Iata criticises price impacts of UK and EU SAF mandates

Airline association Iata has hit out at the sustainable aviation fuel (SAF) mandates of the UK and EU, arguing shortcomings in the policies “put SAF production at risk”.

 

Iata reported global SAF production should hit two million tonnes (2Mt) this year or 0.7% of airlines’ total fuel consumption.

 

But the association noted the cost of SAF in Europe has doubled since the EU and UK SAF mandates were introduced on January 1 owing to “the compliance fees SAF producers or suppliers are charging”.

 

Both the UK and EU mandates require that SAF comprise an average 2% of aviation fuel on departing flights over the course of this year, with the proportion required to increase in subsequent years.

 

Iata estimates the one million tonnes of SAF required to meet the mandates in 2025 would cost $1.2 billion at current market prices.

 

However, it calculates compliance fees could add $1.7 billion on top, suggesting the mandates “have made SAF five times more costly than conventional jet fuel”.

 

Iata director general Willie Walsh said: “This highlights the problem with the implementation of mandates before there are sufficient market conditions and safeguards in place against unreasonable market practices.”

 

He argued: “Europe needs to realise its approach is not working and find another way. Raising the cost of the energy transition should not be the aim or the result of decarbonisation policies.”

 

Walsh insisted: “The pace of progress in ramping up production and gaining efficiencies to reduce costs must accelerate.”

 

But he said: “While it’s encouraging that SAF production is expected to double to two million tonnes in 2025, that is just 0.7% of aviation’s fuel needs and even that small amount will add $4.4 billion globally to the fuel bill.”

 

Iata wants governments to create “more effective” policies, arguing that to scale renewable energy production in general and SAF production in particular it’s necessary “to eliminate the disadvantage renewable energy producers face compared with big oil”.

 

It called on governments to “redirect a portion of the $1 trillion in subsidies that governments globally grant for fossil fuel”.

 

The association also called for SAF production to form part of a comprehensive approach to energy policy and renewable energy production.

 

Meanwhile, Iata projected airline industry net profits of $36 billion this year against $32.4 billion in 2024 with passenger carryings up 4% year-on-year to hit a record high of 4.99 billion.

 

Walsh said: “The first half of 2025 has brought significant uncertainties to global markets. Nonetheless, by many measures including net profits, it will still be a better year for airlines than 2024, although slightly below our previous projections. 

 

“The biggest positive driver is the price of jet fuel which has fallen 13% compared with 2024 and 1% below previous estimates. 

 

“Moreover, we anticipate airlines flying more people and more cargo in 2025 than they did in 2024, even if previous demand projections have been dented by trade tensions and falls in consumer confidence. 

 

“The result is an improvement of net margins from 3.4% in 2024 to 3.7% in 2025. That’s still about half the average profitability across all industries. But considering the headwinds, it’s a strong result that demonstrates the resilience that airlines have worked hard to fortify.”

 

Iata said polling data from April supported projections for demand growth.

Some 40% of respondents expect to travel more over the next 12 months than they did in the previous year. The majority (53%) said that they expect to travel as much as they did in the previous 12 months. Only 6% reported that they expect to travel less.

Almost half (47%) expect to spend more on travel over the next 12 months. An almost equal proportion (45%) expect to spend the same on travel over the next 12 months while only 8% expect to spend less.

Although 85% expected trade tensions to impact the economy in which they reside and 73% expect to be personally impacted, 68% of business travellers (50% of those polled) expected increased corporate travel amid trade tensions to visit customers - 65% said trade tensions would have no impact on their travel habits.

 

*The next Iata annual meeting is to be held in Rio de Janeiro in June 2026, hosted by Latam Airlines Group.  

 

The announcement came as International Airlines Group chief executive Luis Gallego assumed his one year term as chair of the Iata board.