The SAF Podcast
Welcome to The SAF Podcast, the only podcast on the internet that exclusively covers sustainable aviation fuel (SAF). So if you want to find out the real issues and challenges are for commercialising and scaling SAF production, look no further.
Every week we will be hearing from senior industry leaders who are actively shaping the future of SAF and aviation.
Hosted by Oscar Henderson and brought to you by the team at SAF Investor. Connect with us at www.safinvestor.com
The SAF Podcast
The SAF Podcast: PA Consulting - From Cacophony to Symphony
This week on The SAF Podcast Kata Cserep and Salem Esber, PA Consulting join Oscar to discuss the recent Cacophony to Symphony: Successfully Scaling Sustainable Aviation Fuel report.
With nearly 600 survey participants spanning airlines, airports, fuel producers, investors, and policymakers, the report reveals critical challenges in scaling SAF—most notably fragmentation across the ecosystem, cost barriers, and policy misalignment. Kata, an aviation strategist, and Salem, an energy and finance specialist, bring complementary perspectives on how aviation and energy must converge to unlock commercial-scale SAF.
The conversation emphasizes that while no single stakeholder has solved the SAF scaling challenge, there's significant optimism and willingness to collaborate across the ecosystem. We discuss the belief blame graph to stress the importance of looking beyond individual niches to find cross-sector solutions, highlighting emerging innovations in project structures, risk allocation, and demand aggregation that could accelerate sustainable aviation fuel adoption globally.
Key topics include regional policy differences between the US and UK approaches, with the UK taking a more collaborative industry consultation model while US policy appears more fragmented and uncertain. We discuss innovative financing structures, the role of major airlines with strong balance sheets in driving early adoption, and the development of PA Consulting's cost of decarbonization tool that helps airlines calculate long-term financial impacts.
You can read the full report via the link here to see the insight in literary and pictoral forms: https://www.paconsulting.com/industries/transport/aviation/scaling-sustainable-aviation-fuel
Hello and welcome to another episode of the SAF podcast. This week we've got kind of an exclusive. We're going to call it an exclusive. I'm delighted to be joined by Kata Cherrup from PA Consulting and Salem Ezber, also from pa consulting, and some people may have seen a recent report that they published called cacophony to symphony successfully scaling sustainable aviation fuel. So we are going to be going through some of the key findings of the report and some of the key takeaways and you know how reports like this go and get made and then we will probably save some time to talk about orchestras and symphonies and music along the way as well. Kassus, salem, thanks so much for joining me.
Speaker 2:Great Pleasure to be here.
Speaker 1:So, before we get into the report, do you just want to briefly go through both of your backgrounds and how you ended up in your current positions and what your sort of career path looks like? So, kata, should we start with you?
Speaker 2:Sure, so I'm basically an aviation lifer, I would say so. I've been working in in aviation aviation advisory since about 2005, so best part of 20 years um. I studied economics, so that's sort of my toolkit um, and over the last 20 years um I have worked advising airlines on their networks, their fleets, their strategies, airports on their business plans, their mergers, their privatizations over the last decade or so, with a focus on on sustainability issues, which has naturally led me to the topic of SAF, which is the focus of today's discussion. But essentially, looking at this topic and my advisory work always from a from an aviation standpoint and really sort of how the industry works together, that's always been my area of interest perfect and Salem.
Speaker 1:What about you?
Speaker 3:yeah. So I'm coming, uh, to sustainable aviation fuel staff from a little bit different angle. Um, I have a deep energy background and really it started with an engineering background, um, as a student, and then got an advanced degree in policy, so engineering plus policy, and then for the last nearly 20 years I've been working at PA Consulting in the power, renewables and clean fuels space, so really focused on the energy industry and really kind of focused in the finance space of the energy industry. So I think of the world sort of through those lenses or technology policy and finance. How can those three things, those three areas, work together to get things done, to get things built and in the case of SAF, you know, to build large facilities that can produce it and then provide that fuel to the aviation industry, where where kata is the expert. So energy, or I think, is the way to think about us so we've got an aviation lifer and then an energy specialist.
Speaker 1:We have someone from the the us and someone from the uk. The keen listeners will have will have already picked up on, so we've got a nice variety of perspectives and angles coming at this, this problem. So do you want to explain to people because there are a lot of reports in energy and in saf and looking at the big wide problem of scaling sustainable aviation fuel production? So why is this report different from others that other people might have come across in the industry?
Speaker 2:Yeah, I think that's a fair question and it wasn't lost on us that already there have been numerous reports and roadmaps and technical studies and other studies published. They continue to be published. We were not looking to duplicate any of those. Probably from our introduction you would have already started to get a sense of we look at the issue really from a system and the cross ecosystem perspective and with the benefit of that, we wanted to pull out some of the things that we see that we also observe that some of the more niche studies are not covering. So there's a lot of great work out there. We are not doing yet another forecast, for example.
Speaker 2:In this case.
Speaker 2:What we wanted to do is pull together and bring to life why these things are so difficult and why there are so many really specialized, dedicated stakeholders playing in the SAF space and yet what some of the current frictions are in the market, and propose some solutions to helping to move this forward.
Speaker 2:The other piece that we also wanted to really bring to life is through the approach so this isn't just PA's view survey across the ecosystem and check some of our hypotheses and make sure we had a decent data set for some of the things that we are saying. So we surveyed close to 600 people around the world from the airlines, the airports, the investors, the producers, the policymakers to validate and corroborate some of the things that we are seeing in our work in this space. So really this is a higher level report than some of those more focused ones, and really the hope was to join some dots and bring some insights that, for example, somebody who specialized in producing SAF and really in that space might not have thought about as to what they could potentially be doing with respect to either their financing or their commercial negotiations or their logistics and so on. So joining those different pieces together is really the aim of this report.
Speaker 1:And a big part of the report was, as you mentioned, the survey you went to and Salem. I wanted to get an idea of you know the breakdown of who you surveyed and also how the responses to the survey either sort of confirmed hypotheses and theories and ideas that PA already had, or whether there were surprises in those responses that actually made you question some of the sort of conclusions you you might have already come to before the survey yeah, no, it's a good question and I, you know, and the people that we surveyed were investors and some policymakers and regulators, so kind of an equal mix across those groups.
Speaker 3:The work from the survey component of the report was that there really is a misalignment and fragmentation across those different stakeholders in how they think about SAF adoption.
Speaker 3:And so, in addition to the higher cost I mean, I think it's fairly well known that, you know, depending on the pathway that you use to produce SAF, the cost will be higher than just straight jet fuel but there's enough misalignment and fragmentation across the stakeholder groups that it creates an obstacle to overcoming the higher cost cost.
Speaker 3:So that's really what we saw, what we think the problem is as far as achieving widespread SAP adoption in the near term and then longer term as well, and really what we wanted to do then is propose some of the solutions that could help us get past this issue. And really what what this requires from our perspective is that first you need to kind of create conditions for success. So create, you know, create conditions so that those different stakeholders can can come together, um, align around one mission, um, and that is to achieve more widespread staff adoption. And then begin action now and make adaptations to that as the industry scales. So don't let perfect be the enemy of the good. Take action now and adapt as we move forward. So that's really kind of what our views were on what we can do from this point our views were on what we can do from this point.
Speaker 1:Were there any sort of groups that you you surveyed that were particularly willing to come forward, in any that were particularly difficult to get involved, or were they all equally sort of engaged and willing to sort of be involved in the survey and have conversations about this?
Speaker 2:we actually had a pretty good spread sorry to jump in Salem across the respondent groups. I think people saw the benefit of being part of something that was, by design, so wide ranging, so we wanted to make sure that this wasn't an echo chamber an echo chamber. We also wanted to hear from people who were not actively involved in SAF and to understand what was stopping them now. What were their concerns, what were the reasons for not being actively involved? The other bit that we wanted to make sure is that we got as as good a global spread as possible.
Speaker 2:Obviously, this is a global market. Aviation is a global market. Fuels are a global market.
Speaker 2:The industry that is growing up is global, but there are very significant differences in terms of the approaches that different countries are taking, that different organizations are taking, and that has an impact on some of the views.
Speaker 2:So it's a large sample size it's not tens of thousands, but we think it's a good representation within those markets and some of the most interesting insights, I think are about those regional differences and the perspectives and almost the impressions also that people have about countries other than their own. So that for us was a really interesting part of the research and also as actually as a process has been quite fun to work through with our colleagues because, pa you know, I work with Salem in North America and his team, but we also have a team in the Netherlands and the Netherlands is very active in this space. We also have a team in the Netherlands and the Netherlands is very active in this space. We also have a team in the Nordics. They have particular advantages. So so testing some of those and seeing what the regional perspectives are, I think has been, has been a valuable aspect of this study as well.
Speaker 1:I wanted to go into a few of the, the results from the surveys and sort of sort of test those, those waters slightly. So what? Early on in the report there's a, there's a nice sort of graph that goes that says 92 percent of the industry thinks that is crucial to decarbonization, which on the face of it is a you know anything in the 90s is. You probably deem it to be a pretty high number, pretty high percentage, a good result. But then you see only 82% of that think it's their responsibility to make significant progress. And Salem mentioned earlier this fragmentation that we're seeing. They're both on the higher end of the scale is sort of emblematic of the fragmentation that we're. We're currently seeing that there's not full ecosystem, wide buy-in to sort of make all aspects that or scaling staff their responsibility that other people can can do the work for them up front yeah, I think that's exactly it.
Speaker 3:I mean, you know, mean, if you ask folks about decarbonization in the aviation industry, saf is effectively the first thing that comes to mind. And I think there's two things across these stakeholder groups that decarbonization is. Well, they disagree about the importance of decarbonization, about when decarbonization should be a priority and at what cost. So there's all sorts of different perspectives on that. That's the first thing. The second thing is, I think, naturally people don't want to do something that's difficult or costly or presents a risk to them. So it's easy to say, yeah, we should do this, but not me, maybe someone else to do it. So there's probably elements of both of those factors coming into play here. There is, across these, the groups that we surveyed there, there there is still um, you know fairly well they're they're just broad perspectives around decarbonization and its role in the industry and, um, and what people are willing to pay, and and uh and when to get that done. So that's something that needs to be resolved here as well.
Speaker 1:There was some sort of other graphs and obviously, being SAF investor, I was immediately drawn to the investor perspectives throughout the report and there was a really interesting graph where it compared the airports, the airlines, the producers and the investors and the policymakers about their relative levels of optimism and interestingly, the producers came out as being the most optimistic, which is quite interesting. I'd quite like to know the breakdown of how many of those investors are actually invested in SAF so arguably should be saying that because they've got money on the line and how many of those aren't actually invested in SAF. So maybe you can solve that riddle. But also there was another graph that says investors are actually were considered the second biggest blocker of accelerating. So so that seems like quite an interesting sort of dilemma, because it seems like you're trying to put a round peg in a or square peg in a round hole sort of situation where you've got lots of optimism from investors but actually lots of people considering them to be blockers.
Speaker 3:Yeah, and that's a good one. I think what you're pointing to is among investors airlines, airports and producers. Investors were the most optimistic about the potential for SAF to be adopted on a widespread basis by 2030. And producers were the least optimistic. And I think there's an interesting story there, because what I think what it tells us is that investors who have the money, who are willing to invest, who want to do things and I think to your earlier question, I think we have, I think we identified just under 20% are actually invested in SAF or some part of the process for SAF. So, um, many of them want to, um, but aren't there yet. Uh, and I and I think you know that group generally has optimism, uh, because they're looking for opportunities and and they think if they put money, put resources into opportunities, then they can create something valuable, create progress and move the industry forward.
Speaker 3:The producers, on the other hand, were less optimistic. They were the least optimistic of those four stakeholder groups, and I think that speaks to the challenges that they have in trying to create this fuel at a reasonable price, and so they're deep in the weeds on that, on the engineering side of it and the logistics, and they understand the challenges. They understand what they're up against and how difficult it is to squeeze costs out of these industries, and so that shows up in their data, I think, as the least optimistic of those groups, of those groups. One other thing to point to, I think, is that among the groups that these stakeholders identified as being important to the success of accelerating staff adoption was government and regulators. They all identified those as being the ones most important to achieving progress. So I think that that speaks to where these different stakeholder groups think progress needs to be made and can be made, and it really comes from the government regulators, not necessarily the people that are participating actively in trying to make money in the industry that.
Speaker 1:That the end of that ties quite nicely onto my next question, because I wanted to move on to. Probably one of the most interesting, creative, crazy graphs throughout the whole report is this sort of blame belief graph, which I'm not going to try and explain, because if I try and explain it in audio format, um, everyone will just get confused. Um, so people should actually just go and look at it, because it's a very interesting visual about where different industry segments are placing blame around the lack of sort of for a lack of a better word in sort of investment or engagement in sustainable aviation fuel. So, kata, do you just want to explain why, how that graph came about? Why was this sort of a good graph to include? Because it's a really interesting visual, but something that doesn't necessarily immediately jump out as being that helpful if you're looking at sort of immediately helpful in terms of scaling sustainable aviation.
Speaker 2:And I will say it's one of my favorite charts as well, although you have to unpick it a little bit. I really like the visualization because it shows the ecosystem. So if you do download it, it's on page 17. It is a circle and we've got airlines, airports, investors, producers and regulators, and there are some lines. We could have done it in a much more traditional way, where we had bar charts you know who are the top and the questions. Really, this was based on a survey, so the questions were essentially who do you consider to be most responsible? Who are you looking to most of all? And we could have just ranked them, but that doesn't really bring to life this web, this web of what we might call finger pointing. It could be blame, it could be belief, but I think what's most telling is that pretty much all of the arrows do point to the regulators and the governments.
Speaker 2:As Salem just mentioned, there is pretty widespread recognition that in these early stages of building a new industry for SAF, for SAF, the scales need to be tipped in the right way to ensure there are conditions for private sector operators to make economically rational decisions in a way that get this industry to scale. And whose role is that? Well, that's typically a government's role. So that is the simple message of this, but there are some interesting nuances and I think in future iterations we'll dig into some of those dynamics about really what airports are specifically looking for or what an airline is particularly looking for. But essentially, the main message of this visual and I really like it that the main message of this visual and I really like it is the responsibility and therefore the opportunity for governments to be in tune with what the industry is asking for, to develop policies that are supportive in the context of wider policy considerations that they also need to take into account, but to recognize that this is the time. In the in-depth interviews it certainly came out that once this industry has scaled and once we are more towards the symphony end of something that is a well-functioning market, there should be much less of a need.
Speaker 2:It is simply in this infancy period where market design, policy support, incentives, r&d support, a whole range of different things that governments can be doing to support scale up, are really what's going to unlock, help with market distortion by introducing a universal requirement for SAF to be used or uplifted, or it could also make the production more attractive or more competitive through various supply side incentives.
Speaker 2:So it wasn't one type of policy necessarily, but the finger or the request was very clearly from all sides, primarily pointing to governments to help create those conditions for success. The stereotypical thing now that the US are finger wagging at the government because of the recent uncertain life and what we tried to get across in the report itself. So that's sort of the thinking behind having some of the infographics and the numbers. If you look through the reports, we've tried to be very true to also some of the quotes and the anecdotes from those who are in this ecosystem and bring that to life, because it isn't as simple as the US is doing A, europe is doing B. There are nuances and flavors and things that are seen as very positive by some players and some that are seen as quite challenging, so it's not as clear-cut as that.
Speaker 1:One of the other sort of takeaways is the misalignment, potentially, between what government policy looks like and what sort of industrial realities are currently, and I wanted to get both of your flavors on. You know who. What's the conductor going to be to make to make those more aligned, like who's going to conduct the orchestra to make this, to turn this into a symphony? Where does that come from?
Speaker 2:so I mean, I'm happy to kick off with a, with a sort of a UK slash European perspective, and I think it's probably fair to say that on this side of the Atlantic, governments so far do see themselves as a more active conductor, to continue that analogy, and you can see that in the policies that have been enacted. So we've got Refuel EU, we've got the UK mandate. You have additional incentives and border context across the EU. We've also got the revenue certainty mechanism that is in the works in the UK, which is already a structured set of policy mechanisms that are aimed at creating the conditions for success.
Speaker 2:That's not to say that the industry is universally agreed that these are the right policies. There are certainly teething problems. There are fundamental challenges that we are hearing in terms of still not helping to ensure that particular pathways are viable, that there aren't enough projects yet reaching FID, and there are some very specific challenges around that. But it is a much more hands-on. We see the challenge, we are putting policies in place and we want to be conducting this transition. So I think that's probably how I would characterize it. But it's quite different in the US and in other parts of the world, which we do sort of summarize at a high level on one of the other nice charts with the global map. But maybe Salem, I'll just take your perspective on the US.
Speaker 3:You know the US is I mean, really it's a source of cacophony in this whole situation and you know there are a variety of different policies and the policies are changing pretty routinely, I would say, or there's a lot of change in the policy, and most everything is fairly short term as well. So I mean, the way to think about it is there's policy at the federal level, there's policy at the state levels, and then there's policy at even lower levels regional, local, and then there's, in some cases, corporate policy that could be driven by an airline or an airport, and at the federal level there's been a lot of change. Of course, I think the thing that people miss in all of the changes that 45Z, which is the tax credit for clean fuels, was actually extended by two years in the OBAA bill, which was passed in July. So that's great. It provides an additional two years of incentive certainty, but it's still only two years, right? So an investor and a producer that want to build something that may have a 40-year life and requires a 20-year payback period, having two years of tax credits doesn't really do all that much for the project. It's helpful. It provides a signal that maybe that will get extended further into the future. But people that are putting real money down on these things actually need more certainty than that. So that's the federal level.
Speaker 3:Some state programs have been very successful. California has the LCFS program. It has definitely incentivized clean fuels production and use in um in California and um production beyond California's borders as well. Um, but it's also a relatively uh, I mean, there's there's only very short term certainty on the pricing that you can get for those credits. So again you have to take a leap of faith, if you're an investor or a producer, that you will have good price signals beyond the very, very near term. And then there are also, as I mentioned, some regional programs, some sort of staff hubs that are emerging in various cities, minneapolis for example. But again those are in their infancy. It's not clear how much money will be available, real money, to provide real scale for fuel production. So there's all sorts of different policies that are happening in the US and there's policy changes that are happening as well. Um, misalignment that we're talking about, right, you need 20 plus years of certainty to build a large-scale project. You get up to two years of certainty.
Speaker 1:That's a misalignment that doesn't work if you want to scale an industry correct me if I'm being overly harsh, but it seems like lots of people are looking at the uk policy. If if we were to use that, because it was very much developed in consultation with industry. There was what was previously known as the Jet Zero Council, which is very influential in the early stages, informing what the policy looks like, whereas if you go over the pond to the US it very much looks like policy is happening to the industry. It's being decided at the government level. There isn't as high a level of consultation there. Do you think that's a fair assessment or am I just being overly cynical?
Speaker 3:I think it's a fair assessment and I think it reflects the lack of agreement at the highest levels that this is a high priority in the US.
Speaker 3:So between the last two federal administrations I think we have very different views on whether decarbonization is a high priority.
Speaker 3:Decarbonization is a high priority and having that sort of changing backdrop at the highest levels means that it's basically impossible to put together a coherent longer-term policy for an industry. And even if there is a near-term policy that seems to have some certainty to it, it could change again with another administration within a couple of years. So there's all these sorts of things and in the meantime I think the industry um has the perspective is basically we'll do, you know, we'll do what we can do and what our consumers, our customers, want us to do, but we're not really going to take it much further than that. And we'll take some customers want us to do, but we're not really going to take it much further than that. And we'll take some voluntary actions here and there, but until we have some certainty at the highest levels of government we can't really make major changes. And that goes back to my earlier statement about the lack of certainty and coherence. So that's just kind of where we are.
Speaker 1:How much scope is there sort of within the industry, sort of industry to industry collaboration or industry governmental collaboration to sort of innovate in the ways that the ecosystem, the stakeholders are working together in order to to be more pragmatic and de-risking projects and get more projects over the line? Because, cassie, you mentioned the UK policy looks great but actually, you know, when you look at it from an FID perspective, you know if you look at purely from there it doesn't look as perspective yet. So not saying there's not lots of things in the pipeline ready to sort of to be, to go through commercial um production. So how much level and ability is there for innovative collaboration?
Speaker 2:I mean that there's no real limits to to innovation. I think that's one of the things that's pretty exciting to see in this space is that committed policymakers, creative investors, innovative producers and more forward-thinking off-takers are shaping things that have never been done before, and we try and pull out some of those examples, and we are certainly aware of many more that are actively in development. They're not fully fledged, so we can't talk about them in detail, but this is an exciting time to be in this space because those who get it, they understand what's at stake. They understand that there's a range of risks, whether they're technology risks, they're feedstock risks, they're market or policy risks, but there is also risks associated with inaction. And so those who are grasping this challenge I continue to be inspired by the innovation, and it's a layering of those different policy measures, those different pots of cash from different places, the aggregation of demand, the different pooling together of different stakeholders. That's partly where the innovation is coming from. Stakeholders. That's partly where the innovation is coming from.
Speaker 2:Yes, there's really impressive technology innovation of bringing the latest, most efficient technologies on the production side, but actually some of the most practical innovations that we're seeing is in those structures that are springing up. So, and it won't just be the ones that we hear about at a national level. It's sometimes at the project level. Sometimes it's about separating the scope one and the scope three and bringing in a corporate to either to bring down the cost that an airline or the offtaker is actually paying, or to provide a demand certainty signal or to commit for a longer period than an airline is able to commit to. It's about sharing those and allocating those risks and rewards in a way that perhaps wasn't there before, which might get you a bit closer to where you're trying to get to. So I think there is plenty of scope for innovation, but it's quite detailed. You have to be really in it and understand, and that can be a real challenge for those who are new to one particular part of this ecosystem.
Speaker 1:You mentioned the separating of Scope 1, scope 3 emissions, the decoupling of environmental attributes of SAF, the whole book and claim system, which we've covered numerous times on previous episodes in the podcast. But there was a section in the report that talks about large airlines with strong balance sheets, very good credit ratings. They're the ones that you see very actively engaged in SAF. They're the sort of the IEGs of the world the Air France, the KLMs, the Uniteds and Americans, the ones that are making long-term large commitments.
Speaker 1:And you see other airlines not necessarily being so active or purely can't necessarily being so active or or purely can't have the longevity in in the offtake that others can, because they don't quite have the balance sheet or the, the structures in place to to do it sustainably for for them, sort of financially sustainably I mean. So how do you sort of I suppose the way you do that would be book and claim you can do the decoupling that can bring in, you know, the, the smaller airlines, and sort of build the wider offtake base, because the biggest complaint you get from producers certainly the, the ones that I speak to and the investors that what they want to see is the long-term demand over the cycle of a project. So that is an area. Engaging with more of the airline market in terms of offtake is going to be really critical as well.
Speaker 2:Yes, there is definitely an element of that I would also point to. It's also a capacity and an ability to prioritize issue. If we, if you work with airlines of different sizes, of different scales, different uh maturity levels oftentimes it's one person who's dealing with making fleet decisions, making fuel procurement decisions to staying on top of a compliance it's not surprising that, as a general rule, the smaller airlines are following and the policies are impacting them. They can't help but be impacted, but they haven't, on the whole, been at the forefront. So there is a balance sheet plays into it, but also bandwidth and prioritization plays into it. Many of the larger airlines see this as an opportunity for them to stand out, but also some of the smarter ones absolutely see this as a future-proofing, de-risking strategy.
Speaker 2:So if you are thinking ahead and some airlines, not just the largest ones have been thinking about this for quite some time and I remember before EU ETS came out, this is going back some it's the same kind of forward-thinking CFO lens to this that there's going to be a change in my operating costs and my fleet ownership costs and whether it's a SAF mandate that's going to be ratcheting up, whether it's a Corsair obligation, whether it's an EU ETS or some other cost that is going to change my operating economics and my ownership and OPEX of my airline.
Speaker 2:I need to stay on top of that because I want to hedge, I want to know what I'm getting into. I want to know that I'm making the right commercial decisions, not just for the next season but for the lifetime of the asset which is my aircraft and my engines which I'm operating. I mean, that's the optimization that the airline CFO is is thinking about. So that doesn't have to be just the largest airlines. They, historic to date, have been the most visible and the most active. But um, through, through some of our work, um in space, we see some really innovative, quite small airlines trying things because they feel that if they've got the right kind of customer base whether that's corporates or individuals who find this important and they find that there is some strategic rationale for them to be pushing ahead, then they absolutely are doing it as well.
Speaker 1:So it's not just something that's for the largest carriers, I would say it comes into the, the cost of decarbonization, all that that's mentioned um again in the report, the idea that not decarbonizing is going to cost more than decarbonizing, even though the the costs of decarbonizing in the short term seem overwhelming and and, quite frankly, quite terrifying in some cases. But in the long term you're actually making a very smart tactical play against not doing it. So do you just want to explain one how that, how that tool works very briefly, how you sort of go about calculating that and also explain, you know whether you're actually we're actually seeing a, an industry-wide shift in terms of thinking from you know this is actually a requirement as a hedge against sort of increased costs if we go on as we were previously versus the quest for decarbonization, because they're slightly different in their, in their emphasis yep.
Speaker 2:So at a simple level and again this builds on my team's experience of running operating airlines and advising on both fleet and network decisions In simple terms, this will take an airline network planning view of an airline's network work. So you will have a number of aircraft that you're operating on a set of routes where you will have your aircraft ownership costs and your operating costs across the different categories and boiling it down to its most fundamental what do we know about either mandates or Corsair or ETS costs on a route-by-route basis, and how much is that likely to actually add on to your operating costs? Now, there's an interesting interplay there between which generation of aircraft you're using. So fuel consumption obviously plays a big part in it and you highlight some of the differences but also some of those interesting choices. That talk of distortion and carbon leakage often shows up and you see it black and white in the numbers that when you're comparing a like-for-like let's call it an A320 narrow-body operation to an intra-EU route versus an extra-EU route over the ratcheting up or the increasing SAF mandate period, you see the price difference or the cost difference of operating the same aircraft really come to life.
Speaker 2:So this is already being done in-house by a number of airlines. We know that they are looking at this very closely. Some other airlines are not yet thinking this far ahead and part of our reason for developing this tool was just to highlight what this means in dollars and cents and in pounds and pence for the operation of a particular network, and it won't be surprising that in the early years it's not hugely significant. But as the policies start to ratchet up, then the operating costs absolutely start to ratchet up significantly as well. So that's essentially the purpose of it. And then really the application is to try different scenarios depending on what you assume about your SAF mix, the cost you're paying, the length of your commitment, and to help an airline identify really where there may be opportunities to make decisions more smartly Still, in line with their commercial strategy and their network priorities, but with a more fuller picture of where the future costs of decarbonization are likely to hit.
Speaker 3:Yeah, and we come at it. I guess in the energy and utilities team within PA we build financial models for investors and producers who want to pursue production facilities and other projects related to the SAP industry production facilities and other projects related to the SAP industry and so you know, we build up models for them and they think about it in terms of deploying capital on this project versus the range of other projects that they could deploy capital towards, and that's across all opportunity, the whole opportunity set in the energy space and then even beyond that as well, set in the energy space and then even beyond that as well. They're all sort of competing for putting their capital into the best places in the industry where they can get a return. So they have to think about it from a little bit of an upstream perspective, I guess.
Speaker 3:If I undertake this project, what does my return look like, including potential government subsidies? What does my return look like, including potential government subsidies, including contracts that I have with an airline that, for one reason or another, whether it's a mandate or a voluntary target, is willing to sign a contract for SAF? All of these things are factored into their models and how they view opportunities and then that drives their decision making towards whether or not they pursue a project or invest capital there.
Speaker 1:What are some of the takeaways you want people to have from reading this report? It might be something tangible tangible some of the data, or something maybe intangible about the direction the market's heading well.
Speaker 2:So what I what I think is most interesting to to take away from the report I would like people to take away is that nobody has this figured out yet and therefore I think it's incredibly valuable and time well spent to lift our heads up and look around and, yes, there is a lot of noise, but there's a real spirit of collaboration that I see in this space.
Speaker 2:It is not lost on either the supply side or the demand side that this is a complex, high-stakes transition and therefore people seem very willing to share best practices. There are some great initiatives underway where people are lending their time, their knowledge, and that's how this is going to move forward. This SAF scale up challenge is not going to be solved by any one piece of this ecosystem. So I think that's the main thing that I would like to take away is that it can feel really quite overwhelming and sometimes quite lonely to be working in this space, but if you're able to lift your head up, look outside, reach outside of the particular niche you're working in, chances are you'll find somebody else who's looking at the same problem but from a different perspective. So that's probably the main thing I wanted to take away from the report. What about you, Salem?
Speaker 3:Yeah, I think I would echo all of that, and I think one of the main things that we identified was that there is a lot of optimism out there. So I think, across these stakeholder groups, people want to do this, that people want to decarbonize aviation, people want to pursue SAF as a solution to that, and I think they're trying to sort through the noise and all of the cacophony, if you will, and figure out ways that they can bring innovation to the industry and and make things happen and, um, you know, make a return in the process and and and achieve all of their objectives as as a professional, um. So you know, that's the main thing is, uh, is is there is understanding how much optimism there is out there, um, and then finding a way to capture it for the positive.
Speaker 1:Well, to be honest, the main takeaways was the last thing I wanted to cover, and I think we've gone through the report in some really good detail and hopefully given people a flavor of what they can expect and hopefully it prompts them to go and go and read the full, the full 60 odd pages, I think it is. It's uh, it's no small undertaking, but it's very much worth the time sitting down and reading through it there are also some beautiful pictures, so don't be put off.
Speaker 2:It is 60 odd pages, but we've purposefully made this one very accessible. So we have. We have pitched this at people who may be very familiar with one particular area but less familiar with another. So, um, I really I hope there is something in there for everybody. It is supposed to be accessible. We've tried really hard not to have too many acronyms. We've tried really hard not to go into really, really deep, deep rabbit holes. It is based on a huge amount of in-depth data analysis and know-how and in future reports we will certainly be getting a bit more technical, but we really felt that bringing this together was incredibly valuable and we haven't seen other reports that are doing this, and we are in this in this energy transition. We were excited by the innovations that we are seeing and, yeah, we really hope that everybody gets something from it to spark a new conversation. So, yeah, it's been a pleasure chatting with you and look forward to continuing the conversation.
Speaker 1:Absolutely. Thank you both so much for taking the time.
Speaker 2:Thanks a lot, Oscar.
Speaker 3:Thanks, oscar, really appreciate it.