Ryanair has a lot riding on development of cheaper sustainable aviation fuel

Ryanair is suggesting that sustainable aviation fuel (SAF) can do much of the heavy lifting as it seeks to reach net zero emissions by 2050. The company said on Monday that using greener fuel would help it to achieve more than a third of its emissions target. But SAF is also extremely expensive and could drive up airfares. Ryanair, which bases its entire business model on ruthless cost control, has much at stake.

Ryanair’s announcement that it intends to focus heavily on sustainable fuels came on the same day that the Securities and Exchange Commission (SEC), the stock market regulator in the United States, floated the idea that companies under its watch may in future be forced to report their emissions in detail. Ryanair is listed on the Nasdaq, and could be among the companies affected if the SEC’s suggestion flies.

SAF, which is produced from waste oils, emits almost three-quarters less carbon than conventional aviation kerosene fuel, but it costs almost three times as much. The aviation sector, under pressure from governments and climate change campaigners, is looking to sustainable fuel to allow it to reduce emissions without sacrificing growth.

Airfares

Willie Walsh, the former Aer Lingus chief executive who now runs the International Air Transport Association trade group for airlines, warned in recent weeks that SAF will inevitably drive up airfares. Fuel accounts for 25 per cent of the average airline's cost base. That will grow unless the price of SAF comes down.

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Many airlines, such as Ryanair, have rushed to commit to emissions targets but most cannot say for sure how they will get there. Ryanair last year stumped up €1.5 million to fund a research partnership with Trinity College Dublin, which will cover issues such as the development of more economically sustainable SAF. The company's chief executive, Michael O'Leary, has already warned that reaching its target of using SAF for 12.5 per cent of its fuel needs by 2030 is "ambitious" and will be hard to achieve.

The aviation sector’s best hope is that governments heavily subsidise SAF to encourager its take-up. That might just be the most logical solution for Ryanair, which normally eschews state intervention in the sector.