African airlines will not get any concessions as the European Union kicks off the world’s first mandatory transition to sustainable aviation fuels (SAF) for the air transport industry.

The measure, approved by the European Parliament and the EU Council in April 2023, requires fuel suppliers at all airports within the EU airports to blend SAF with fossil-based aviation fuel in ratios of two percent starting January 1, 2025, going on to peak at 70 percent in 2050.

But the key question facing the African airlines is whether to absorb SAF-associated costs or feed them into ticket prices and how the market would react to such a move.

In Eastern Africa, by virtue of the number of European destinations and frequency, the most exposed airlines to the mandate are Ethiopian, Kenya Airways, Air Mauritius and RwandAir, which operate into the UK and the EU, while aspiring entrants Uganda Airlines and Air Tanzania now face potentially higher costs of entry into the European market.

Under the mandate, all flights departing from EU airports will be required to load only the blended fuel, while arriving aircraft will also be required to land with only the necessary fuel on board, a measure designed to prevent possible evasion of the mandate by tanking-up on conventional fuels on the inbound leg. The restriction is also intended to reduce emissions since aircraft carrying more than the trip necessary fuel leave a larger carbon footprint as a result of the added weight.

Despite breaking away from the EU, the UK closed ranks with Brussels. The UK parliament last month also approved its version of the sustainable aviation fuel (SAF) mandate, which will also come into effect on January 1, 2025. Also starting at two percent share of SAF in 2025, it will increase to 10 percent in 2030, 15 percent in 2035 and max out at 22 percent in 2040, with future increases pegged to certainty about the supply of SAF.

Although mandating suppliers to provide the blended fuel solves the problem of availability in the short term, airlines are apprehensive about the mandate because of the high cost of SAF, which can be three to four times the price of conventional fuels.

For African airlines, which already operate in the highest aviation cost environment and thin margins, the concern has been about the likely impact of the cost of SAF on already fragile operations. On average in Africa, aviation fuel costs 30 percent above average global prices, placing the continent’s carriers at a distinct disadvantage.

There are also fears that the additional costs could confer a competitive advantage on the bigger airlines that have scale, while complicating the cost structure for the smaller carriers such as Uganda Airlines, which plans to launch London Gatwick, its first European destination, early next year."The European position is green and adapted to the current context of players adopting the ESG agenda. African Airlines, in particular, clearly need to move in that direction. Nevertheless, we also need to deep-dive into the continent framework, and we may conclude that African airlines may need a different timing and more realistic compliance with the standards. Overall, it requires complex logistics and investments, and several airlines are still in the process of becoming profitable," said Miguel Carneiro, chief commercial officer at Angola’s flag-carrier TAAG.

During various fora over the past year, African airline CEOs argued that the continent should be exempted from the mandate, or its airlines given subsidies because their carriers, which contribute only 0.06 percent to the industry’s emissions, would be punished unfairly for the sins of their bigger siblings in the northern hemisphere.“There are airlines that are flying 800 aircraft while we are flying 40-50 or even just ten aircraft. Can we get subsidies because we don’t have scale,” Kenya Airways CEO Allan Kilavuka asked during a panel discussion at the AviaDev 2023 in Nairobi.“African airlines are still struggling with many issues, and nobody has the money to purchase SAF at this point in time. If we are going to use SAF, which is 4-7 times more expensive than jet fuel, we are going to need subsidies.”Read: Instead of bickering over fossil oil, use the energy to make biofuelsKilavuka was making reference to a €2 billion ($2.08 billion) euro kitty that the EU had provided in funding from the EU carbon market to support its airlines transition to SAF.

Airlines in the region were cagey about the arrangements they are making to comply with the mandate. But Abderahmane Berthe, secretary-general of African airlines Association (Afraa), told The EastAfrican that the continent had not yet won any concessions from the EU.“To the best of my knowledge there has not been any negotiations on concessions, so African airlines will have to comply with the mandate and pay the same price as anybody else for the SAF they uplift from Europe to Africa,” he said, adding that the cost of SAF is a concern for the global airline industry, not just African airlines.

Berthe added that Afraa, which has been working on a decarbonisation pathway for African airlines, would include SAF in its tender for February 2025, marking the first time SAF will be available at African airports.“We normally conclude the tendering process by May, so that means the first SAF supplies will be available starting July 2025. For now, it is up to individual members to negotiate SAF supply,” he explained.

On the likely impact of the SAF mandate on ticket prices, he said responses would vary from one airline to another.“Some might increase, some might not. Airlines have different cost structures and face different competition profiles, which is what will determine individual responses. Some might choose to absorb the additional cost depending on the state of competition in the different markets, you can’t increase prices when you have competition,” he said.

Although the starting threshold of two percent blend is considered manageable, given the current production levels of SAF, concerns remain about the production ramp-up as the decarbonisation gathers pace.

Speaking in Geneva December 10, Wille Walsh, director-general of the International Air Transport Association (Iata) expressed disappointment with current production levels -- 1.3 billion litres in 2024. Although this is double the 600 million litres produced in 2023, it accounted for just 0.3 percent of global jet fuel production. Production was significantly lower than the 1.9 billion litres that had been projected for the years after major SAF production facilities in the US postponed production increases to the first half of 2025.

Iata projects that SAF production will rise to 2.7 billion litres in 2025, but this would just be 0.7 percent of total jet fuel production.“SAF volumes are increasing, but disappointingly slowly,” Walsh said, blaming governments he said were “sending mixed signals to oil companies which continue to receive subsidies for their exploration and production of fossil oil and gas,” creating an atmosphere where investors in new generation fuel production were also holding back on new investment in anticipation of “easy money before going full throttle.”Walsh said given the thin profit margins for airlines, SAF producers need to reset their profit expectations. “Profitability expectations for SAF investors need to be slow and steady, not fast and furious,” because the long-term prospects for SAF were good. Make no mistake -- airlines are eager to buy SAF and there is money to be made by investors and companies who see the long-term future of decarbonisation. Governments can accelerate progress by winding down fossil fuel production subsidies and replacing them with strategic production incentives and clear policies supporting a future built on renewable energies, including SAF,” Walsh said.

Although private sector investment in renewable energy has risen, the share going to SAF remains low, at just 11 percent of global renewable in 2024, and 13 percent in 2025.“The airline industry’s decarbonisation must be seen as part of the global energy transition, not compartmentalized as a transport issue. That’s because solving the energy transition challenge for aviation will also benefit the wider economy, as renewable fuel refineries will produce a broad range of fuels used by other industries, and only a minor share will be SAF, used by airlines. We need the whole world to produce as much renewable energy as possible for everybody. Airlines simply want to access their fair share of that output,” said Marie Owens Thomsen, Iata’s senior vice-president for Sustainability and chief economist.

Iata’s own studies show that achieve net zero CO2 emissions by 2050, the world would need 3,000-6,500 new renewable fuel plants. The annual average investment needed to build the required capacity over the 30-year period to 2050 is about $128 billion per year, in a best-case scenario.

In contrast, the solar and wind energy markets attracted $280 billion per annum in investment between 2004 and 2022.“Governments must quickly deliver concrete policy incentives to rapidly accelerate renewable energy production. There is already a model to follow with the transition to wind and solar power. The good news is that the energy transition, which includes SAF, will need less than half the annual investments that realizing wind and solar production at scale required. And a good portion of the needed funding could be realised by redirecting a portion of the retrograde subsidies that governments give to the fossil fuel industry,” Walsh said.

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