Net Zero Flights Hang on Green Fuel Gains, Air New Zealand Warns

Air New Zealand’s push to slash aviation emissions hinges on a precarious reality: its ability to secure affordable supplies of sustainable aviation fuel (SAF) and advance alternative propulsion technologies. While the airline has made strides in recent years—securing 30 million liters of SAF in fiscal 2025 and partnering with global producers like Neste—the path to net-zero emissions by 2050 remains fraught with supply chain bottlenecks, technological uncertainty, and the high cost of green fuels. For investors, the airline’s progress will be a litmus test for the broader aviation sector’s decarbonization ambitions.

The SAF Crucible
Air New Zealand’s 2025 milestones underscore its reliance on SAF to achieve emissions cuts. The airline’s 1.6% SAF blend rate—up from negligible levels in prior years—is a modest start toward its 10% target by 2030. However, CEO Greg Foran acknowledges that scaling SAF remains “the single biggest hurdle” due to global supply shortages and costs that are up to six times higher than conventional jet fuel. To bridge this gap, Air New Zealand has leaned on partnerships like its deal with Neste and advocacy for government incentives, including Australia’s emerging role as a regional SAF hub.

Challenges Beyond Its Control
The airline’s fleet renewal plans, critical to reducing emissions, have been derailed by industry-wide bottlenecks. Delays in aircraft manufacturing and the collapse of hydrogen-electric partner Universal Hydrogen in 2024 highlight the risks of over-reliance on nascent technologies. Meanwhile, Air New Zealand’s revised “guidance” framework—a softer commitment than its abandoned 2030 science-based targets—reflects the harsh reality of balancing growth with decarbonization.

Offsetting the Gap
While Air New Zealand emphasizes direct emissions reductions, it has not entirely shunned carbon offsets. Limited use of high-quality projects—such as reforestation initiatives—will supplement its efforts until SAF and new propulsion systems mature. Yet, the airline stresses that offsets account for just 5-10% of its net-zero strategy, with the bulk relying on SAF adoption and operational efficiency.

The Investment Case: Risks and Rewards
For investors, Air New Zealand’s trajectory hinges on three factors:
1. SAF Supply Growth: Current global SAF production capacity is less than 1% of aviation fuel demand. Scaling to 10% by 2030 would require a tenfold increase in output.
2. Policy Momentum: Government subsidies, tax incentives, and mandates (e.g., the EU’s SAF blending requirements) could lower costs and boost supply.
3. Technological Breakthroughs: Advances in synthetic fuels and electric/hydrogen propulsion could provide alternatives if SAF scaling falters.

Conclusion: A Bumpy Ride to Net Zero
Air New Zealand’s 2025 progress—a 1.6% SAF blend and a 20-25% emissions reduction target by 2030—paints a cautiously optimistic picture. However, the airline’s own data underscores the scale of the challenge: even with these steps, its 2030 emissions are projected to remain at 3.5-3.7 million tonnes, down only 14-19% from 2019 levels. To hit net-zero by 2050, SAF must contribute at least 7% of global aviation fuel by mid-century—a goal that hinges on unprecedented investment and policy alignment.

Investors should weigh Air New Zealand’s strategic bets—its SAF partnerships, advocacy for regional supply chains, and transparency in annual emissions reporting—against the sector’s systemic risks. For now, the airline’s stock reflects this tension: while its share price has outperformed regional peers over the past five years, volatility persists as SAF costs remain unpredictable. Success will require not just Air New Zealand’s efforts but a global shift in fuel infrastructure—a race where timing, as much as technology, will determine the outcome.