IATA urges airlines to explore in-house SAF production amid uncertain net-zero deadline

Airlines must step beyond their traditional business models and consider manufacturing their own fuel particularly sustainable aviation fuel to control costs and secure long-term viability, a top International Air Transport Association official said June 2.

Marie Owens Thomsen, Senior Vice President for Sustainability and Chief Economist at IATA, said airlines should explore internally manufacturing SAF to ease dependency, cut long-term costs and make meaningful progress toward carbon neutrality.

While the industry's 2050 net-zero goal remains technically achievable, the timeline is now in serious doubt amid lagging SAF production and rising operational pressures, Thomsen said.

"Airlines need to come out of their core business and look at other options to boost revenue," Thomsen said in Airline Industry Outlook session on the sidelines of IATA's 81st Annual General Meeting in New Delhi. "Producing their own fuel, especially SAF, could give them more control over one of their largest cost drivers and support net-zero goals."

Thomsen noted that fuel accounts for 26% of the aviation industry's total operating costs, making it the single largest line item after labor.

"Aviation is a capital-intensive and complex endeavor, and our margins are slim -- just 3.7% on a global profit of $36 billion in 2024," she said.

Net-Zero still the goal, but timeline in doubt

While IATA continues to back the aviation industry's net-zero carbon commitment by 2050, Thomsen acknowledged the timeline may be slipping out of reach due to a massive shortfall in SAF production.

"At the current pace, the world will produce 400 million [mt] of SAF by 2050, but we need at least 500 million [mt]," she said. "That's a shortfall of 100 million [mt] -- and it could grow if we don't act now."

Only 1 million mt of SAF was produced in 2024, barely 0.5% of total jet fuel demand, according to IATA.That number is expected to rise to 2 million mt in 2025, but the gap remains vast.

Co-processing -- blending renewable feedstocks in traditional refineries -- could rapidly scale up SAF production, especially in regions like the Middle East, Thomsen said.

"If this co-processing happens, then boom -- we have a SAF plant," she said. "The Middle East is uniquely positioned for this. But governments need to create investment policies that make it attractive."

South Africa, Middle East poised as regional SAF hubs

Thomsen pointed to South Africa and the Middle East as high-potential regions for SAF leadership.

During IATA's Wings of Change Focus Africa conference in Johannesburg in May 2024, she called on South Africa's next government to prioritize SAF development as both an environmental and economic strategy.

"This is not just about aviation's decarbonization -- it's a national development opportunity," she said. "SAF can create jobs across agriculture, energy, and transport."

Meanwhile, the Middle East is already seeing movement. Saudi Arabia has a 350 million-liter SAF plant in the works, backed by Nordic Electrofuel, while the UAE plans to reach 700 million liters by 2031 with support from major carriers like Emirates and Etihad. Shell began SAF deliveries to Dubai International Airport in 2023.

"We are seeing efforts, but not enough," Thomsen said. "The world needs investment -- and policy alignment -- now."

SAF faces supply chain strains, difficult economics

Beyond fuel, Thomsen said the industry is also battling aircraft delivery delays, especially for regional jets and turbojets.

"These delays are impacting fleet expansions and operations," the said. "The manufacturing sector is simply not keeping up with roaring demand."

Thomsen also challenged the assumption that SAF must always be expensive.

While SAF costs remain higher than those of fossil fuel-based jet, she said internal production and policy incentives could bring prices down over time, helping airlines stabilize one of their most volatile expenses.

"There's more than enough feedstock in the world," Thomsen said. "What's missing is the capacity and policy will to convert it at scale."

Airlines must evolve or be left behind

IATA believes aviation can still reach net zero, but only if governments, oil majors and airlines themselves diversify, innovate and invest. Thomsen's message was clear: the current trajectory is not enough.

"This is an inflection point. If airlines want to survive the fuel and carbon challenges of the future, they'll need to think beyond tickets and routes," Thomsen said. "Energy is part of the strategy now."

Platts, part of S&P Global Commodity Insights, assessed the Asia SAF-jet fuel spread at $1,122.04/mt on May 30, down $1.68/mt day over day.

The US West Coast SAF-jet fuel spread was assessed at 458.38 cents/gal on May 30, up 5.49 cents/gal day over day.

Meanwhile, the European SAF-jet fuel spread was assessed at $1,331.37/mt on May 30, up $9.49/mt day over day.