Ready to invest in India to accelerate, push SAF production: Airbus

Qantas Airways, Airbus, and the Queensland government had in March 2023 announced a collaboration to invest in a biofuel production facility, which is being developed by Jet Zero Australia, LanzaJet

Airbus is willing to invest in India to accelerate the production of sustainable aviation fuel (SAF) if the right opportunity arises, Julien Manhes, head of SAF at the European planemaker, has told Business Standard in an interview.

“We are helping projects to accelerate (SAF production) by bringing funds. We are not going to become fuel producers. But where our money can help, we are willing to consider investing it,” he said, citing the example of what Airbus has done in Australia.

Qantas Airways, Airbus, and the Queensland government had in March 2023 announced a collaboration to invest in a biofuel production facility, which is being developed by Jet Zero Australia and LanzaJet.

Airbus and Qantas will jointly be investing $1.34 million in this project.

India is in a unique position as the production of biofuel, and in particular, SAF, can be a new industry for it, not just for domestic consumption but also for exports to regions such as Europe and Oceania, he noted.

“That is why the government has a role to play in helping the (SAF) market become a reality,” he added.

Does it mean that for the initial boost to the SAF market, the regulation will have to play a role?

“Absolutely,” he replied, adding that a regulatory push is needed to kick-start widespread production and consumption of SAF in India.

The price differential currently between SAF and aviation turbine fuel (ATF) is three to five times, and that is why SAF is not making much economic sense to airlines, he observed.

“It is the economic equation that we need to solve,” he added.

Fuel cost comprises about 40 per cent of an Indian airline’s total expense.

In November 2023, the National Biofuel Coordination Committee, led by Union Petroleum Minister Hardeep Singh Puri, established “indicative” targets for blending SAF into ATF.

According to the committee, at least 1 per cent of SAF should be mixed in ATF by 2027, initially only for international flights. Subsequently, by 2028, this percentage is proposed to escalate to 2 per cent.

Indian Oil Corporation (IndianOil) had in June last year announced a collaboration with the aforementioned LanzaJet to establish a SAF production facility in Haryana. Manhes said Airbus is closely following the number of such plants that are being established.

“So, IndianOil is working on one. There could be others. We are willing to support. We are willing for this pipeline to be populated with many more products and help those products accelerate... That is what we have done in Australia where we have invested with a customer of ours in a project that converts cane-based feedstock into fuel. We are willing to reproduce the same thing in India and announce that," he noted.

Airbus estimates that India will annually be consuming anywhere between 11 million tonnes (mt) and 14 mt of ATF by 2030.

India currently consumes somewhere between 6 mt and 8 mt of ATF. Currently, it is difficult to predict the demand for SAF, he said.

“The demand for SAF in India, from what we see, will be driven primarily from what the regulator may impose in terms of SAF consumption and distribution,” he mentioned, adding that Airbus expects the demand for SAF to rise in India to between 0.2 mt and 0.7 mt per annum by 2030.

By setting out the desired blending targets, the regulators in India are expressing the demand signal.

“What the regulator has understood is that you need to set the demand signal so that the producers make necessary investments to produce SAF,” Manhes said.

When asked if SAF’s usage will increase only in the presence of a strong regulatory mandate, he answered, “Regulation has a role to play. It is a typical chicken-and-egg situation. There is an ambition in the sector to decarbonise. All stakeholders, including airlines, of the aviation industry want to reach the net-zero carbon emissions target by 2050. Whatever the forecast, you will need hundreds of millions of tonnes of SAF every year to get that.”

“Why isn’t there more SAF available in the market today? If you ask an airline, it will say it wants to buy but there is none. When you talk to a producer, it says it can produce SAF but no one wants to buy it because it is too expensive. So, there is an economical equation here where there needs to be a regulation facilitating the scale-up of the market that will eventually bring down, with the economies of scale, the price of SAF, and help a new industry to emerge,” he added.