Shell and Lufthansa Agree on Potential Deal for 594 Million Gallons of Sustainable Aviation Fuel
Shell and German airline Lufthansa announced a memorandum of understanding for sustainable aviation fuel (SAF) supply, both companies said in press releases on August 1. The memorandum is the first step in establishing a fixed purchase agreement between both parties.
Shell has agreed to potentially supply up to 594 million gallons of SAF to Lufthansa between 2024 and 2030 at airports around the globe. Shell said this would be “one of the most significant commercial collaborations for SAF in the aviation sector and Shell’s largest SAF commitment to date.”
SAF, according to the International Civil Aviation Organization, “are renewable or waste-derived aviation fuels that meet sustainability criteria.” SAF can be made from used cooking oil, for example, and even from captured CO2 emissions.
Shell said it could use four different technological production modes for the SAF and base the production on a wide range of different sustainable products. The British oil and gas giant further stated that an airline’s tank can be filled with up to 50% SAF and that it can reduce lifecycle emissions for aviation fuel by 80% in comparison to traditional fuel.
For Shell, SAF will play a big role in its future. The company announced in September 2021 that it plans to produce about 2 million tons of SAF per year by 2025. By 2030 its goal is to have SAF make up 10% of its aviation fuel sales.
According to the airline, it is already the largest SAF customer in Europe and “one of the world’s leading airline groups in the use of sustainable kerosene.” Lufthansa said in the press release announcing the memorandum of understanding that it has a strategy to reach CO2 neutrality by 2050, according to which it plans to cut its emissions in half by 2030 in comparison to 2019 levels. The airline considers SAF an important component of making its flights CO2-neutral.
Another important way it will attempt to reach that goal is with its new “green fares,” announced in a press release on August 2. The green fares will include a compensation for CO2 emissions consisting of 80% “high-quality climate protection projects” and 20% usage of SAF. Lufthansa will offer its green fares for all passengers flying from Denmark, Sweden and Norway and will include additional benefits such as free rebooking, extra status and award miles. The fares will be offered on all Lufthansa Group airlines, which includes Swiss, Austrian Airlines and Brussels Airlines.
The carrier provided no further details on the exact pricing structure for its customers, but airline travel news and rewards site One Mile at a Time did a cursory search and found that “economy green” and “business green” fares on a one-way flight from Copenhagen to Frankfurt cost $162.51 and $224.30, respectively. The cheapest economy fare, economy light, came in at $87.93 and the cheapest business class fare, business saver, was $167.48. Notably, both green fares were the exact same price as the highest-cost non-green options in each class. No details on the date of the flight were given.
Because SAF is much more costly than conventional jet fuel and the supply is still scarce, it is not yet extensively utilized. According to the International Air Transport Association, SAF accounted for less than 1% of the world's demand for jet fuel in 2019. In 2020, 3.4 million metric tons of SAF were produced worldwide according to a study conducted in April 2022 by the statistics website Statista. In 2022, 4.9 million metric tons are anticipated and for 2025 that figure is estimated to jump to 8.2 million metric tons.
The aviation industry’s path to zero emissions continues to be questioned by some. The European Federation for Transport & Environment said in a blog post in October 2021 that the sector’s goals are too dependent on subsidies for fossil fuels and cheap carbon offsets.
According to a report from KMPG, which modelled the demand for SAF, demand will continue to rise reliably over the next 15 years. However, a number of factors, notably the challenge of making SAF manufacturing economical, may restrict its market penetration beyond then.