Takeaways from the 2023 Paris Air Show-Part 4

This series of stories covers our takeaways from the Paris Air Show from a strategic perspective on the topics of Technological Change, Aftermarket and Retrofit Growth, Urban/Advanced Air Mobility, SAF and Carbon Reduction, and Airbus vs Boeing. SAF AND CARBON REDUCTION This year in Paris, we saw more SAF providers than ever before, both those displaying products and meeting individuals from SAF producers at the show. SAF is clearly the key element that the industry is counting on for environmental gains. Without SAF it is unlikely that the industry can reach its environmental objectives to reduce carbon emissions by 50 percent by 2035 and to be carbon neutral by 2050, as has also been outlined by IATA. Projections from the First Movers Coalition and World Economic Forum project that 65 percent of the 100 percent carbon reduction target for the industry in 2050 will come from SAF. The remaining 35 percent will come from newer aircraft with lower emissions from advancing technology. Their very interesting 33-page white paper on SAF is available here. What it shows is even with SAF, the industry is likely to have a difficult time meeting its goal of carbon neutrality by 2050 without major performance improvement. Can the industry achieve a 35 percent gain in non-SAF efficiency in fewer than 27 years? A 1 percent-per-year improvement in the industry, on average, is celebrated as a great achievement. But we will likely need to do better than that by 2035, which will require a breakthrough in aerodynamics, propulsion, or both to achieve the target. Meeting the goal on a timely basis will require a high enough percentage of the fleet to adopt it to lower the average. As a result, the new technology needs to be ready 10 years earlier, by 2040. That would mean an average 2% increase per year in efficiency over 17 years, something very difficult to achieve. Even with SAF, the industry has a long way to go. SAF IS IN A STATE OF FLUX Sustainable Aviation Fuel or SAF is the leading method to achieve industry carbon goals and has the advantage of utilizing the existing infrastructure for fuel delivery at airports. As the “low-hanging fruit,” SAF will be the prime technology utilized to achieve the industry’s strategic goals of a 50 percent reduction in emissions by 2035 and carbon neutrality by 2050, as many airplanes being delivered today will likely still be in service 12 and 27 years from now. But gearing up for a transition from JetA to SAF will be neither easy nor quick. SAF is not a monolithic term, but one covering several technologies, each with its own ramp-up challenges. A key challenge for SAF is the additional cost over JetA, which ranges from twice to eight times as expensive today. As the industry ramps up in production volume, costs should come down, but may in the end be more expensive than JetA, with that differential passed on to customers. The term SAF covers a broad range of methodologies to create sustainable and/or synthetic fuel. Those methodologies range from utilizing used cooking oil from fast food restaurants (sustainable aviation fuels) to wood residuals or growing feedstock crops for synthetic aviation fuels in power to liquid (“PtL”) processes pioneered in Europe. Each methodology has its own benefits and challenges to overcome before the industry can move into large-scale adoption and replace JetA with SAF to reduce carbon emissions by 90 percent plus. Currently, there are seven different ASTM standards or pathways for Sustainable Aviation Fuel, based on the various production methods being considered. FOG - Fats, Oils, and Greases The first generation of SAF turns fats, oils, and greases into biofuel. Currently, Neste collaborates with McDonald's in The Netherlands, where more than 250 restaurants supply their used cooking oil that is refined into fuel. This fuel reduces carbon by 50-80 percent over the lifecycle of the project. Because technologies exist to separate fats, oils, and greases from municipal waste, the next step in this process is to gather feedstock from sewage centers and treatment plants to enable higher volume production. Since most waste treatment centers are government-owned and operated, proving FOGs from waste streams will require investments and political approvals to move forward, typically a slower-than-desired process. BIOMASS - Growing Feedstock Much like ethanol, produced from corn for the ethanol market, SAF can be produced from specific crops grown as feedstock for a conversion process. With global populations increasing and the need for food continuing to grow, there are concerns over growing SAF feedstock. Fortunately, some feedstocks can be grown during the fallow winter season in much of North America, enabling additional revenue for farmers while not competing with land used for food production during the summer season. Those crops, including Camelina, Carinata, and Pennycress, can be grown during winter months, particularly south of Interstate 70 in the United States. As feedstock logistics improve, it is estimated that SAF costs for biomass fuel can be reduced from the current 300 percent price point down to 150 percent, but that would still result in a 50 percent increase in fuel cost for airlines. POWER TO LIQUID Power to Liquid will pull CO2 from the atmosphere and, combined with green energy, create synthetic fuel. The process, however, is not yet proven in high-volume production. The recapture of carbon from the atmosphere and the availability of green energy are keys to this process, which could produce lower-cost SAF in the future once critical mass for economies of scale can be achieved. This is a promising alternative to the more expensive logistics needed for waste or agricultural feedstocks. But we’re not there yet. THE BOTTOM LINE While the industry is looking to SAF as the answer to carbon neutrality, it may not, in itself, be enough to achieve the industry goals for 2035 and 2050. It may be feasible to shift 10 percent of the global JetA requirement to SAF by 2030. Ramping up from there to meet the ever-increasing needs of an industry that will require more than 40.000 new airplanes by 2042 will be a difficult and expensive challenge that will require government and industry support, with new facilities around the world. Until those technologies can mature and critical mass for scale economics are achieved, the adoption of SAF may be too expensive for commercial airlines to adopt in high percentages. The key to success is how quickly SAF production techniques can come down the learning curve, and whether the most promising technologies will be successful. There remains a lot of work to be done, but with multiple well-funded players attacking the problem, we remain hopeful that progress will continue as the industry ramps up production volumes. Bringing down high costs, however, will be essential to long-term success.

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