to make inroads into their carbon emissions, it is on SAF where they are pinning most of their hopes.
However, SAF production is also struggling to stay on course.
“We are not making as much progress as we’d hoped for, and we are certainly not making as much progress as we need,” says Walsh.
IATA estimates SAF production volumes reached 1 million tonnes (1.3 billion litres) in 2024. While that was double 2023 levels, it fell short of the 1.5 million it previously projected as several key SAF production facilities in the USA pushed back their ramp-up to the first half of this year. And that accounts for just 0.3% of global jet fuel production.
FOCUSED DEVELOPMENT
While it remains a mixed picture in terms of the pace of developing SAF production across the different regions, attention is focused on Europe, where mandates for its usage have this year entered force.
Under the RefuelEU Aviation regulation, fuel companies are mandated to supply a 2% SAF blend across EU airports in 2025 as a weighted average. This will step up to 6% by 2030, with notable increases at five-year periods up to 70% of all fuel by 2050.
Notably, the mandates require half of this SAF to be synthetic power-to-liquid (PTL) fuel, including calling for 1.2% usage by 2030.
The UK too has this year implemented a SAF mandate, which starts at a 2% requirement, rising to 10% by 2030. It also includes a PTL requirement, starting at 0.2%, from 2028.
Meeting the requirement for synthetic fuels is causing airlines the greatest consternation.
A December report from the European Union Safety Agency, which is tasked with monitoring progress, flagged concerns over the development of synthetic fuel production.
It concluded that while announced production capacity would likely meet the minimum 6% SAF-share target by 2030, “rapid action” is needed to hit the synthetic fuel share requirement.
“Our key concerns are around actual availability. Are there enough molecules to meet this mandate?” said IAG group head of sustainability Jonathon Counsell, during FlightGlobal’s Meet the airline sustainability leaders webinar in December.
While relatively comfortable about meeting the initial HEFA – fuel developed from oils or fats – component of both schemes, Counsell says the move to next generations of SAF is more challenging.
“Where we start to get a bit more nervous is where it [the EU mandate] leaps up to 6% but also starts to include quite an aggressive power-to-liquid sub-target,” he says. “Today there is no PTL in Europe and PTL is a complicated third-generation fuel so the lead times to produce in that capacity takes longer. So that’s one of our anxiety points and why we’ve been actively sourcing PTL, because we see a lot more action on this in the US.”
PRODUCTION BOTTLENECK
Similarly, the UK has included a cap on the amount of HEFA SAF after the first two years of its scheme. “[There’s] very little production of 2G [second-generation] SAF anywhere in the world, so we’ve got to get our skates on to get those plants built,” Counsell says.
Monika Rybakowska, policy director for sustainability at trade association Airlines for Europe (A4E), similarly flags the lack of production of synthetic SAF in Europe.
“The problem is when in 2030 the synthetic fuels mandates kick off, you have to be prepared for that and in order to create a SAF production facility, this takes at least three to four years from an investment decision to sending fuel to the pipeline,” she says.
“So those investment decisions need to take place now in order to uplift the synthetic e-fuels by 2030. This is what we don’t see happening.”
She notes that because of their high launch capital expenditure costs, these projects are missing out in the EU Innovation Fund to incumbent industries like steel and cement under the cost-efficiency criteria.
“The offtake agreements are long-term – 10- to 15-year timelines. This is where we are calling for the [European] Commission to also provide capital grants or direct loans to the industry to fund those SAF production facilities,” she says.
This is one of a number of measures A4E, together with other European aviation trade bodies, have put in place as part of their recently-updated Destination 2050 net-zero roadmap. That comes as the Commission finalises its flagship Clean Industrial Deal framework and related Sustainable Transport Investment Plan.
Industry bodies are also pushing for a Contracts for Difference scheme to ensure a fixed price for SAF within the EU; advocating for a ‘book and claim’ system – which would enable airlines to pay for SAF without it having to be available from that airport; as well as increasing and extending beyond 2030 existing SAF allowances available to airlines under the EU’s emissions trading system.
European clean energy and transport lobby group Transport and Environment (T&E) criticised the lack of progress on SAF uptake in a December report in which it claimed that only 10 out of 77 airlines it ranked are “making noteworthy efforts” to switch to truly sustainable alternatives to fossil kerosene.
“Too few airlines are committing to truly sustainable fuels. The majority are either buying the wrong types of fuels or, worse still, no SAF at all,” says Francesco Catte, SAF manager at T&E.
Catte suggests that oil companies are the “missing piece of the puzzle” in the green fuels ecosystem.
“They have gone unnoticed so far but their reluctance to invest into SAFs is hijacking the transition of the sector as a whole,” he says. “Regulators must get tougher and ensure oil majors are investing in SAFs, whilst also developing a European industrial strategy for e-kerosene, to support this nascent industry with adequate funding and regulatory measures.”
Airline industry ire has increasingly turned to traditional fuel companies, such as when Shell last year paused building a biofuel refinery in Rotterdam.
Speaking last September at IATA’s World Sustainability Symposium in Miami, Florida, Shell Aviation president Raman Ojha said the business remains committed to helping the aviation sector’s energy transition, but that work in the Netherlands had been paused “to assess the situation and begin the journey again”.
Walsh, though, is unimpressed by the progress being made by fuel companies.
“The big fuel producers have made great announcements but have pulled back from it in terms of producing sustainable aviation fuels. We can’t just rely on new entrants. We have seen companies like Neste who are investing in the production of sustainable aviation fuels. But we are not seeing as much action on the part of traditional fuel suppliers. So that’s disappointing.”
That relationship is further complicated by the cost of the mandate. While responsibility falls on the fuel suppliers, airline bodies say this is already being passed on to operators.
IATA, in a January-issued policy update, points to a lack of competition among fuel suppliers and the immaturity of the SAF markets as causing airlines to bear the brunt of the costs through the imposition of a compliance fee or surcharge in Europe.
“Of course we do recognise this will cost everyone more,” says A4E’s Rybakowska, pointing to airlines having shown a willingness to play their part by making voluntary commitments to uplift SAF usage prior to the mandates.
“I think the biggest problem here is the cost – and those policy recommendations [in Destination 2050] all have the aim of bringing the cost down,” she says.
“It doesn’t matter at what level the mandate is [if] an airline can’t afford the SAF. So we need to accelerate availability of affordable SAF. This is what we need to happen to get the thing off the ground.”
In terms of policy incentivising SAF production, the industry has been extolling the virtues of the Inflationary Reduction Act of former US President Joe Biden’s administration, which is widely credited with having provided a jumpstart.
“There is clear evidence that that has incentivised the additional production of sustainable fuels. We need governments to recognise they have a huge role to play in this,” Walsh says.
TRUMP ADMINISTRATION
However, the extent to which this policy continues is in the hands of the new Trump administration. An avowed supporter of the US fossil fuel industry, one of the returning president’s first actions was to freeze investments in the programme while a review is carried out.
“The general expectation is that some of the measures that have been introduced will be reversed, but whether that impacts on the investments that were made to support the development of facilities for production of sustainable aviation fuel is unclear at this stage,” Walsh said prior to the change in administration.
“I don’t think it’s a black and white issue,” he says, noting that “there was quite a lot of progress” under the first Trump administration in this area.
Meanwhile, other initiatives are under way within the industry to help close the gap. Patrick Edmond is chief marketing officer with Irish start-up Future Global Energy, which is seeking to replicate lessons from the aircraft leasing market to help boost the buying power of smaller airlines and in turn provide greater commitments for SAF producers.
“That’s a big mismatch at the moment, and that’s one of the reasons why things aren’t happening right now,” he says. “We are taking that same [lessor] model and applying it to SAF. It’s dealing with the scale mismatch, and it’s dealing with the timings mismatch. And that’s what we think is what is needed.
“SAF isn’t the silver bullet, but it is a big part of anything we can do,” Edmond adds.
While Walsh has stressed that progress will not be linear and that he expects exponential SAF growth after 2035, the stuttering early stages of aviation’s energy transition come at a time when airlines face accusations of ‘greenwashing’ and where their projected growth remains in the sights of the industry’s detractors. T&E, for example, argues that SAF is only a viable solution without exponentially growing levels of traffic.
Edmond also sees it likely that the industry will still have to address growth, even with the SAF development.
“We are trying to produce SAF faster and faster, but if the industry keeps growing as it is, it’s like running after a car that is accelerating away from you. So we do have to talk about growth as well.”
