The heads of two of the UK's largest airlines have said the UK government needs to do more to take the risk out of the increasing use of sustainable aviation fuel (SAF) as part of the efforts towards decarbonising the aviation sector.
Sean Doyle, the chief executive of British Airways and Shai Weiss, the chief executive of Virgin Atlantic told the World Sustainable Skies Summit that price and revenue stability are essential in the quest for 'Jet Zero' by 2050.
“If you're an investor and you're putting a long-term business case together and you're putting a lot of capital in, you need to make sure there is some certainty around the top line,” Mr Doyle said.
“What investors will be concerned about is the volatility of prices.”
The government recently introduced a mandate for the use of SAFs, which means that from the beginning of 2025, SAF will make up an increasing percentage of aviation fuel, as it slowly takes over from the traditional kerosene-based fuel.
Beginning next January, SAF will have to make up at least 2 per cent of total UK jet fuel demand, increasing to 10 per cent in 2030 and then to 22 per cent in 2040. From 2040, the obligation will remain at 22 per cent until there is greater certainty regarding the supply of SAF.
The problem is, for the immediate future SAF is six times more expensive than traditional jet fuels, so the airline industry wants the government to take some of the price and revenue risk.
For its part, the government has said the mandated plan does include a review mechanism to help manage prices and minimise the effect on ticket fares for passengers, but that “any mechanism will be industry-funded”.
The government also has the power to change vital limits within the mandate to block higher price rises in the case of SAF shortages.
However, the airlines feel a government-funded mechanism similar to what has operated in the renewable energy sector would be fairer.
“It just gives the people who are taking the risk and putting the capital in a bit more confidence that if the revenue line is volatile, then they would be able to navigate through that,” Mr Doyle said.
He added that because travel demand should remain robust and banks are lined up to invest in SAF, it wouldn't represent a “massive government subsidy, but rather the government standing behind this industry”.
'Slightly disingenuous'
Mr Weiss agreed and added that the “government is slightly disingenuous on this point”.
“They tax aviation, they tax consumers on aviation. Our money goes into the coffers of the Treasury but is never used to support one of the most important industries this country has.
“Aviation in this country supports £46 billion and 180,000 jobs.
“At the end of the day, the people who are going to pay the price [for the use of SAF] are consumers in this country.”
Julie Kitcher, the chief sustainability officer at Airbus said when it comes to funding the transition to greener fuels, every player in the industry and government needs to play their part.
“Airbus invests more than two billion euros per annum into research and development into technology to improve the performance of our aircraft and for those sustainability objectives,” she said.
“Of course, the airlines are heavily taxed and involved. The passengers ultimately will need to be to a certain extent too, but we need governments on board to take their role.
“That comes through carrots, like the mandate, and sticks. We need both. Every country, every region needs a combination of carrots and sticks.”
She added that what was required was more economic effort to enable the production of SAF to be scaled up because the science and technology were already in place.
“We've got the production pathways, we've got the capabilities, we've got the equipment.
“What we need is to break the economic conundrum that we're all facing to really stimulate SAF at scale.”
