The Green Takeoff (Part 2 of 2): Challenges and Opportunities for Sustainable Aviation Fuel

In the aviation sector’s pursuit to achieve net-zero emissions by 2050, Sustainable Aviation Fuel (SAF) is expected to be the single most important solution, contributing an estimated 65% of emission reductions by 2050. While there are significant hurdles along the way, including scale and cost, the sector is keen to make SAF viable on a wider scale, with investments being made across the value chain to support a SAF transition.

This commentary is the second of a two-part series that focuses on the challenges and opportunities for SAF, and its implications on airlines and airport operators. The first commentary, “The Green Takeoff (Part 1 of 2): Challenges and Opportunities for Aviation's Alternative Propulsion Technologies,” is available at https://www.dbrsmorningstar.com/research/421404.

DBRS Morningstar’s key observations include the following:
-- Despite the significant uptick in SAF production globally over the past several years, significant ramp-up in investment and production is required in order to achieve SAF targets of up to 10% set by some major economies by 2030.
-- Cost of air travel may increase moderately over the coming years as the industry transitions toward SAF. As a result, there could be some, but not material, impact on air travel demand.
-- Blended SAF or drop-in SAF is compatible with existing aircraft fuel systems and fuel infrastructure at airports, and the transition to SAF should be relatively seamless.

“In the near-to-medium term, we expect the impact on airports and airlines to be minimal under the assumption that the transition to SAF will be gradual” said Rohit Kumar, Assistant Vice President, Diversified Industries and Valiant Ip, Vice President, Infrastructure Finance. “However, if the governments implement further climate-related policies and/or accelerate their climate-related targets materially, this could be detrimental to the aviation industry and may negatively affect airlines' and airports' credit rating profiles.”