News & Views
The Promise and Shortcomings of Sustainable Aviation Fuel (SAF)
In the 1990s, the automotive industry faced seemingly insurmountable challenges in curbing its carbon footprint. Three decades later, the general public is gravitating toward environmentally-friendly autos more than ever before, a trend certain to continue until vehicles powered by conventional gasoline become a thing of the past. Today, the aviation industry is grappling with similar issues and hopes to reach similar heights, but it has a long way to go. Currently, the sustainability ambitions of the industry largely rest with a commodity commonly referred to as SAF.
What is SAF?
SAF stands for Sustainable Aviation Fuel. In comparison to fossil fuels, SAF in its pure form reduces carbon emissions by up to 80 percent. Unlike finite fossil fuels, SAF is produced using feedstock, which consists of renewable, biological materials, such as cooking oil, plant oils and agricultural residues.
While current international aviation regulations only allow up to 50% of SAF in jet fuel blends, the end product is no different from conventional fuel, experts say. The regulations are due to understandable caution. However, research has shown that jet engines are just as receptive to SAF as they are to conventional fuel. In fact, airlines are rapidly on the way to proving that SAF would be capable of completely replacing conventional fuel if it were more affordable and plentiful. The obstacles related to SAF have much less to do with efficacy than they do with cost and supply.
The challenges regarding the adoption of SAF for the aviation industry are plentiful. But they mainly boil down to two main issues: 1) supply and demand and 2) cost.
Separate from the supply chain issues that have arisen as a result of the pandemic, one of the main barriers to SAF being the answer to aviation’s carbon footprint is availability. Current production is less than 1% of the global jet fuel demand with hopes that that figure will grow to 2% by 2025. Only three major SAF production facilities are currently operating worldwide. Without demand, the goals of SAF advocates appear untenable. However, with appropriate legislation, be it tax penalties or incentives, SAF might still thrive in the aviation industry.
Inextricably connected to SAF supply is the fuel’s cost. The expense of the production process, along with the lack of supply, has caused SAF to be up to five times more expensive than conventional jet fuel, which is why legislation is crucial. For example, a fixed-base operator (FBO) in Los Angeles recently made a 30% SAF blend available to jets, and the cost per gallon is more than a dollar greater than that of conventional jet fuel.
Europe and the United States have different opinions about the best way to encourage the usage of SAF. Whereas European nations are in favor of tax penalties and use requirements, the U.S. favors incentives because tax penalties are unlikely to pass in Congress. With policy roadblocks, it is up to aviation companies to bridge the gap and come up with alternatives to make flying more environmentally friendly until SAF becomes more mainstream.
While SAF is a scientifically proven and highly publicized way for the aviation industry to reduce its carbon footprint, the aforementioned challenges still leave the aviation industry decades away from biofuel making a meaningful environmental difference.
In the short term, alternative solutions are needed. Unfortunately, viable alternatives are wanting. For example, while the auto makers can go electric, this is not an option for aviation because batteries are currently too heavy for flight. Aerodynamic advancements and new technology are other ways the aviation industry can become more sustainable, but such solutions involve a slow, uphill progression, much like the challenges of SAF.
In the meantime, companies that want to make an immediate difference need to consider carbon offsets. For instance, with its carbon neutral flight program, Private Jet Services (PJS) has committed to offset carbon emissions by pledging to plant “79,200 trees in two of the nation’s most needed regions and will reconcile its reforestation program annually to compensate for increased flight activity, ensuring that the PJS Carbon Neutrality Pledge is honored in perpetuity.” This is one way both private and commercial aviation companies can do their part to stem the consequences of carbon emissions.
Sustainability in aviation has a bright future with the promise of SAF. But with the meaningful impact of renewable fuel still decades away, it is up to individual companies to commit to legitimate, attainable efforts until then. It takes a village; every individual can do their part to diminish the effects of climate change. Likewise, aviation companies can make a difference when they decide to lead rather than follow.
Why the Value of Private Jets Are Surging
The current market for pre-owned and new business jets is in the midst of a well publicized crisis. Much like the housing boom that coincided with the pandemic, demand is sky high and inventory is at record lows. For sellers and aircraft manufacturers, this is a good problem to have. However, for buyers, it is a source of frustration. How did the industry find itself here, and when and how does it end?
Similar to why housing prices reached the stratosphere, high demand in aviation is closely tied to the new reality brought on by the pandemic, which left homeowners abandoning cities and commercial airlines virtually grounded. Also, COVID-19 health concerns made flying private appealing because it allowed for the avoidance of crowded airports and packed airplanes. Another factor driving demand is rising wealth that has brought an influx of first-time buyers to the industry. Enticing this new segment of buyers were low interest rates and a 100% bonus depreciation bestowed by the Tax Cuts and Jobs Act of 2017, a reform bill that is in effect until the end of 2022. As the pandemic lifted, corporate customers wishing to build their fleet added to the demand.
Tightening the vise on the market crisis is low inventory, which also has the pandemic partly to blame. 5-6% of the world’s fleet of business aircraft is for sale right now, which is the lowest in decades. While the market is great for sellers, many do not want to part with their aircraft because of the difficulty in finding a replacement, not to mention the desire to travel more safely by avoiding commercial airlines. Meanwhile, on top of global shipping delays, the production of new aircraft and parts stalled during the height of the pandemic, resulting in a shortage of newer-model jets that drove up the demand and, consequently, the prices of pre-owned aircraft.
Though it is too early to tell, the sanctions placed on Russia in response to the Ukrainian invasion could also squeeze inventory. The sales of Russian-owned aircraft and even those with unorthodox ownership structures are bound to be rife with complications and scrutiny, and that assumes that the sanctions do not render certain types of sales completely off limits.
The idea that prices will fall as the pandemic fog lifts and people return to flying commercially is possible. But as Greg Raiff, CEO of PJS, wrote in a recent LinkedIn article related to business travel, “Factor in the convenience of flying according to your schedule, the privacy to conduct business on board, and the ability to reduce travel time and expenses, and airline travel no longer adds up … For the first time, it’s more cost-efficient to fly a group of mid-level managers on a private aircraft than it is to send them on a commercial flight.”
For the foreseeable future, buyers will continue to scramble to close on aircraft they covet. The frenzy has caused buyers to make decisions that range from necessary, such as paying upfront with cash, to irrational, like foregoing a pre-purchase inspection to close on an aircraft. Aircraft acquisition experts urge buyers to be sensible despite being in a disadvantaged position. Using brokerages, such as Keystone Aviation, can help buyers with paperwork and the inspection processes, so that they can more easily navigate this market crisis and move quickly enough to snap up the unique aircraft that meets their needs.