Assessing the Viability of Sustainable Aviation Fuel (SAF) as a Long-Term Investment in a Post-Crisis Aviation Sector

The aviation sector, still reeling from the economic shocks of the post-pandemic era, now faces a dual challenge: decarbonizing operations while navigating the financial strain of costly green mandates. Sustainable aviation fuel (SAF) has emerged as a critical tool in this transition, but its viability as a long-term investment hinges on balancing regulatory pressures, production scalability, and strategic corporate partnerships.

The Cost Conundrum of Green Mandates

The International Air Transport Association (IATA) has been a vocal critic of policies that prioritize speed over feasibility. The EU’s mandate to import SAF from outside Europe, for instance, has been labeled “a great green scam” by IATA Director General Willie Walsh, who argues that the policy ignores the carbon footprint of transporting SAF across continents [1]. In 2025, SAF costs in Europe are 4.2 times higher than conventional jet fuel—a jump from 3.1 times in 2024—largely due to compliance fees imposed by suppliers under EU and UK regulations [2]. These fees, which IATA calls “profiteering,” have added $1.7 billion in costs to airlines this year alone [3].

The association warns that such mandates risk stifling innovation by diverting capital from research and development to compliance. IATA estimates that achieving net-zero emissions by 2050 will require $4.7 trillion in investment, a figure that should not be inflated by policies that prioritize political expediency over economic realism [1].

Strategic Partnerships as a Path Forward

British Airways, however, offers a counterpoint to IATA’s skepticism. The airline has signed multi-year SAF supply agreements with companies like EcoCeres and Twelve, aiming to use at least 10% SAF by 2030 under the UK government’s mandate [4]. These partnerships leverage waste-based feedstocks, such as used cooking oil, to produce SAF with up to 80% lower lifecycle emissions than traditional jet fuel [4].

But British Airways’ strategy goes beyond procurement. The airline and its parent company, IAG, are co-investing in SAF production facilities to reduce costs and secure supply chains. This approach mirrors IATA’s call for government incentives over mandates, as private-sector investment can drive economies of scale. For example, British Airways’ parent company has committed to funding SAF plants that convert non-competitive feedstocks into fuel, a move that could lower production costs and increase availability [5].

Scalability Challenges and Market Realities

Despite these efforts, scalability remains a major hurdle. SAF currently accounts for just 0.7% of global airline fuel consumption in 2025, and production must increase exponentially to meet regulatory targets [3]. The industry faces three key constraints:
1. Feedstock Limitations: Waste-based biomass, the primary feedstock for SAF, is finite and often diverted from other renewable energy sectors [4].
2. Supply Chain Complexity: Producing SAF requires integrating disparate logistics networks for feedstock collection, refining, and distribution—a process that is both capital-intensive and geographically fragmented [2].
3. Cost Barriers: Even with co-investment, SAF remains 4.2 times more expensive than conventional fuel, deterring widespread adoption without subsidies [2].

Regulatory Dynamics: A Double-Edged Sword

The tension between mandates and incentives underscores a broader debate: Should regulators enforce strict SAF quotas, or should they prioritize market-driven solutions? IATA advocates for the latter, urging governments to harmonize global SAF policies to avoid a patchwork of conflicting regulations [3]. For instance, the EU’s focus on importing SAF has created a “carbon leakage” risk, where airlines shift operations to regions with laxer environmental rules [1].

British Airways’ experience suggests that a hybrid approach—combining targeted mandates with financial incentives—could work. The airline’s partnerships are supported by UK government grants for SAF infrastructure, illustrating how policy can align with private-sector goals [5].

Conclusion: Weighing Risks and Opportunities

For investors, SAF presents a high-risk, high-reward proposition. The sector’s growth is contingent on resolving three key questions:
1. Can production costs be slashed through technological innovation and scale?
2. Will governments shift from punitive mandates to incentive-based policies?
3. Can airlines like British Airways replicate their partnership models across the industry?

The answers will determine whether SAF becomes a cornerstone of aviation’s green transition or a cautionary tale of overambitious regulation. For now, the path forward requires a delicate balance—leveraging corporate innovation while pushing for regulatory frameworks that prioritize practicality over political theater.

Source:
[1] EU's 'green' fuel mandate costly and not helping ..., [https://www.reuters.com/sustainability/eus-buying-green-fuel-outside-meet-its-targets-is-not-making-sense-iata-says-2025-07-16/]
[2] Policy Shortcomings Puts SAF Production at Risk, [https://www.iata.org/en/pressroom/2025-releases/2025-06-01-02/]
[3] IATA: Production of sustainable aviation fuel will double in ..., [https://www.travelweekly.com/Travel-News/Airline-News/IATA-says-sustainable-aviation-fuel-production-will-double-in-2025]
[4] British Airways signs SAF supply deal with EcoCeres, [https://www.ttgasia.com/2025/07/10/british-airways-signs-saf-supply-deal-with-ecoceres/]
[5] Sustainability LIVE: Net Zero – British Airways' Journey, [https://sustainabilitymag.com/net-zero/sustainability-live-net-zero-british-airways-journey]