ISTAT Jetrader - Autumn 2022 - 28

FIGURE 1: U.S. ADULT POPULATION FLIGHT STATS
100%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0%
◾ NO TRIPS PER YEAR ◾ 1 OR 2 TRIPS PER YEAR ◾ 3 TO 5 TRIPS PER YEAR ◾ 6+ TRIPS PER YEAR
% US ADULTS
% OF ALL TRIPS
Source: The International Council on Clean Transportation, based on
data collected by Airlines for America in 2018
FIGURE 2: AVIATION PERSPECTIVES
12%
14%
21%
68%
solutions. However, the high cost of SAF
compared to fossil jet fuel could still
put a brake on demand for air travel,
negatively impacting the future value of
aviation assets.
To understand this issue, it is useful
19%
13%
to understand the potential future cost
of SAF. A report published in November
2020 by McKinsey and the World
Economic Forum projected the future
cost curve for various types of SAF.
As things stand now at the midpoint
INDUSTRY PERSPECTIVE:
Aviation's Global Carbon
Footprint: 2.5%
PASSENGER PERSPECTIVE TODAY:
Frequent Flier's Carbon Footprint
due to Aviation: 20%
PASSENGER PERSPECTIVE 2030:
Frequent Flier's Carbon Footprint
due to Aviation: 35%
Source: Our World in Data; Ishka Analysis: 2030 CO2 emissions per capita assuming
US meets its target to reduce all CO2 emissions by 50% vs. 2005 levels
Although aviation globally produces just 2.5% of
CO2 emissions, as the public starts to focus more on
their personal carbon footprint, they might reconsider
the amount of their flying.
needed to fill the aircraft in the future.
Tomorrow's frequent flying consulting
or banking executive is today's Berkley
liberal arts undergrad.
Where Do We Go
From Here?
By now, much of the industry has
settled on the idea that SAF is the only
solution that can reduce net carbon
emissions from aviation in a time
28 * THE OF F I C I AL PUBL I CAT I ON OF ISTAT
frame that will prevent excessive tax
or changing consumer habits from
eroding demand for tickets. So, what
does this mean for aircraft values?
Since SAF is a drop-in fuel
compatible with existing aircraft and
engines, the migration from fossilderived
jet fuel to SAF jet fuel should
create no cliff edge of stranded assets,
which would occur were hydrogen or
electrical aircraft to become viable
of 2022, there have been significant
increases in the price of HEFA-derived
SAF (hydroprocessed esters and fatty
acids) due to the Russian invasion
of Ukraine and the high cost of oil.
The McKinsey/WEF study projected
HEFA SAF would trade in a range from
$1.20/kg to $1.40/kg in this period.
According to data from Argus, the cost
of HEFA SAF at the end of May 2022
was close to $4/kg. In regards to the
other pathways, it is difficult to say how
accurate the price projections are since
so little production has come on stream.
According to data compiled by
Ishka, over 90% of currently operating
SAF production capacity and 70% of
new planned SAF capacity is HEFA.
There are two issues with this. First is
that feedstock for HEFA (material such
as used cooking oil and animal fats)
is thought to be limited to producing
20 million tons of jet fuel a year
(approximately 5% of global jet fuel
demand). The second is that HEFA is
a technological cul-de-sac; adding
production capacity of HEFA SAF does
not mean we're learning anything about
how to produce cheaper SAF from
other pathways that have the feedstock
potential to replace all jet fuel demand.
Given this situation, it seems there
is a much larger role that governments
could play to simulate investment in
the SAF pathways that do have the
potential to fuel the entire industry, such
as gasification/FT and power to liquid.
These technologies have not matured to
a stage where they can attract the lower
cost of capital investment needed for
large-scale rollout. We don't have time

ISTAT Jetrader - Autumn 2022

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