Air travel costs are expected to rise as the aviation industry transitions to Sustainable Aviation Fuel (SAF) and aims for net zero emissions by 2050. Willie Walsh, Director General of IATA, highlighted that customers will have to bear the higher costs as SAF is at least three times more expensive than regular fuel. He emphasized the need for the industry to recover these costs to maintain a sustainable financial model.
At the International Air Transport Association (IATA) conference in Dubai, Sir Tim Clark, President of Emirates, expressed optimism about the transition to SAF. While acknowledging potential price increases in the short term, he believed that prices would eventually fall as the industry scales up production. There is also a possibility that airlines could absorb some of the costs, according to Clark.
IATA is on track to triple the production of SAF this year to 1.9 billion liters, with plans for around 140 renewable fuel projects to be in production by 2030. The industry aims to achieve a 5% reduction in carbon emissions for international aviation by 2030, with current SAF production only meeting 0.5% of the world’s airlines’ fuel needs.
Despite projected record revenues of almost $1 trillion in 2024, with expenses reaching $936 billion, the net profit for the airline industry is expected to be $30.5 billion, representing a net margin of just over 3%. Walsh highlighted the industry’s wafer-thin profit margins and the challenges of earning the cost of capital in a fiercely competitive environment.
Walsh emphasized the industry’s resilience in recovering from the pandemic, achieving record revenues, and returning to profitability. He urged governments to understand the industry’s narrow profit margins and the challenges faced in a highly competitive market. While celebrating the industry’s achievements, he also acknowledged the need for continued efforts to maintain financial sustainability in the face of rising costs.
In conclusion, the aviation industry’s shift towards Sustainable Aviation Fuel is set to bring about higher costs for consumers, with the need for the industry to recover expenses to maintain financial sustainability. Despite challenges, the industry remains resilient and continues to strive for decarbonization and reduced emissions to meet ambitious targets for the future. Collaboration between industry stakeholders, governments, and consumers will be crucial in navigating the transition towards a more sustainable and environmentally friendly aviation sector.
