The first 100% Sustainable Aviation Fuel (SAF)-fueled transatlantic flight operated by Virgin Atlantic (Virgin) using a widebody Boeing 787 Dreamliner (powered by Rolls-Royce Trent 1000) completed its journey to New York from London on Tuesday. In addition, Rolls-Royce, after various ground and flight tests, announced earlier this month that all its in-production engines for long-haul and business jets are compatible with 100% SAF usage.
READ: Virgin Atlantic flies world’s first 100% Sustainable Aviation Fuel flight
“We think the successful long-haul flight using 100% SAF is an important development in the aviation sector’s pursuit to increase SAF usage to 10% by 2030 and ultimately achieve net zero targets by 2050 as (1) it could pave the way for an increase in the SAF blend from the current regulatory maximum of 50% to a possible 100%, which would increase the scope of emissions reduction and affirm strong potential demand for SAF, and (2) it could eliminate the need for additional investments by airlines, which might otherwise would have been required to upgrade their fleets to materially increase SAF usage,” DBRS Morningstar stated.
“Currently, SAF constitutes less than 0.1% of total fuel used by the industry. While we view Virgin’s successful 100% SAF flight as an important step in the decarbonization journey, SAF usage at scale is still expected to take years to achieve as significant hurdles remain. First, SAF is currently expensive to produce and can cost anywhere from two to nine times more than conventional kerosene-based jet fuel. As fuel cost is a major part of airlines’ total operating costs, it is important for the sector to reduce the cost of SAF in order to enable wider adoption without a material impact on ticket prices and/or airlines’ margins. Second, a significant ramp-up in investment and production is required in order to achieve 2030 SAF targets. On a global scale, the International Air Transport Association projects worldwide SAF demand at 23 billion litres by 2030, This compares with only 300 million litres of SAF produced in 2022. In addition, fuel infrastructure upgrades to accommodate 100% SAF might also be required, which could take significant time and investment.”
READ: Behind the pioneering technology that enabled the first 100% SAF trans-Atlantic flight
“Potential credit implication for airlines will depend on the impact of the higher cost of SAFs on air travel demand, pricing leverage, and airlines’ margins. Regulators are also likely to play a key role in determining the pace and cost of decarbonization. Assuming the transition will be gradual, and the aviation and energy sectors continue to invest in scaling up production and reducing costs, we expect that the credit rating impact on airlines is likely to be manageable over the medium to longer term.”
