Air New Zealand's Greg Foran uses first long-haul trip as boss to visit Neste sustainable aviation fuel plant

Sami Jauhiainen, vice president of renewable aviation at Neste and Greg Foran, Air NZ chief executive. Photo / Supplied

Air New Zealand chief executive Greg Foran used his first long-haul trip with the airline to visit a sustainable aviation fuel refinery in Singapore, which will next year be the biggest in the world.

Flights partly powered by sustainable aviation fuel (Saf) are now on the radar after the signing of an agreement between New Zealand and Singapore to coordinate the research, development, test-bedding and trial of such fuel.

The agreement, announced by Singapore's Prime Minister Lee Hsien Loong and New Zealand leader Jacinda Ardern, will also lead to a study of the commercial viability of "green lanes" between the two countries to encourage consumers to take flights that run on sustainable fuel.

Speaking at the Neste plant in Singapore, Foran said his airline had made "meaningful progress" with sustainable aviation fuel, particularly over the past year.

"The progress that we're making with sustainable aviation fuel is meaningful and it needs to be because the clock is ticking. We're past just talking about it - we're now deep into working with [the Ministry of Business, Innovation and Employment] and others to come up with some solutions that will be able to solve a wicked problem."

He said understanding what a big Saf producer was doing was critical in helping the airline to help reach its emissions-reduction goals.

"If we want to solve net zero by 2050, we have to be able to solve [it with] sustainable aviation fuel; there's no technology around that addresses the issue of long-haul flights," he said.

"Working with Neste and working with others is going to be absolutely important to solving that problem."

Sami Jauhiainen, vice president of renewable aviation at Neste and Greg Foran, Air NZ chief executive. Photo / Supplied

Air New Zealand flies some of the longest routes in the world and they are a bigger part of its business than they are for most other airlines.

Neste, a Finnish company, is already the world's biggest producer of Saf and is now spending billions of dollars expanding its Singapore plant to produce both aviation fuel and green diesel.

Foran said the cost of establishing a Saf production network was too much for one sector such as airlines or energy companies to solve. At present, Saf is three to five times the cost of traditional aviation fuel, even at today's elevated oil prices.

"The Government has to come in here and they will provide some mandates and some policy settings, as will other suppliers right across the supply chain. It can be solved but it requires everyone to lean in here. It can't just be left for airlines."

Sami Jauhiainen, Neste's vice president of business development, renewable aviation, said current global production capacity of 100,000 tonnes will grow to 1.5 million tonnes as a result of investments in Singapore and Rotterdam.

While Saf production at Neste and other companies is growing quickly, it still represents a small fraction of fuel consumption by airlines, which contribute more than 2 per cent of global CO2 emissions.

A Neste Sustainable Aviation Fuel tanker refueling an aircraft. Photo / Supplied

Jauhiainen said Neste's expanded production would meet about two-thirds of New Zealand's aviation fuel use. Its Saf was made with used cooking oils or animal fats.

Palm oil was not among the raw materials used, he said.

Neste says that over its life cycle, including the impact of production and logistics, sustainable aviation fuel has a carbon footprint that is up to 80 per cent smaller than conventional, fossil jet fuel.

It is fully compatible with existing jet engine technology and fuel distribution infrastructure when blended with fossil jet fuel, typically at around half and half.

He said his firm was starting production in the United States with a joint venture partner and was continuously looking for partnerships and investment opportunities globally.

"We don't have any existing agreements in place for New Zealand but we are open to collaborations and partnerships. New Zealand has some significant strengths when it comes to the availability of forestry residue, which is an important raw material," said Jauhiainen.

Air New Zealand has signed a memorandum of understanding to partner with MBIE on a feasibility study for domestic production of Saf and what Government support might be needed to make that commercially feasible. Besides Saf, the airline is exploring hydrogen and battery technology for its planes.

Late last year the Government announced that a biofuel mandate for Saf would be developed this year, taking in work already under way.

While mandates for land transport are planned from 2023, MBIE officials recommended to Cabinet that aviation be given more time, with a regime by 2025.

Establishing production of a sustainable aviation fuel in New Zealand, or even securing reliable imported supply, requires extensive infrastructure investment at an average cost of about $1 billion, a Cabinet paper says.

The sharp increase in oil prices - exacerbated by Russia's invasion of Ukraine - has resulted in jet fuel prices spiking.

Aviation Weekly today reports that in the US the average price of Jet-A was 30 per cent up on a year ago. The inventory level for East Coast jet fuel stood at 6.5 million barrels, its lowest level since 1990.

In the US, airfares have been soaring since the start of the year, with the average cost of a round-trip domestic flight at US$235 ($346) in April, up 40 per cent so far this year, and another 10 per cent rise is expected in May.

Airlines typically pass on to passengers as much as 60 per cent of a rise in fuel prices, Aviation Weekly reports.

This year Air New Zealand increased fares by 5 per cent on its international network, citing rising fuel prices and other costs.