SAF Mandates Are Landing — and the Aviation Fuel Supply Chain Is Nowhere Near Ready

The EU's ReFuelEU Mandate Has Created a Compliance Obligation Airlines Cannot Yet Fulfil

ReFuelEU Aviation, which entered force on 1 January 2025, requires aviation fuel suppliers at EU airports to blend a minimum of 2 percent sustainable aviation fuel into the total fuel uplifted at each airport from 2025, rising to 6 percent by 2030 and 70 percent by 2050. The UK's SAF Mandate, which came into force simultaneously at 2 percent, is aligned in structure if not in specific percentages. These are not aspirational targets , they are regulatory blending obligations with financial penalties for non-compliance. The production capacity available to meet the 2025 mandate is estimated at approximately 600,000 tonnes globally. European aviation consumed approximately 40 million tonnes of jet fuel in 2024. Meeting 2 percent SAF requires roughly 800,000 tonnes of European-origin or ReFuelEU-compliant imported SAF, leaving a meaningful gap at mandate launch that the European Commission has confirmed will be managed through enforcement flexibility in 2025 while production capacity ramps.

The commercial consequence is that the SAF price premium over fossil jet fuel , currently running at 3-to-5 times the cost per litre , is not going to compress quickly because feedstock competition, refinery conversion capital costs, and certification timelines are all supply constraints that cannot be resolved in a single planning cycle. Airlines are absorbing the cost differential as a new structural input cost with no near-term relief mechanism , a position that is fundamentally different from oil price volatility, which has historically been manageable through hedging programmes and, where necessary, fuel surcharges. SAF price risk is not currently hedgeable on commodity exchanges in meaningful volume, leaving carriers exposed to spot market pricing on the compliance portion of their fuel mix.

Feedstock Competition Is the Binding Constraint, Not Refinery Technology

The technology pathways for producing SAF are established. Hydroprocessed Esters and Fatty Acids , conversion of used cooking oil, animal fats, and agricultural residues to jet fuel , is the dominant commercial pathway today. Alcohol-to-jet, power-to-liquids, and gasification-to-liquid routes are at earlier commercial stages but have demonstrated production at pilot and demonstration scale. The technology is not the constraint. The constraint is feedstock: the volume of used cooking oil and animal fat available globally is finite, and aviation is competing for this feedstock with renewable diesel production for road transport , specifically HVO for trucking, which has been mandated or incentivised in several European markets simultaneously with SAF mandates.

Neste, the largest renewable fuel producer globally, has publicly stated that feedstock availability is the primary factor limiting its SAF production growth, not refinery capacity or capital. The feedstock competition is also geographic: the EU's supply chain sustainability requirements for SAF under ReFuelEU effectively exclude palm oil and first-generation biofuels, narrowing the eligible feedstock universe to used cooking oil, tallow, forestry residues, and agricultural waste , all of which have existing demand from other sectors and limited incremental supply. Chinese used cooking oil collection and export had been a significant supply source for European SAF producers until the EU's anti-dumping investigation and subsequent tariffs on Chinese biofuel imports imposed in 2024, which removed approximately 20 percent of available European HEFA feedstock supply in a single regulatory action.

Airlines Are Absorbing SAF Cost Exposure That Their Revenue Structures Cannot Easily Pass Through

The airline industry operates on net margins that averaged 3-to-4 percent pre-pandemic and have recovered to approximately 4-to-5 percent in 2024 and 2025. Fuel represents 20-to-30 percent of total operating cost for most full-service carriers. The current SAF price premium of 3-to-5 times fossil jet fuel cost means that mandated 2 percent SAF blending adds approximately 4-to-8 percent to the fuel line per litre of total fuel purchased , a material cost increment that falls entirely on the carrier if fuel surcharges cannot be passed through to fare revenue. International Air Transport Association modelling suggests that progressive SAF mandates reaching 6 percent in 2030 at current price premiums would reduce average airline pre-tax margin by approximately 2 percentage points.

The airlines best positioned to manage SAF cost exposure are those with fuel hedging programmes structured to include SAF price risk and those with corporate travel customer bases willing to pay explicit sustainability premiums. Lufthansa Group's Compensaid programme allows corporate customers to purchase SAF co-funding contributions that Lufthansa then credits against blending obligations. British Airways' sustainable aviation fuel programme offers similar corporate partnership structures. The passenger leisure travel segment , which is both the largest volume segment and the most price-sensitive , has demonstrated no consistent willingness to pay a SAF surcharge in any consumer research conducted to date, and low-cost carriers including Ryanair and easyJet face SAF cost structures their business models were not designed to absorb.

New Entrants in SAF Production Are Targeting the Power-to-Liquids Pathway for Long-Term Scale

The sustainable aviation fuel producers building for the 2030-to-2050 mandate horizon rather than the 2025-to-2028 HEFA window are concentrating investment in power-to-liquids , synthetic jet fuel produced from captured CO2 and green hydrogen via Fischer-Tropsch synthesis. Norsk e-Fuel, developing a facility in Norway powered by hydroelectric electricity, is targeting first commercial production in 2026 with offtake agreements with Lufthansa and SAS. Synhelion is developing solar-powered SAF production using concentrated solar energy to drive thermochemical CO2 reduction, with a first commercial facility planned in Spain. Zero Petroleum in the UK has demonstrated gram-scale synthetic aviation fuel production and has attracted investment from the UK SAF mandate compliance environment.

The economics of power-to-liquids SAF depend entirely on the cost of green hydrogen and the availability of point-source or direct air capture CO2. At current green hydrogen costs of USD 4-to-7 per kilogram, the production cost of synthetic SAF via Fischer-Tropsch is USD 4-to-8 per litre , roughly 6-to-12 times the cost of fossil jet fuel. The pathway to competitiveness runs through the same electrolyser cost reduction and renewable electricity price trajectory that the broader hydrogen economy is navigating: possible by 2035 in high-renewable-penetration markets, not commercially viable in the near term without significant subsidy support. The SAF market in 2026 is a market where the long-term supply solution is clear and the near-term supply gap is real, and that combination is producing the volatile pricing and policy uncertainty that characterises markets in transition.

Airport Infrastructure Is Becoming a SAF Delivery Bottleneck

The physical infrastructure required to deliver SAF to aircraft is a constraint that receives less attention than feedstock or refinery capacity but is equally real. SAF from HEFA pathways is a drop-in fuel , it can be blended with conventional jet-A and delivered through existing fuelling infrastructure without modification. Power-to-liquids and some alcohol-to-jet pathways produce synthetic fuel that may require minor infrastructure adjustment at higher blend rates. The current infrastructure constraint is not blend compatibility but supply logistics: SAF is produced at a small number of refineries, transported by pipeline or tanker truck to airport fuel farms, and blended at the terminal before delivery to aircraft. The logistics chain between SAF refinery and aircraft fuelling point involves multiple handoffs, limited dedicated storage, and blending infrastructure that was not designed for variable-proportion blending across hundreds of daily flight departures.

The airports investing proactively in SAF infrastructure are those with regulatory targets or airline tenant commitments that create contractual pull: Amsterdam Schiphol, Frankfurt Airport, and London Heathrow have all invested in dedicated SAF storage and blending infrastructure, and their airport-specific SAF blending rates are running above the EU mandate minimum as a result. Smaller regional airports, which collectively handle a significant portion of short-haul European aviation, have made limited infrastructure investment, and the economics of per-airport SAF infrastructure are challenging at lower throughput volumes. The infrastructure investment required to enable SAF delivery across the full airport network in Europe is estimated at several billion euros , a capital requirement that neither airlines nor airports have signalled willingness to fund without government support, and which the current EU mandate framework does not include.

Top 10 Companies in the Global Sustainable Aviation Fuel Market

1. Neste , World's largest SAF producer using HEFA pathway; facing feedstock constraints but expanding Singapore and Rotterdam refinery SAF capacity
2. World Energy , US SAF producer at the Paramount California refinery; supplier to Los Angeles International Airport with Air BP offtake partnership
3. LanzaTech , Carbon capture and fermentation SAF producer using alcohol-to-jet pathway from industrial waste gas and forestry residues
4. Gevo , US alcohol-to-jet SAF producer with Net-Zero 1 plant in Lake Preston, South Dakota targeting agricultural feedstock supply
5. BP Aviation , Major fuel supplier under ReFuelEU SAF blending obligation; investing in SAF supply partnerships and biofuels production
6. Shell Aviation , Global aviation fuel supplier with SAF blending obligations at European hub airports and bio-refinery investment in the Netherlands
7. Synhelion , Swiss solar SAF startup using concentrated solar to drive thermochemical CO2 reduction for synthetic fuel production
8. Norsk e-Fuel , Norwegian power-to-liquids SAF developer with Lufthansa and SAS offtake agreements for first commercial production in 2026
9. Lufthansa Group , Largest European airline group with Compensaid corporate SAF co-funding programme and direct SAF offtake agreements
10. IATA , International Air Transport Association coordinating industry SAF certification, supply chain standards, and mandate compliance advocacy