Global production of Sustainable Aviation Fuel (SAF) is set to remain a fraction of what airlines need, creating a costly but thin supply market that is constraining the industry’s decarbonisation plans and raising the cost of compliance. The International Air Transport Association (IATA) estimates SAF output will reach around 2.4 million tonnes in 2026, just 0.8% of aviation fuel use, at a cost to airlines of USD 4.3 billion.
“It looks to be another disappointing year for SAF production,” said IATA Director General Willie Walsh. “Five years after committing to achieve net zero by 2050, SAF production will only account for 0.8% of airline fuel use this year. The path to meeting 65% of our needs in 2050 is growing more difficult with each year of ineffectively sequenced government policies and oil companies’ manifest lack of interest.”
Why SAF’s business case is broken so far?
SAF’s cost premium and supply scarcity are the core business risks. At current volumes, airlines must spend billions to secure a tiny share of fuel, exposing profit margins to volatile pricing and limiting usable capacity for genuine network growth. Walsh noted the energy shock “should add even more urgency to the development of renewables, including SAF,” but warned that the market has not yet materialised the incentives needed for a viable SAF supply chain.
The combination of weak production, fragmented infrastructure access and policy uncertainty crowds out commercial investment and makes airlines’ long-haul cost structures more fragile.
IATA’s 4 priorities to scale SAF and protect airline economics
- Expand renewable energy supply to underpin SAF production and ensure sufficient feedstocks and clean energy are available.
- Ensure open access to fuel infrastructure — pipelines, storage and airport fuel systems — to enable fair competition and efficient distribution.
- Strengthen policy support through effective sequencing of production incentives and investment frameworks that provide certainty and reduce risk before any mandates are imposed.
- Enable a global SAF market with sufficient volumes at commercially viable prices, critical for airline financial and economic sustainability.
A global book-and-claim system is essential to transform the SAF market from local to global by making it accessible to airlines and producers regardless of domicile, and harmonised standards must create enduring rules and fair competition, IATA said.
e-SAF: Ambitious mandates, minimal capacity and a high-risk strategy
Bio-SAF will not be enough; electro-SAF (e-SAF)- produced via power-to-liquid (PtL) conversion of renewable electricity using green hydrogen, water and CO2- is expected to play a growing role in air transport decarbonisation. However, the EU and UK have mandated e-SAF production of around 0.6 million tonnes by 2030, while global operating and under-construction capacity is only about 0.02 million tonnes, with just one production site operational. It would take approximately 20 commercial-scale refineries to meet that mandate. No new final investment decisions for e-SAF facilities have been made over the past year.
“The 2030 e-SAF targets by the UK and the EU are beyond unrealistic- they are utterly detached from reality. It is a reckless energy market creation strategy to impose mandates before production is enabled. Such a strategy will only drive up the price,” said Marie Owens Thomsen, IATA Senior Vice President Sustainability and Chief Economist.
“The strategy is also bewildering given that Europe has the highest renewable energy prices in the world. A serious strategy would first scale renewable energy production to drive its price down and build the e-SAF production capacity on sound economics. Only at that point can mandates achieve the desired results.”
Money, markets and airline balance sheets
The SAF shortfall is a direct hit to airline profitability. With compliance costs estimated at USD 4.3 billion for 2.4 million tonnes, airlines face a steep per-tonne premium that will sting margins and could force higher fares or reduced capacity on long-haul routes. Supply scarcity also increases procurement risk- airlines may need to lock in multi-year contracts at elevated prices to secure volumes, raising working-capital demands and debt exposure. Infrastructure bottlenecks- restricted access to pipelines and airport storage- further elevate logistics costs and limit competition among suppliers.
The risk of mandates before production is enabled to especially acute for e-SAF. Imposing compliance targets without sufficient capacity will drive prices up and coupled with penalties, divert scarce resources from actual CO2 reductions, Thomsen said. Investors will likely demand clearer risk mitigation- credible incentives, stable feedstock and energy prices and harmonised standards- before committing final investment decisions for large PtL facilities.
IATA’s April 2026 passenger survey shows strong support for decarbonisation and a willingness to pay more, but passengers prioritise real solutions over taxes. 89% believe the industry should continue reducing emissions even if governments scale back efforts; 66% say they are willing to pay more to compensate for emissions; and 88% expect ticket prices to rise as sustainability investments increase.
Passengers favour tangible decarbonisation- 25% prioritise SAF and 23% emissions-reduction technologies, far ahead of taxes at 10%. Nearly half of travelers (48%) look at carbon emissions when choosing flights, influencing decisions for over 85% of those who do; around three-quarters prefer airlines with stronger environmental performance.
For SAF to scale without wrecking airline economics, policy must sequence incentives before mandates, ensuring investment certainty and lower risk premiums. Expanding renewable energy supply will lower the cost of green hydrogen, open infrastructure access will reduce logistics costs and enable competition; and a global book-and-claim system will unlock cross-border volumes and liquidity. Until these steps are taken, SAF’s business case will remain broken, compliance costs will stay elevated and airlines will face a thin, expensive supply market that constrains growth and profitability.
