That Was The Week That Was 18-22 July 2022
SAFs – Testing Times
It has long been my theory that the Covid pandemic did not change anything, it just accelerated everything. We have seen that a lot in the industry. The retirement of many of the larger four engine aircraft, the rise of super long-haul and the rise in touchless technology are three obvious examples. But the changes have been more fundamental than that, and like all good fundamental changes, they take longer to become apparent.
We have had two such changes in recent times. First, the brouhaha about airport capacity, that saw airports around the world move to limit their capacity is nothing more or less than what each and every airport does every year, only normally, this year for the season a year ahead. Under the slot rules, airports one and only role is to declare its capacity. Now, the airports are having to do it in real time. Yes, that must be annoying for the airlines who had planned fantasy schedules involving staff they do not have to not operate flights on aircraft not yet ready to be back in service, but at least it gave the airlines the moral not-quite-so-low ground for a week or so as they vented their outrage, whilst praying their bluff was not to be called.
But this week, the week that was, was also Farnborough Air Show week – as Noel Coward so very nearly sang, ‘Mad Dogs and Air Show Men Go Out in the Midday Sun’… A song worth looking up, if only for the observation that ‘the English just detest a siesta’. The metaphor did not so much punch you in the nose as melt your ability to think. Your display, your presentation, your banner was obliged, apparently, to use the word ‘Sustainability’. The only word that got an even more unsustainable beating was ‘SAF’.
For years and years the airline industry, and ATAG – IATA’s diffusion line – have led the charge, telling the world that all that needs to happen is for there to be sensible policy to encourage the use of SAF. With a sensible policy, the argument goes, there is certainty for investment. Once that happens, we will see increased production and the price will go down. You might argue that the policy poles are well and truly in place, but still, IATA would like to encourage more. And, because of the next great crisis to hit the world – war in Ukraine – they have got their wish. Let’s see how that theory pans out.
Europe faces the real risk that Russia will cut off fuel supplies, both oil and gas, next winter. Plans are being drawn up to reduce consumption of gas by 15%. A large part of the plan to do is replace as much fuel as possible with biofuels, or SAFs, as we like to think of them. There have been a raft of policy announcements in favour of encouraging more biofuels in Europe – but not soy based fuels, because that directly affects the interface between heating (or propulsion) and food. Nonetheless, we have got our wish: clear, definitive policy announcements.
The economic theory behind that call for policy says that we need regulatory certainty to proceed, and thus for the price to fall, but all good economic theories only work in isolation in textbooks. That good old stalwart supply and demand is always there. Get a decent policy, encourage production and then watch as demand surges. The rest is economics 101. Again, all this is doing is speeding up the inevitable, but the big test for aviation now is whether our rallying cry, our article of faith, that aviation is special, is about to be put on trial, in real time.
TWTWTW is going to take a summer break now. We will see you in September. Have a great break.