Continued from page 48
Stewart weighed in this week to warn: “A major reassessment of prospects for AI could trigger a dotcom-style bust.” Other economists point
out the AI investment ‘bubble’ is now 17 times the size of the dotcom frenzy and four times the subprime mortgage bubble of 2007. Investors bet AI will deliver huge gains in productivity, but there is little sign of this to date – just huge investment in data centres. Against this eye-watering
picture, we should note the UK economy has grown this year, wages continue to rise, consumers’ confidence in their own finances remains surprisingly strong and travel sales solid. Barclays’ card spending
data for September showed an overall decline but spending with travel agents was up 4.2% year on year – although tellingly the number of transactions with agents rose 18%, suggesting a sharp fall in value. The Deloitte Consumer
Tracker for July to September even showed a small rise in overall consumer confidence, with sentiment on job security up 1.2 percentage points, although confidence in the UK economy was the lowest since the raging inflation of summer 2023. Yet the economy grew by 0.3% in the three months to August following 0.7% growth in the first half of the year and the IMF forecasts the UK will be the second-fastest growing of the world’s most-advanced economies this year. So, it’s not all gloom. There
is just an element of whitewater rafting to the sector’s situation.
SAF supplier levy: DfT predicts ‘small impact’ on airfares. By Ian Taylor
Passengers to pay for SAF revenue certainty mechanism
Ian Taylor
A government consultation on the levy to fund a revenue certainty mechanism for sustainable aviation fuel (SAF) producers makes clear that costs running into tens of millions a year will be passed on to air passengers. The Department for Transport
(DfT) proposes a variable levy on suppliers in the consultation published last week, with the costs passed “through the supply chain and on to consumers”. It notes the extent to which
costs are passed on will depend on “consumers’ sensitivity to price changes” and the level of competition, noting: “It will be a commercial decision for aviation fuel suppliers whether they pass on some or all costs to airlines.” However, it assumes they “will
pass on 100%”, calculating this will lead to “a small impact on ticket prices”.
DfT consults on levy to underpin SAF production
The Department for Transport (DfT) Levy Design Consultation sets out the arrangements for and potential impact of a levy to fund its SAF Revenue Certainty Mechanism, with supplier contributions based on market share and fuel volumes. It proposes a ‘forecast levy rate’ to provide a guide on future costs
46 23 OCTOBER 2025 These costs will be on top of
the price of SAF itself, which Iata reported to be more than three times the cost of jet fuel last year, adding $1.6 billion to carriers’ fuel bills. Iata has estimated the costs
Proposed levy aims to reduce financial risk for SAF producers
An indicative table of payments
based on 2024 data suggests the costs will amount to more than $55 million a year for large fuel suppliers, £22 million for medium-sized producers and £5.5 million for small producers. The government proposes
an additional amount to cover unforeseen costs and mitigate the risk of under-collection, noting a need for cash reserves and mutualisation of the costs of supplier failures or defaults. It estimates the costs of a large supplier failure in a single year at £21 million.
and options for mitigating financial risks, administering the levy and enforcing compliance. The government notes: “It
is critical the design of the levy promotes a high level of compliance and responds to non-compliance effectively.” It proposes “regular public
reporting” on the extent of non- compliance and actions taken in response as a reputational deterrent” and “a suite of enforcement measures”, with the secretary of state having the power to impose fines of up to £100,000
of SAF in Europe this year at $1.2 billion, with an additional $1.7 billion in compliance fees, for which it blames the UK and EU’s SAF mandates, suggesting these “have made SAF five times more costly than conventional jet fuel”. Airlines must purchase one
million tonnes of SAF to meet the requirements of the mandates this year and Iata notes the cost of SAF in Europe has doubled since the mandates were introduced in January, owing to “the compliance fees SAF producers or suppliers are charging” to cover their potential costs. The UK and EU mandates require
SAF to comprise 2% of fuel on departing flights over the course of this year, rising to 6% in the EU and 10% in the UK by 2030.
£100k
Proposed maximum fine for SAF suppliers for levy non-compliance
or 10% of annual turnover. The consultation is due to
close on January 8. The DfT expects to publish a response next year and said it is committed to passing “all necessary legislation” for the mechanism to be in place by the end of 2026.
travelweekly.co.uk
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