AeroTime exclusively from Sydney | The International Air Transport Association (IATA) has just announced its forecast that rising jet fuel prices, compounded with the current political uncertainty around the world, are expected to result in lower profits for airlines in 2018. But on June 4, 2018, at the World Air Transport Summit, IATA touched upon the subject of alternative fuels and whether they could be the future of the industry, leading the way to a decarbonized aviation?

In a session on sustainable aviation fuels, Andrew Stevens, Specialist Business Correspondent for CNN, talked to Matti Lievonen, President and CEO of Neste, a Finnish-based oil producing company, one of the world’s leading producers of sustainable fuel and the world’s leading producer of diesel, as well as a growing force in the sustainable aviation fuel (SAF), about the future of alternative fuels ten years on from the first biofuel flight.

The panel began with an overview of the usage of biofuel in the industry. The first test flight using a mix of SAF and regular jet fuel took place in 2008 on a Virgin Atlantic flight. Since then there have been more than 100,000 flights using an SAF and regular fuel mix. IATA is expecting that number to go from 100,000 flights to 1 million flights by 2020. “This is a very steep trajectory of the use of SAF,” pointed out Stevens.

IATA’s predictions are impressive, however, the actual usage of SAF is “tiny”. Of the aviation industry's annual (including this year’s) $140 billion fuel bill, just 0.05% is spent on SAF, something Stevens described as a “massive lag”. “At this sort of ratio, IATA, ICAO is not going to reach this holy grail target it talks about of cutting fuel emissions by 50% of the 2005 levels by the year 2050. It is just not going to happen if the usage of SAF stays at that sort of relative ratio,” he commented.

IATA has spoken about the use of biofuels on numerous occasions in the past, but always focusing on the airlines and their perspective. At this event, the limelight was on the supplier, the producer and on their perspective, on finding out what their problems are, how they need and how they can ramp up their production. And also, very importantly, on the use of the ‘ecosystem’: the airport operators, the plane makers, the airlines, the producers. On getting that ecosystem together and pushing it in the right direction to achieve emission goals.

The challenges and the potential of sustainable aviation fuel

During the 20 minute interview panel, Lievonen, whose company Neste ranked second on the Global 100 list of the world’s most sustainable companies, shared his expertise. Ten years ago, Neste was a $3 million market cap. Today, it is a $22 billion market cap. According to Lievonen, this was achieved based on renewables. This also shows the interest by the investment community in companies like Neste and their sustainable products. “We are dedicated, we are very committed, we are putting millions to this business also, so we see that there is a future,” he remarked.

Lievonen’s company started working on sustainable solutions ten years ago and created their own technology. “Nobody believed that you could replace fossil fuel, and we have replaced fossil fuel,” the CEO remarked. Sustainability is now the core of Neste’s business. Today the company uses 13 different feedstock and all of it, over 3 million tons, comes from waste and residuals. The results? Neste was able to reduce CO2 emissions by 80% and ast year the company reduced 8.3 million tons of CO2 emissions, which is equivalent to 4 million cars taken out of traffic.

Neste also performed test flight with Lufthansa (LHAB) (LHA) using 50% SAF blend without any engine alterations on the aircraft. However, the test flight did not show great results. According to Lievonen, “We could use 100% but the engine technology does not allow that.” Moreover, a 100% SAF flight may be unrealistic due to the rising cost of bio-stock. Since SAF is more expensive than jet fuel (it is much more expensive because of feedstock, which is much more expensive than crude oil), the optimal level to start today is 10% to 15%.

Matti Lievonen, President and CEO of Neste

All in all, if the industry is to hit its goal of a 50% cut in net CO2 emissions by 2050, compared to 2005, a massive uplift in production and use is necessary. Neste, for instance, will have 1 million ton more renewable jet fuel by 2022. “So we see that there is an exponential growth,” says Lievonen, “but we need other players also.” What is needed for this to become a much bigger process is for the whole air transport 'ecosystem' – fuel suppliers, airline companies, airports, engine manufacturers and governments – to play their part.

Government support is crucial to the increased use of SAF. Governments give subsidies for electric cars, for solar panels, but the current subsidy support for SAF is close to zero. So far there have been no policies, no incentives, and that is what needs to be introduced. “Governments should start to think how they could support aviation,” says Lievonen. Airports have a key role too. The beginnings of collective action, when talking about ecosystems, can be seen at the Geneva airport where a new biofuel supply is set to go online later this year. Airports could also offer the more eco-conscious passengers their ‘green’ check-in lines, ‘green’ lounges, etc.

When does the big oil come in? Lievonen says they are not there yet. SAF is a niche product and the major oil companies do not see it as their “playing field” yet. “When we go into 2050 and they see that there’s a huge demand they will probably, but not at the moment,” he commented. It may take time for companies like Neste to prove that sustainability is a business, that you can really make a difference and earn profits. It is a major re-think, but Neste CEO believes that, “Sometimes you need to cannibalize your own business, as we did.”