Virgin Atlantic is partnering with energy specialist LanzaTech to aid development of low-carbon fuel.
It intends to use the new fuel within three years on routes between London Heathrow and Shanghai and Delhi.
LanzaTech will develop facilities in China and India to support the plan.
Shanghai is to have a demonstration facility in place this year and China will open a commercial operation in 2014.
The UK carrier said the process involves taking waste gas from industrial steel production and chemically converting it using technology from Stockholm-based Swedish Biofuels.
Virgin said the process recycles gas which would otherwise be vented as carbon dioxide.
LanzaTech estimates that two-thirds of steel mills could adopt the process, enabling broad application to support the air transport industry.
Virgin chairman Richard Branson, speaking at an event in London, said the steel industry could potentially supply over 15 billion gallons of fuel per year.
"This new technology is scalable, sustainable and can be commercially produced at a cost comparable to conventional jet fuel," he added.
LanzaTech chief Jennifer Holmgren said the technology would allow airlines to "dramatically reduce" carbon footprints.
Virgin said it is aiming to cut carbon levels per passenger-kilometre by 30% by 2020 and that the new partnership would take the carrier "well beyond" that target.
Source: Air Transport Intelligence news
