With SAF being the only current solution to decarbonising air travel on existing aircraft, should the owners of around half the global fleet, the aircraft lessors, be putting more skin in the game?
This is a large component to this week's episode where Al spoke to Natasha Mann, CEO, Future Energy Global.
Natasha launched Future Energy Global in early 2024, but she has a long history in the aviation after experience with Fairchild Dornier and Airbus as well as her time in aircraft leasing at GECAS.
Now Natasha is focusing on the Sustainable Aviation Fuel industry by creating a pre-purchasing system which aims to simultaneously reduce the cost of capital for the producer, increase airline access to SAF and make aircraft lessor portfolios more green inline with the aggressive ESG requirements of their underlying Institutional Investors.
Natasha gives a great explanation as to why lessors should be more involved in the SAF space and how Future Energy Global plans to bring capital in to SAF production whilst also lowering the cost of SAF for the consumer.
If you liked this episode, check out our previous discussion with Nicole Sautter, American Express Global Business Travel: https://www.buzzsprout.com/2202964/14463484
SAF Investor London
This conference serves as a nexus for innovators, customers, financiers, regulators, suppliers, and advisors, forging partnerships that will drive change. SAF Investor London 2024 isn't a conference for debating the merits of SAF; it's about convening the dealmakers who can effect real transformation.
Join over 200 leaders in the SAF Industry for two days of stimulating debates, discussions and plenty of networking.
You can find out more about SAF Investor and our conference in London here: https://www.safinvestor.com/
Host: Al Whyte, SAF Investor
Producer: Oscar Henderson, SAF Investor
With SAF being the only current solution to decarbonising air travel on existing aircraft, should the owners of around half the global fleet, the aircraft lessors, be putting more skin in the game?
This is a large component to this week's episode where Al spoke to Natasha Mann, CEO, Future Energy Global.
Natasha launched Future Energy Global in early 2024, but she has a long history in the aviation after experience with Fairchild Dornier and Airbus as well as her time in aircraft leasing at GECAS.
Now Natasha is focusing on the Sustainable Aviation Fuel industry by creating a pre-purchasing system which aims to simultaneously reduce the cost of capital for the producer, increase airline access to SAF and make aircraft lessor portfolios more green inline with the aggressive ESG requirements of their underlying Institutional Investors.
Natasha gives a great explanation as to why lessors should be more involved in the SAF space and how Future Energy Global plans to bring capital in to SAF production whilst also lowering the cost of SAF for the consumer.
If you liked this episode, check out our previous discussion with Nicole Sautter, American Express Global Business Travel: https://www.buzzsprout.com/2202964/14463484
SAF Investor London
This conference serves as a nexus for innovators, customers, financiers, regulators, suppliers, and advisors, forging partnerships that will drive change. SAF Investor London 2024 isn't a conference for debating the merits of SAF; it's about convening the dealmakers who can effect real transformation.
Join over 200 leaders in the SAF Industry for two days of stimulating debates, discussions and plenty of networking.
You can find out more about SAF Investor and our conference in London here: https://www.safinvestor.com/
Host: Al Whyte, SAF Investor
Producer: Oscar Henderson, SAF Investor
Hi and welcome to SAF Investors SAF podcast. This week we're absolutely delighted to be joined by Natasha Mann from Future Energy Global, a brand new launch which we're going to dive into. But first, natasha, what's your background? How did you end up in aviation?
Speaker 2:My background is I got very inspired, actually at four years old, taking a 747 from England down to St Lucia and back. In those days what was really cool was that you could get up into the cockpit as a child and you get your little plastic wings, and it was inspiring to see that this massive aircraft that was carrying 300 people was being controlled by this little teeny tiny cockpit of flight controls. So that left a lasting impression on me and actually inspired me to become an aerospace engineer. So I did my degree in Carleton University, studied aerospace engineering, aerodynamics and performance engineering, but very quickly actually got bored with engineering which sounds really bad because you need so many engineers to actually design an aircraft and what I was really looking for was well, what's the bigger picture here? How is this aircraft being used?
Speaker 2:I was fortunate enough actually to be able to have an internship with a company called Saw Bear Craft Leasing way back in 1997. Saw Bear Craft Leasing back then they were releasing little turbo crops 30 seat turbo crops and 50 seat turbo crops and that was kind of like the beginnings of the leasing world. And the interesting thing with aircraft leasing is that you actually did get to see sort of all the different market dynamics at play. It wasn't just the aircraft, but it was the struggles that the airlines had to go through. It was cost capital, it was all these different things and my first project was basically just trying to keep an aircraft and a Latin American carrier and explain to them if they didn't have a spare parts pool when the aircraft had a problem, they wouldn't be able to get it flying. If they couldn't get it flying, they couldn't get the passengers on board and they wouldn't be able to pay their lease. Really simple problem. But it shows how in aviation we've got this entire ecosystem that has to work. So continuing on from there, you know what we really wanted to do is just keep going in the leasing industry. But everybody said, since you have this engineering degree, you should really get a foundation in engineering first, because you can always go from engineering into aircraft leasing, but vice versa it's very difficult.
Speaker 2:So back in the day it was kind of the race for who was going to have the first regional jet and I went to go work with Fairchild Dornier and for three years until 9-11 when I went bankrupt. At the time what was really interesting was to see the passion actually that connected everybody to get this aircraft flying. Everybody was working like 100 hours a week just to get the thing up in the air and all the different problems that you had to go through in terms of the aircraft design and unfortunately, we went bankrupt Fairchild Dornier after 9-11 happened, which then took me on to Airbus for new adventures and to lose in terms of marketing aircraft and then sales and again back in the early 2000s. It was really exciting time because everybody was so passionate about aviation and what we could do in aviation whether it was getting the A380 up in the sky or the development of low-cost carriers, the rise of the emerging markets, the rise of the regional jet markets Everybody would come to work, just so passionate about what they were doing.
Speaker 2:But I think the best part of my career was really GCAS, when I joined them in 2007,.
Speaker 2:They were looking to get into the freighter market and develop the regional jet market and for me, the lessors are such an integral part of the aviation ecosystem they now own 50% of the world's fleet, they are the airlines closest liquidity partners and to see what they could do in terms of facilitating carriers to become carriers, whether it was EasyJet or Ryanair Southwest, like I said, with the low-cost carriers, the regional jet carriers to be able to provide those aircraft to them in the early stages of the market was just incredible, and I had a team as the head of portfolio strategy.
Speaker 2:First I started with product marketing, product strategy and then portfolio strategy. We're a team that would look forward 20 years, five, 10, 15, 20 years, because we would hold our assets for that long and we have that type of vision of the world and you own by the end, I think we own 7% of the world's fleet. You really have a hold on the market, I would say the aviation market, and how whether it's an economic crisis or a rise in fuel prices or whatsoever can actually have a serious impact on aircraft values even pilot scope clauses.
Speaker 2:We would see the impact of pilot scope clause changing and see what would happen. So that's where I actually started getting interested in SAC, because around 2020 is, I think, when we started to think about well, what do we now need to do with the coming impact of climate change in terms of our portfolio? It kind of hit us like a ton of bricks at the time.
Speaker 1:And let's also keep on SAC, because if you've got an asset you want to last 20 years, it's great because you just SAC keeps conventional turbine aircraft going.
Speaker 2:That's right. That's right. And I think for lessors we always used to say, once an aircraft would leave a manufacturer, whether it's Airbus or Boeing we'd be a little bit stern about that. We'd sort of say they don't really care about it anymore. It's kind of the lessor that carries the baby. After that. It's during the next 20 years. So in terms of asset values, yeah for sure.
Speaker 1:Well, that's not true, because the ABM wants to sell laser parts for the next 20 years.
Speaker 2:They do, they do and they also want to sell a lot of new aircraft too. But, sac, keeping something flying longer and keeping this sort of economic life going longer is the best thing that you can do in terms of asset values. We had a lot of people at GCAS projecting asset values. We had a whole team actually trying to figure out if there is a change in the market, what does this do to our asset value. And way back in 2020, when we attended the airline economics conference and we hadn't even heard about climate change impact on asset values until Skyfairy Moss gave this presentation the airline economics about climate change impact for aircraft flying in Sears I remember being in the audience. I was just totally floored, like this is just kind of a crystal balling of what has come today, which is basically, you know, all asset managers and owners have to start and have to become responsible for the emissions of their portfolio.
Speaker 2:And going back into GCAS and trying to figure out okay, my goodness, how are we gonna actually model this, because that was our saying, like we modeled everything how are we gonna model climate change impact on asset values? We looked at it for months and we kind of threw up our arms. At the end of the day, we said it's impossible. It's impossible. You know how do you model when an airport gets too hot for an aircraft to land, but it's only certain times of the day, right, and it's only certain airports, or migration of people, airports going underwater. I mean it was just colossal the conversations that we were having internally in terms of, basically, it was a selection exercise. You know which assets are gonna hold their values and which ones aren't.
Speaker 1:And also, presumably, whether the growth can keep going. It's another one.
Speaker 2:Right and whether the growth can keep growing. Because within our team, you know, we used to do our own passenger forecast and that's a great question, because in 2021, I don't know if you remember we had Flesch Gamm right and Flesch Gamm was in. I think it was in Sweden. It was kind of after what was happening in terms of the wave of Greta Thunberg appearances and people stopped flying, and it was only for I mean, it was only for maybe a short period. It was like three months where there was maybe 10% less traffic. But when you plug that into a traffic forecasting model, if all of a sudden you've got 10% less traffic, that automatically translates into, you know, less demand for travel and what that then means is that's aircraft on the ground. An aircraft on the ground, that means a decline in aircraft values. So all of these things, we were watching very closely and trying to calculate and again we were like my goodness, I like how do you model this? And it was just impossible.
Speaker 1:Do you think most lessors are looking at this now or are some still to really get into it?
Speaker 2:The analysis yeah, I think some of them are, some of them are, some of them are probably you know where we were, kind of pre-2020. And I think that's fine because you know the number of aircraft lessors that we have is maybe 140, sort of maybe 40 real kind of players. Some are small and some are big. It's a really complex issue to try and get your head around. I mean, the great thing within GE is that we had resources to look at this. So we weren't just GCAS off on an island, we were GCAS. We had a bigger umbrella organization which had GE renewables, ge aviation and industrial and criminal finance, and we actually all got our heads together.
Speaker 2:I started up kind of a group in 2021 to get our heads together to try and figure out, you know, how are we actually gonna contribute to the solution of this problem? Right, and that was a great time because you had people from various sectors trying to connect the dots and saying is it just a carbon credit play? Is it an industrial play? Is it purchasing future removals of direct or carbon capture? How do you get into SAF companies?
Speaker 2:Most lessors don't have those types of resources really, and so I don't think that we can expect some of these smaller lessors to have the expertise to be able to connect all the dots, and so that's why we decided to start this business after GCAS was sold to AirCAP. Sometimes people say, once you get your walking papers, it's the best gift you have in life. I think it was a great opportunity for me to continue on this work kind of independently, and spend 100% of my time trying to figure out, you know, how can aviation become more sustainable and what's the right play, what's the right path and the quickest path, and that's why you launched Future Energy Global.
Speaker 1:Explain Future Energy Global to people.
Speaker 2:Sure. So you know, again, back in GCAS, we thought the simple solution was just to going out and buying some carbon credits and my management team said you know, go away, make me something that actually works, that you can either wrap a lease around or you can lend it into a lease transaction. You know which at the time, I think, when you're passionate about climate change feels like a big kick to the stomach, but it's actually. It was actually one of the best things that happened because it forced me to go out into the world into all kinds of climate change solutions and companies and start taking a look at what the pain points were. So I've probably spent a good six months not just looking at SAP companies and kind of shadowing them, but also direct our carbon capture, even things like biochar companies, all these different companies basically that could contribute to carbon removal and reduction. We started to follow them to try and figure out what's the best solution. So I think pre-2022, the jury was kind of out in the aviation space as to what was going to be the biggest lever in terms of aviation to carbonization carbon credits or DAC or SAP or all these different things and by November 2022 is really obvious, once all the EU mandates came out and the incentives from the US government, that had to be SAP.
Speaker 2:When we spoke to SAP players coming from something like a GCAS where we would sign $800 million deals like every 15 minutes that's maybe an exaggeration, but the capital was kind of flowing. What I couldn't understand was why couldn't a SAP player even raise $25 million or $35 million. When I put it on kind of my so-called investment way, I looked at it, its technology, and I looked at the market, the future market, the disruptors in the place and the tradability of this. I couldn't understand why they couldn't raise $25 million and the ones that we were following. What was clear was that it was just taking too long, way too long. So a raise that they had said would maybe take six months, unfortunately it was taking 12 months or even 18 months, by which time they would have to start leaning out their workforce, laying people off, maybe getting bridge loans, all kinds of reactive kind of strategies instead of long-term strategies.
Speaker 2:When we asked them to do the capital stack as well in terms of the cost of capital, I looked at the cost of their capital. It was ridiculous, just ridiculous. In the order of like interest rates equivalent, let's say interest rates, or equivalent cost of capital, that might be 25%. So if they're looking for $30 million over five to eight years, it was maybe going to cost them $30 million just in capital costs or $60 million altogether. So I just thought, well, this isn't working.
Speaker 2:So I went to the institutional investors and they said we can't get our heads around tough companies, and there's too many. There's 300 of them, or at the time I guess there's maybe 150 of them, and we don't know where to make our big play, and so it's not the right time for us to come in just yet. And then when I would go to the airlines I would say, well, where's your pain points? And they would all say, well, it's price. But it's not even price, it's even just access. Everybody else has kind of signed these off-take agreements. We can't even get our hands on it, even if we wanted to pay the price. But now the slots are so far out and I call them the slots. Some used aircraft Availability is so far out in two years' time we can't put money forward because our margins are so skinny, right.
Speaker 2:So then it brought me back to the middleman, folesso, or. Well, what if Folesso, or kind of made the connection between all these different places and it went around this conversation kind of in a circle, going back and forth to sort of say, well, what if, what if, what if, what if, what if? And the conclusion that we came to was the what if was what if you could somehow intersect the needs of everybody into one price point, right? So the need for the SAF supplier to reduce their cost of capital and get capital in quicker, the needs of the airlines to get access to SAF and the needs of the lessors as well to green up their portfolio, because of course behind the lessors you've got all the institutional investors who have very strong ESG targets.
Speaker 2:When you intersect all of those things, if you say, well, if we can somehow bring forward revenues from the future through a pre-purchasing system into a SAF supplier at a certain price point so that you can make a return on investment for everybody, can we actually start to unlock this capital and accelerate the system? And when we worked with all these SAF suppliers, you know they were like wow, this is like gold for us, because the idea is that they you know they may be pre-sell a small percentage of their their future supply at a lower price to work that through the system. So, in a way, what we're doing is we're we're pre-purchasing in large quantities and then we're we're selling it off in smaller quantities, you know, to lessors and other other players' airlines as well as themselves, and this isn't the first time that this multi-model has been done. So it's actually been done.
Speaker 2:In the vaccine space, you know, when we needed to actually yeah, when we needed to to accelerate the technology and the scale up of vaccines, and before COVID, what happens is governments come in and they pre-purchase a lot of vaccines and then they distribute it out to either member countries in the EU or or to the distributors. So that's one you know example of where it works. It also works in the direct air carbon capture space, where you've got the end user, which is like Google's and Amazon's the world. They're pre-purchasing, you know, pre-purchasing direct air carbon capture from the future, but they've got much bigger margins in the airline right.
Speaker 1:So it's really interesting. It's almost like pre-purchased financing is one way of looking at it. If you're an operator, if you're an airline, you're saying I'll commit to buying in five years time X amount, and are they giving you any money up front?
Speaker 2:No, the airline themselves. It depends. If the airline is willing to do that, then yes, most of the airlines that we've spoken to, a time horizon of something like five years is just too far out for them to actually put that money forward, and so that's why we look for financiers in the middle, whether it's lessors or maybe somebody else that's willing to put this on their books as an intangible asset. Now, the lessors are really interesting because what we know in the airline space is that, whether we like it or not, we have airlines that come and they go bankrupt and they stick around. And so having an airline commit to it, if they're of a certain kind of investment grade and certain robustness, I think it's great.
Speaker 2:Having a lessor commit to the SAF for a SAF supplier, what that does is it should give them reassurance that there won't be a risk of them having a problem to deliver in the future. The reason why is because we just did this analysis this morning. If you look at certain aircraft lessor was portfolios. You only have to pick one airport and they may have 20, between 20 and 30 or maybe even 40 customers flying into that airport. So if one airline goes bankrupt or cannot take the SAF. They can easily move it on within their portfolio, just like they do with aircraft.
Speaker 1:It's really interesting. If I'm a producer and I go to you going, you know I've got this brilliant technology. What stage should I start talking to you?
Speaker 2:What we need for this to work is we need a delivery date and we need a delivery location. So if you've got those two things sorted out, then you can come and talk to us. If you're kind of in the early stages and we've talked to even some great feedstock suppliers you know that don't know exactly where their plant's going to be. They're still trying to figure out where the lowest cost energy is. You know that's a little early stage for us, but we still want to talk to those suppliers as well, and the reason why is because we're building a pipeline Like these pre-purchases. They're not once every five years, they're going to be once as quickly as we can do them. So while they may not fit into like the first pre-purchase or even the second, they could fit into the third and that way they can work our financial product into their future capital raises.
Speaker 1:So I come to you and I'm going to make staff from Forestry Waste in Sweden and I'm going to be five years out from delivery. Is that too long out?
Speaker 2:No, no, our window is really between 2025 and 2030. I mean, we'd love to have staff this year, but it's just not going to be possible. So it's really 2025 to 2030.
Speaker 1:And I loved it. I actually wrote down it's taking too long sort of sums up the entire staff market. Everyone says that People who are already making staff want to be the next product. I think you've summed up the entire state of staff you know, in those three words I come to you in 2030, but actually it ends up being 2032. Does that matter?
Speaker 2:Well, of course it matters, but we'll basically try and put that in a pipeline. So I mean, we've got 300 staff projects right now, so even if you haven't come and spoken to us. We know exactly well, exactly, we kind of already have placed where you are right and it's worth having a chat with us so that we can place you where you should be in the pipeline.
Speaker 1:And I guess less also used to having aircraft delayed anyway.
Speaker 2:Well, they used to have an aircraft delayed.
Speaker 2:And again, you know, people get really stuck on delivery date and delivery location, right, because the lessors are like well, you know, we're used to having mobile assets and we need a date because the airline's got to take it, otherwise they're going to lose revenue and we need to be able to move that asset around.
Speaker 2:If the, if the airline goes bankrupt I keep saying bankrupt, the airline can't take it SAF. What I do is I flip the whole thing on its head where I say the only reason why an airline can take SAF right now is for accounting principles or, you know, for internal ESG targets, right? So whether they get on January the first, whether they get on December the 31st, so long as you can manage that 365 day window, your meeting, let's say the airline's needs, right. And when it comes to quantity, it's the overall fleet SAF consumption that the airline is concerned with. So if it's one aircraft that's picking up 50% of SAF and its tank out of its 700 aircraft towards every aircraft picking up 0.5%, I mean you know which way is more efficient from an accounting perspective. And again it comes back to, while the delivery of the SAF is not mobile, the assets that are coming in are mobile right, so if it's not suitable for one airline, it's definitely suitable for another.
Speaker 1:And you've gone out there looking for investors in your company. How easy have you found it?
Speaker 2:It was really an eye-opener when we actually had to go and do our seed cap all raise ourselves. And again, when you come out of the corporate world, when you're, like you know, top pile back into entrepreneurial world, it's a very humbling experience. I would say the biggest challenge that we had was just educating people. So there was a lot of investors that wanted to put the capital into us, but it would take three months to get the investors up to speed. Just in terms of what SAF was, why the lessors play a key role in the model you know, mandates, all of this stuff.
Speaker 2:You know, people don't let us enter out the door until they're sure that they're going to get a good return on investment. So, as one of my advisors said, you know, we had to kiss a lot of frogs before we found the prince Aviation partners. It's a great match for us. It matches, you know, their own history and their own, I would say, sector, which is business aviation, with what we're doing, which up to now, you know my history has been more in the commercial aviation sector and the airline sector. So we actually we kind of close a loop and we bring both of them together, just with the two of us working on it.
Speaker 1:And for people who don't know aviation partners, they're a really interesting company on there where they basically make winglets. They designed the invent of the winglet that go, you know, or found a way to do it. So they're. And the great thing about winglet is it reduces fuel burn. So actually they're fighting against you.
Speaker 2:No, not at all, Because imagine if one day we could like offer a package of winglets and SAF First and back it's. I know aviation partners like way, way right back to 2010. At G-CAS we actually used to roll their winglets I think it was into some of our 737 classic leases because in 2010, fuel prices jumped first from like 35 cents a gallon to 85 cents a gallon, and then it jumped all the way up to like $4 a gallon. So every percent made sense, and so we're buying these winglets from aviation partners to put on our 737 as a way to save fuel. So there you go, Like we were. We were basically blending them into the lease transaction and figuring out how the customer to pay a little bit or rammer kinds this over a number of years to save fuel.
Speaker 2:So we have a history, an indirect history, I guess with them.
Speaker 1:But the great thing about winglets, which is this obviously in the business aviation market they cut fuel, burn, but I really think the success is largely because they look really cool.
Speaker 2:Totally, and the bigger the better. Right, the bigger the better. And if you can put your logo on the winglets or something on the winglets, yeah for sure.
Speaker 1:I think if they didn't let go, they never have caught on.
Speaker 2:No, exactly, I said to Gary. You know we have to come up with like a really cool, like powered by future energy, global stickers for aircraft, or maybe you put it on like the winglet.
Speaker 1:So you've got aviation partners as one partner investing in the seed and supporting you. You've also got an agreement with climate and nature solutions. Do you expect about those guys?
Speaker 2:Yeah, absolutely Absolutely. So you know, in this space, what's really important. When you're looking for large sums of money. You're going after institutional investors and these guys have very strict ESG targets. They're not playing with their own money, they're paying with pension money. So it's your pension, my pension, right. And what's very important for them is that whatever you're doing, it is authentic and it is at a high level of integrity. So climate and nature solutions we decide to bring them on board, basically to get that stamp in terms of integrity, that we're aligned with what these institutional investors are striving for. So they'll basically ensuring that any solution that we put together is lined up with what these investors are trying to achieve In climate and nature solutions. You know, if you go onto their website, they're actually. It was founded by Catherine McKenna, who is the former minister for climate change and environment and infrastructure for Canada. So you know we've got the creme de la creme there.
Speaker 1:With your pre-purchasing product. Where are you getting most interest from? Is it from the you know? Is it from SAP suppliers or buyers, airlines or investors?
Speaker 2:Yeah, what's interesting is that it's all three, and so that's why it's quite a juggle. All three are struggling with their different pain points and they don't speak each other's language right, so we're connecting the dots between all three of them. The institutional investors it's really hard for them to do what they do best, which has come in with a billion dollars in one staff plan, just yet it's just not there yet. The market is. We're getting there, definitely, but to see that happening more and more often, we're not there yet. So the fact that they can almost partner up with us on a very, very small scale small scale for what that means to them in terms of their money size is almost like dipping their toe in the water to understand the space a little better, to figure out how it all works and to see where the returns are, investment are going to be, so that they can make the big play. From the staff suppliers. I mean, as soon as we launched our press release, literally like every day, we get requests to take a look at staff suppliers and where they're at and whether we can do something for them. So that's been really great. And then, on the lesser space as well, I think there's enough lessores now that have enough education in this space and that information in this space to actually start deploying capital. So there hasn't been any lack of interest from the lesser space. It's just a matter of structuring it as a financial product, really, and making sure that all of the risks are mitigated. So we have more and more lessores coming to us to get into our network of venture buyers, and the airlines themselves too. They're curious to figure out. Well, how can we do this? Can we come to you directly? And if we can't purchase it, could you use your network of financiers, lessores, to actually be the link for us? So it's pretty busy.
Speaker 1:And are you expecting to be on the whole? Are you expecting to be smaller airlines you'll work with, because we've already seen some of the big majors already committing them SAP investment and signing offtake agreements.
Speaker 2:Right. I think it all depends on how everything's going to price out. To be honest with you, what we are is we're a lower capital cost solution for SAP suppliers and that plays a part in how they're going to price their SAP in the future. And, at the end of the day, what the airlines want is they want the lowest priced off and the most accessible of price off. If that means that our mechanism is more beneficial to a larger airline that maybe already has an offtake agreement, perhaps there might be some interest from them. I think in the beginning it will probably be whoever's in the lessores portfolio that is interested in the product. So we'll have to see because, again, when you have the SAP, maybe one airport within a less worth portfolio, it can be 30 different airlines.
Speaker 1:Yeah, and I guess also if you're a major carrier flying into one specific airport once or twice a day, it's very convenient if the lessor can arrange that for you rather than you having to go around 500 airports. That's right. So if I'm a SAP producer and I'm confident I'm going to be making SAP in the next one to three years I should approach you.
Speaker 2:Absolutely. Yeah, absolutely. We want to talk to you and see if we can get you into our first pre-purchase or second or third. Absolutely, I think there's advantages even for those SAP producers who don't necessarily need the capital, the non-dialogue capital, low cost of capital, and that's just building a network of buyers.
Speaker 1:And you're agnostic when it comes to feedstock or process.
Speaker 2:Yeah, oh, totally, totally. Sometimes I get really frustrated because on a day-to-day basis we're speaking to various investors and it's interesting to see how people make their bets, so-called what they're betting on. I used to be a casino croupier, so yeah, yeah, blackjack, roulette that's how I put myself to university. It's always interesting how they're placing their bets when some of the investors they only talk about kind of the end point right, which are the e-fuels, and they only wanna invest in e-fuels. And there's like 10 years at least to get there of SAF and really what happens over these next 10 years in terms of climate change solutions are gonna be key and integral and whether it's first generation or second generation biofuels and alcohol to jet, they're not gonna go away just because e-fuels come on the scene. They'll just scale and probably the pricing will be appropriate for that type of SAF.
Speaker 2:But I think that you can't be picky in the aviation industry anymore about what you invest in, because there's a real urgency now and I know nobody likes to talk about the urgency of things, but there is an urgency which is if we don't start putting solutions in place and flowing more money into things like SAF, what we don't want to happen is that taxes start to go up, ets allowances start to go up, which increase the cost of carbon, and there are different ways that flying can become more expensive and if it becomes more expensive, that dance and demand for travel and it goes back to the fleet scamming thing, where you start to have an impact on your assets. So we are agnostic. It is. We are more delivery date-driven, availability and price.
Speaker 1:Do you? Are you a bit frustrated that the lessors I don't feel the urgency from most leasing companies. I talk to.
Speaker 2:Really, I actually am not frustrated with them at all. It's really funny because I think everybody gets really frustrated with the lessors, which is kind of look at, if you look at what they're holding onto, the lessors they own 50% of the world's fleets over $200 billion. Their spend is, like I don't know, $40 billion per year, right, and everybody's like, why are you not doing more? But I come from the world of lessors where I completely understand why they're not doing more. I mean, they're not charities, and I've had this conversation with both lessors and with banks and again, it's not their own money that they're playing with. It's other people's money, right? These are asset managers and the money that they get comes from somebody else and typically it's, like I said, it's people's pensions and university education, so on and so on. So these lessors, if they're gonna put one cent into something, they have to get a return on investment, and their horizon is not eight years, right, it's more like one to three years where they need to start having a return on investment for any dime that they put into SAF or any other type of investment. So I actually I don't get frustrated with them because it's taken me you know, with 30 collaborators, almost three years, to figure out this space and try and figure out a financial model where everybody can kind of make their return on investment that's required and get the capital in that they need and the people can get the product they need.
Speaker 2:You know you can't expect a lessor who just deals with like well, is it gonna be a Max or a Neo or is it gonna be a Zero and NG? Right, their main product is maybe four different types of aircraft and it's one type of leasing model For them to get up to speed on this. You're asking them all to put serious expertise in house, which would just not be. It wouldn't be efficient. It just makes much more sense for them to partner with somebody.
Speaker 2:And I think they are Like when I speak to all of them. You know they're all looking for the key and for the kind of the silver bullet that somebody could provide in terms of, you know, a service or an offering. So I think that once they understand it, once you can show them that they can provide a return on investment to the people that are putting money into them, then it will just be obvious for them. But yeah, it can be frustrating with some of the rhetoric that you hear up at conferences and they say it's not our role and blah, blah blah. But inevitably, inevitably, if you own, if you have that much skin in the game, so to speak, in terms of assets, they're gonna have to do something in this space, whether they like it or not. Otherwise, the money behind them will kind of decide for them.
Speaker 1:I think it's a really strong argument. In some ways, I think it's more frustrating where you get a lot of talk about how committed they are, but actually very little action.
Speaker 2:Yeah, exactly. I mean, when I was up at airline economics, I kind of put forward the idea of ensuring your portfolio against climate change risk. So we always buy insurance for our airplanes. But the question is, how do you insure it against climate change risk in terms of value of the portfolio? And the answer is you can't. So the only way to insure something when you can't actually do anything about it is to actually make some money off of something else. That helps kind of solve the problem. And when you put it to a lessor like that, they're like yeah, okay, that makes sense, but it just needs to fit into our wheelhouse. We can't be. We're not venture capitalists, so we're not gonna invest in 10 different SAF projects and wait for returns eight years from now. Their investors are looking for return investments within five years and they get it. A lot of them get it, but they're not at the stage where they're willing to talk about how much they get it until they have the solution in place.
Speaker 1:So when do you think you'll this? Is harsh, because you only announced the company the start of 2024, and we're in February. But when do you think you'll make your first pre-purchase or sign your first pre-purchase agreement?
Speaker 2:Well, we're targeting a first half of this year. So, even though we have just launched, we have been working with a group of collaborators collaborators within all parts of the ecosystem to make sure that this can work for quite some time now. So the target is before the end of June. So if your SAF supplier come talk to me, if your buyer come talk to me, investor, come talk, we'd love to be able to do something by the end of June.
Speaker 1:Brilliant, and you'll also get a chance to see so many SAF suppliers and investors at the SAF Investor Conference at the end of this month.
Speaker 2:Yeah, I mean, what a great initiative. Saf Investor, the SAF Investor. I'm happy to be able to speak there and to meet the suppliers that'll be there, as well as everybody else who wants to play a role in this space.
Speaker 1:Great, and that wasn't a pre-prepared plug, but thank you very much.
Speaker 2:It was not.
Speaker 1:Thanks very much, that's awesome.
Speaker 2:Thanks, aleister, see you in a couple weeks.
Speaker 1:Brilliant, thank you, thank you.