WHAT THIS MEANS FOR AIRLINES
Cost base and pricing power SAF currently carries a significant price premium over fossil jet fuel. While exact spreads vary by feedstock and location, UK policy documents and mandate impact assessments assume much higher unit costs for SAF than for conventional jet fuel and provide a buy out mechanism to prevent excessive SAF prices being passed on to the end consumer. In a parallel policy workstream, a “guaranteed strike price” style revenue certainty scheme has been passed into law to help with advanced SAF projects’ bankability. As mandated SAF blends ratchet up from 2% in 2025 to 10% by 2030 and 22% by 2040 in the UK, blended fuel costs will tend to rise unless technology and scale bring down SAF prices dramatically.
For airlines, the strategic question is how much of this cost can be passed through into fares. Given competition is fierce and global this is a challenge especially for network carriers that operate over different hubs with different mandate requirements.. Ultra‑low‑cost carriers such as Ryanair and easyJet may have less room to dilute their cost advantage but may benefit from higher aircraft utilisation, newer fleets and disciplined capacity growth, which partly offset higher fuel bills.
SUPPLY RISK AND COMPETITIVE POSITIONING In the near term, although there is a relatively good supply of HEFA, first generation SAF, advanced SAF is yet to be produced at scale and is unlikely to be available before mandates kick in - “virtually unobtainable” at scale, according to Ryanair’s leadership has repeatedly remarked. This makes early, sizeable offtake agreements and strategic partnerships a source of competitive advantage: airlines that secure long-term volumes are better placed to comply with mandates and to market lower-carbon flying to corporates.
Carriers that move slowly may find themselves forced into buying small spot volumes at high prices or paying mandate buy-out penalties, with limited ability to make credible emissions reduction claims. Over time, a bifurcation is likely between airlines with robust SAF strategies, secured supply, clear targets, transparent emissions accounting and laggards who face higher regulatory and reputational risk.
CAPITAL ALLOCATION AND BALANCE SHEET IMPACT The shift to SAF is also changing how airlines think about capital allocation. Long term offtake deals resemble power purchase agreements, they create visibility on future costs but add long dated contractual commitments that investors need to understand. Some carriers and groups are going further, considering equity stakes or JV structures in SAF plants to capture more of the margin and secure priority volumes, effectively moving up the value chain.
These investments sit alongside other decarbonisation capex including new generation aircraft, retrofits, digital efficiency tools. This means trade-offs between fleet renewal and fuel innovation will be an important part of the investment story. For UK facing airlines, alignment with the UK’s SAF industrial strategy may also influence access to government support, R&D partnerships and favourable financing.
INVESTOR TAKEAWAYS For equity investors in airlines serving the UK market, SAF should now be treated as a core driver of medium term earnings quality and risk, not just a CSR line item. Key diligence questions include the scale and tenor of each airline’s SAF offtake commitments, the extent to which these are fixed price or indexed, how management expects to pass through costs, and how SAF plans integrate with fleet and network strategy.
For infrastructure and private-capital investors, SAF production, logistics and feedstock value chains are emerging as investable themes underpinned by legally binding mandates and UK revenue certainty mechanisms. However, technology risk, feedstock sustainability, and policy stability over multi decade time horizons remain critical variables.
The direction of travel is clear: for airlines operating to and from the UK, meaningful exposure to SAF is becoming a licence to operate issue. Those that move early to secure supply, optimise cost pass through and communicate a credible net zero pathway are likely to be better positioned with regulators, customers and capital markets alike.
Colin Stewart Chairman BAR UK E:
colin.stewart@
aireuropa.com
21 | ADMISI - The Ghost In The Machine | Q1 Edition 2026
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40
