IATA expects sustainable aviation fuel production to double in 2025

IATA projects sustainable aviation fuel (SAF) production to double in 2025, reaching 2 million tonnes, or 0.7% of airline fuel consumption; however, IATA Director General Willie Walsh notes this limited supply will add $4.4 billion to the industry's fuel bill. Walsh emphasized the need to accelerate SAF production and cost efficiencies to meet the sector's 2050 net-zero emissions target, citing current SAF scarcity and delays in deliveries of fuel-efficient aircraft as key challenges.

Analysis

The International Air Transport Association (IATA) projects sustainable aviation fuel (SAF) production to double in 2025, reaching 2 million tonnes. However, this volume will represent a mere 0.7% of total airline fuel consumption, underscoring the significant challenge in scaling SAF to meet industry needs. This anticipated increase in SAF supply, though a positive development, is expected to add $4.4 billion globally to the aviation sector's fuel bill, highlighting the current cost disparity between SAF and conventional jet fuel. IATA Director General Willie Walsh characterized the progress in ramping up production and improving cost efficiencies as "disappointingly slow" and stressed the urgent need for acceleration to achieve the industry's 2050 net-zero emissions target, which is heavily reliant on a transition to SAF. The slow SAF adoption is exacerbated by tensions between airlines and energy companies over limited SAF supplies, and with aircraft manufacturers like Airbus and Boeing (BA) concerning delays in the delivery of more fuel-efficient aircraft. The overall sentiment surrounding these developments is moderately negative, reflecting concerns about the pace of transition and its financial implications for the aviation industry, with specific negative sentiment observed for Boeing related to aircraft delivery performance.

Key Decisions for Investors

• Investors should carefully evaluate the impact of rising SAF costs on airline profitability and monitor progress towards emissions targets, as these factors will increasingly influence operational expenses and ESG ratings.
• Maintain scrutiny on aircraft manufacturers such as Boeing, as their ability to deliver fuel-efficient jets on schedule is critical for airlines' cost management and sustainability goals, with delays potentially impacting orders and industry sentiment.
• Assess opportunities and risks within the energy sector related to SAF production, focusing on companies demonstrating scalable and economically viable solutions to meet the growing but challenging demand.
• Track regulatory developments, including potential mandates or incentives for SAF adoption, as these will significantly shape the pace of the aviation industry's transition and the investment landscape.