Plotting the decarbonisation course

As the climate crisis finally begins to imbue us all with a sense of urgency, the pressure on the aviation industry to decarbonise and deliver on net zero ambitions is increasing every year. Advances are being made in areas like sustainable aviation fuel (SAF) but production is at minuscule levels in comparison to the industry’s needs.

What is the industry doing to reach its net zero targets, how realistic are those targets, and what is the aviation finance sector doing to help?

According to Chris Brown, head of strategy at KPMG, other options are being worked on but the industry’s “primary mantra” is SAF.

“Around the edges, start-up players make disproportionate noise around electric and hydrogen flight, but this is a distraction from meaningful decarbonisation through to 2050,” he states.

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And while the industry largely believes that SAF can deliver on meaningful decarbonisation, Brown says this is “optimistic”, given the relatively small scale at which it is being produced.

Julie-Ann Sherry, partner in Aviation and International Asset Finance with law firm Mason Hayes & Curran, says the use of SAF could reduce CO2 emissions by up to 80 per cent compared with traditional aviation fuel but admits there are significant barriers to this being fully realised.

“The overriding factors that will impact the ability of the industry to meet the ambitious target of net zero carbon emissions by 2050 is the speed of technology development, the capital investment required to scale them and the certification process for new technologies.” Sherry also points out that for the aviation industry to achieve its net-zero targets, it will rely ultimately on the combined effect of multiple carbon emission reduction measures.

Bertrand Dehouck, head of transportation capital markets with BNP Paribas, agrees. He says all stakeholders in the aerospace industry are pursuing multiple paths to reach net zero, all of which will require significant technological development. “We are seeing an increased pace in fleet replacement with newer, more fuel-efficient aircraft, coupled with an acceleration in the development of next-generation platforms, with designs that bring the industry closer to a true e-fuelled net zero aircraft.”

Several avenues can be developed to provide quick wins over the medium term, Dehouck says, such as increasing the efficiency of airspace management, and air traffic control, coupled with improved airport and airline operations.

Brown is more pessimistic when it comes to these other avenues of sustainability. “The political will does not yet exist to push through the required airspace modernisation, including pragmatism around airspace sovereignty, for example, the failure of the European Single Skies initiative, or the required investment in state air navigation service providers.” Carbon offsets, while controversial, will always need to be a significant part of net zero for the sector, he adds.

Debrouck says the aviation industry must also look towards newer technologies and critical infrastructure systems to make aircraft more fuel efficient and more electric as well as air traffic management systems better able to bring flights to destination more efficiently, thus limiting their emissions.

“Streamlined flight and ground operations can drive small but material reductions in carbon emissions,” adds Sherry.

But as one of the most heavily regulated industries in the world, innovation in aviation can be slow to roll out. Dehouck says this presents some “unique constraints in any new tech development”, especially when it comes to new propulsion systems and fuels. “No truly radical shift in tech level can be developed and deployed in the short or medium term therefore the industry must adapt to a continuous incremental pace of technological advancement.”

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This view is echoed by Elizabeth Bowen, director of Aircraft Leasing Ireland (ALI). “Aviation is a complex industry governed by an extensive regulatory environment,” she says. “This means that the technological leaps required to address the climate threat are measured in decades rather than years and in turn means that our transition to carbon neutrality by 2050 is critically dependent on actions taken today, even though the results of those actions are not immediately apparent.”

It is Brown’s view that the “single most realistic way” to make a meaningful dent in aviation’s climate impact this decade would be through contrail management. This approach seeks to avoid the creation of net warming contrails through small adjustments to flight plan altitude.

“The EU will require airlines to report on non-CO2 impacts like contrails this decade,” he explains. “Unlike SAF or air space modernisation, however, contrail management is directly within the influence of airlines to make a difference.”

Dehouck maintains that while net zero objectives are ambitious, with the right investments in the right areas they are “entirely achievable”. He points to the work carried out by BNP Paribas and five other banks to help decarbonise the aviation sector through the formation of the Aviation Climate-Aligned Finance Working Group. “The goal of the working group is to create a collective climate-aligned finance framework that defines common goals for action for aviation sector decarbonisation.”

Sherry agrees. “There is no doubt that the net zero target by 2050 is a challenging one and will require significant collaboration across the whole industry to reach viable solutions.”

This includes the aviation finance sector. Bowen explains that its members launched the ALI Sustainability Charter, the first set of ESG and climate-aligned principles for the aviation industry promoting collaboration and ambition among the lessor community, in October 2022.

“As owners of almost half the global fleet of aircraft, the leasing community has the experience and global influence necessary to move the needle and drive aviation towards a sustainable future,” she says.

Ongoing research and innovation will be a critical element of this, and Bowen says ALI members are supporting improvements in aircraft design and operational efficiency. For example, ALI is funding a new research project on SAF production in Ireland in collaboration with Trinity College Dublin and University of Limerick and is a member of the Government’s SAF Taskforce looking to bring about the development of a national SAF policy roadmap.

But Brown says the aviation financing sector has yet to leverage its influence on aviation. “Given aviation finance knows the sector, they are the natural pioneers within the financial community in stimulating SAF supply, investing in disruptive technologies which reduce airport turnaround inefficiencies, which reduce airspace inefficiencies, and which tackle non-CO2 factors. However, as of 2024, the number of lessors actively looking at these areas can be counted on one hand.”