The SAF Podcast

The SAF Podcast: Alaska Airlines - Focusing on what you can control

• SAF Investor • Season 3 • Episode 28

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In this episode of The SAF Podcast, Diana Birkett Rakow, Executive Vice President of Public Affairs and Sustainability at Alaska Airlines and incoming CEO of Hawaiian Airlines, joins Oscar for a deep dive into how the airlines are shaping their SAF strategy and how it plays into overall emissions reductions ambitions. 

We dig into Alaska’s five-part path to net zero by 2040—operational efficiency, fleet renewal, SAF, new propulsion and airframes, and only then high-quality removals—and why the middle lever, sustainable aviation fuel, is the one that can move emissions at scale this decade.

We also discuss how potentially the role of the airline in scaling SAF is changing, traditional offtakes alone won’t unlock the market. Agreements with Neste, World Energy, Cosmo Oil and Philips 66 get molecules of SAF into the ring, but are not having the desired fly wheel effect of indicating the level of demand to scale production. 

Diana highlights the real change will come from building deep partnerships with early stage producers developing new technologies, such as Twelve and AIRCO alongside investments from their Alaska Star Ventures investment arm.  

This has been expanded with the new $150 million fund launched with Breakthrough Energy Ventures and oneworld Alliance partners, designed to identify and scale next-generation SAF technologies. With deep technical expertise and a global lens, the fund targets pathways that can scale, hit strong carbon intensity scores, and compete on cost

We also look at the more regional scale work being done in Hawaii with the Par Hawaii. There is a real drive to build out renewable energy security highlighted by the  $90 million investment in renewable fuel production and trials of camelina as a locally-grown feedstock.

SPEAKER_00:

Hello and welcome to the latest episode of the SAF podcast. And today I'm delighted to be joined by Diana Burkett Rakow from Alaska Airlines, soon to be from Hawaiian Airlines as well. So we're going to get into all that stuff around Alaska and Hawaiian and Diana's um new position. Um Diana, thanks so much for joining us and for coming on the podcast.

SPEAKER_01:

Absolutely. Thanks for having me. I I enjoy your podcast and um listen frequently.

SPEAKER_00:

Excellent. That's great to hear. I will also say Diana's had such a busy year. We've been trying for about a year to get Diana on the podcast. As we will find out throughout this discussion, there are excellent reasons as to why it's it's taken until now, but we're so glad that we're able to make it happen now. So, Diana, before we, you know, get into all the happenings that have happened at Alaska and Hawaiian, do you just want to give everyone a sense of your background, how you ended up in your current role, what your current role is, and then also what your your future role is that you're going to be taking up towards the end of the month as well.

SPEAKER_01:

Yeah, sure. Happy to do that. Um, and thanks again, Oscar. So um I have been on the executive team for Alaska Airlines for the last eight years. And my responsibility is looking after um corporate affairs or public affairs and sustainability, um, which includes our communications work, our public policy and government affairs, our community engagement. We actually have had um sales and marketing uh in my team's portfolio for both Alaska and Hawaii, given how um unique those two markets are. Uh, and then sustainability, um, our social impact. And a couple of years ago, we started uh a venture fund called Alaska Star Ventures, um, which was sort of actually a uh um offshoot in a way of our climate strategy. And we can get into that a little bit. Uh as we go forward, I uh later this month am stepping into the role of CEO of Hawaiian Airlines. Fortunately, I actually get to continue to look after sustainability and our venture fund because um at an enterprise level, because those are just really exciting and really important areas of work. They're important to Hawaii and they're important to the business as a whole. So in the role of um being responsible for the go forward work of Hawaiian Airlines, we are keeping the Hawaiian Airlines brand as a really critical part of our company. And while we do come together at the end of this month as a single operating certificate, so meaning a single airline under one federally regulated certificate and one operating structure, one set of processes and procedures, we will have such a significant operation in the Pacific, uh, to from and within the islands and also to the South Pacific and over to Asia that we decided that really we needed a strong leadership structure going forward in Hawaii to make sure that employees, customers, operations were well supported and that we've got really strong stewardship of uh a beloved brand going into the future. So we're doing something that no airline has done before in preserving these two brands under a single operating certificate, but there's really good reasons for it, and I think it'll make us stronger in the long term.

SPEAKER_00:

And you're going to be the first CEO from a sustainability background of an airline. That's what I read anyway.

SPEAKER_01:

Perhaps that may be the case. Yes. Um, yeah, and I'm I'm excited for it. I think, you know, there's so much in sustainability that really is about, and even just the literal definition of the world word, it's about long-term durability. It is about doing the right thing for all of our stakeholders, but in service of being able to survive and thrive for a long time to come. And, you know, to do that in a way, we talk a lot at Alaska about um delivering for those who depend on us or delivering for our stakeholders, delivering value to all of our stakeholders, which includes our employees, our owners, our communities, our customers, and sustainability is part and parcel of doing so. So I think there is a lot of uh salience between um sort of the bigger picture strategy and the sustainability work itself. So I'm glad to be uh involved in both.

SPEAKER_00:

So the the merger between Hawaiian and Alaska was finalized about a year ago, and you're gonna, as you mentioned, go under one operating certificate later this month. You've there's also you've got a five-part path to to reaching net zero, and you've got your the target of doing that by 2040. So, first off, do you just want to explain to everyone what those five different aspects are, and also how the merger and that sort of the union of those two um airlines together is affected or for the good or for the bad, or how it's changed the sort of the rollout of those, of those five parts?

SPEAKER_01:

For sure. It's a it's a great question. So um maybe just a little bit of storytelling, sort of going back to the 2020, 2021 timeframe when we were talking with the board about we were about to sunset our 2020 goals during the period between about 2012, 2012 and 2020 when those goals had been in place. And I came into the company about halfway through that journey. We had just acquired Virgin America and we had gone through the exercise of sort of re-baselining those goals with our combined operation. And we were about to hit that timeframe. So it was time to think about what was the next set of goals. And we set 2025 goals in a lot of different areas, including around fuel efficiency, around emissions intensity, recycling, social impact, et cetera. But we decided that we really needed something bigger and bolder and longer term to set as a North Star in the area of uh environmental stewardship and sustainability. And so that's how we got to the decision to set a net zero ambition for 2040 and a five-part path to get there. And the reason that we set 2040 was really to make sure that we were pushing ourselves as hard as we could to make progress. Um, 2050 is a very valid goal, and it just seemed at the time far away. Um, and you know, it it seems in some ways, both 2040 and 2050 seem frighteningly close as we think about the pace that um and the the time that it takes for our sector of aviation in particular to decarbonize, and we can get into that a little bit. But we decided that 2040 was right for us. And when we set a goal at Alaska, we like to know how we're gonna get there. Not just, okay, we're gonna hope and and uh um uh, you know, and set this sort of arbitrary goal. And so we set a five-part path, which was our strategy to achieve um the net zero target. The five parts are first and foundationally operational efficiency. And that's things um from everyday practices, such as single engine taxiing, where it's possible to do so by our pilots. And we've built that into regular procedure and into training, turning off the APU and making sure that we've got good support from preconditioned air and electrification from the airports, so that you don't need to be running the APU, which saves about a half a gallon. If you can turn it off, it saves about a half a gallon of fuel every minute. And that kind of thing adds up, especially over flights. But there's also um, you know, moving to electric uh ground vehicles and technology-enabled things like optimizing our flight paths using AI and machine learning technology called flyways and other high precision navigation to shorten and smooth out flight paths. So that's the operational efficiency category. And we're really excited that over the last several years, we have been able to sustain being the number one most fuel efficient premium US airline. And that's a goal that we want to continue and a bar we want to hold ourselves to as we go forward. Alaska has just as an aside a saying control what you can control, um, which is part of our kind of rigorous discipline around, you know, costs and operations, et cetera. And this fits in that category. Number one, control what you can control, which is save fuel where we can in our in our um everyday operations. Then there's fleet renewal is the second pillar of our strategy. And um our uh the average age of our fleet is about 9.4 years. Um, that's one of the youngest in the industry, which helps with fuel efficiency as each generation of aircraft is significantly more fuel efficient than the ones that they replace. So we've brought the MAX into our fleet, the the 737 MAX. Um, Hawaiian Airlines flies the A321 NEO. Uh, we have um the sub Boeing 787 Dreamliner in our fleet, and we're continuing to take new deliveries. So all of those are more fuel efficient. That's pillar number two. The third pillar is sustainable aviation fuel. And we'll, I'm sure, get into uh that pretty deeply given the title of the podcast. Um, but we're going after that from all angles. And it really is, you know, fleet and operational efficiency are those two sort of levers that we can control, but you can only go so far. SAF is the real major variable and the the opportunity to make a step-level change here in the next couple of decades. And I think it's the reason that, you know, folks like you are paying so much attention to it because it is that major variable and where a lot of the action is. The fourth pillar is around new technology and in particular uh new propulsion technology. So a couple examples of things that could play there are some of the companies that we've invested in. And the reason that we set up the venture fund was because we acknowledged that so much of what was going to be required to hit our net zero tool, uh our net zero ambition was technology that didn't exist today at the scope or scale required to hit that target. And so that includes staff. That also includes new propulsion technology or new airframes. So Jet Zero is a good example. It's a blended wing body uh uh aircraft that is being developed that has tremendous benefits for fuel efficiency. So not only much more fuel efficient, about about twice as fuel efficient for if you're using conventional fuel, but then if you um replace that conventional fuel with SAF, um now we're really talking. Zero Avia is another company that we invested in for hydrogen electric. And then finally, the last pillar, and really only as a last resort, is carbon offsets and removals. And we've got some criteria around what high quality offsets and removals look like to us. Um, but that's not an area that we have focused to date because our focus is really that in sector change. So that those are the five pillars. In terms of um just briefly sort of where the integration with uh Hawaiian Airlines has an impact, we decided from the beginning that we would integrate our strategies and um and pull them together. And honestly, Hawaiian Airlines had been focusing on sustainability for a long time also, and the two strategies were very complementary. So we're re-racking some of the numbers because we have different fleet types and, you know, a more complex international operation. But the strategy itself, in terms of where we're focused, doesn't change. There's interesting new opportunities that Hawaiian Airlines brought to the table. They had focused pretty deeply on local sourcing as a way to both have um uh lower waste onboard products and support the local economy. And they focus a lot on regenerative tourism, which we had started to do as well. Um, some of those are also related to environmental impact. So they're they're really nicely complementary to the five-part path, but we're gonna stay on that path together going forward.

SPEAKER_00:

I'd recommend anyone that hasn't actually seen it, go ahead and look at a picture of a jet zero aircraft. I know it's not SAF related, but they do look phenomenally cool. Um, and the idea of those flying about is is very exciting.

SPEAKER_01:

Yes, we totally agree. Um the other thing that's um cool to look at is uh, and I think some of it probably is online, uh, is looking at the interior, um, the LOPA, as we call it in aviation. There's a lot more opportunity to do things differently inside an aircraft of that type and just more spacious and uh really interesting onboard experience and accessibility. And so I think there's benefits on a lot of different fronts, guest experience as well as environmental impact.

SPEAKER_00:

I think people can actually talk to the people talk to people from or listen, as I should say, to people from Jet Zero on our sister podcast, the revolutionary podcast. So I think they've actually been in spoken on that. So um, if people want to find out more about that, I can put a link and people can check that out separately, but they've got to listen to the rest of this one first. Um so why is SAF such a priority for Alaska? There are a lot of different airline strategies when it comes to sustainability. Some are being very proactive, like yourselves and you know, IEGs of the world are being very proactive in this space, both in off-takes and investments, and really driving the narrative, the market building, whereas others are being slightly more passive, waiting for the costs to come down, the inevitable argument about it it's too expensive and they're gonna wait until they see that cost curve really declining. Why is it important for Alaska to be so active in the sustainable aviation fuel space?

SPEAKER_01:

Well, it answered that question two ways. First of all, if you think about the bookends of the five-part path to net zero, it's gonna take a long time uh for new technologies, new propulsion, new airframes to be developed and certified. Now, it'll be here sooner than we think, but it's still gonna take time. And as I said, offsets removals should be sort of the the last option. And then there's only so far we can go with existing fleet renewal and operational efficiency. So the middle part is SATH that has the opportunity to reduce lifecycle carbon emissions by 80 or so percent, depending on the technology, today, if there was enough of it to use. It's safe, it's certified, it's drop-in, we can use it in our airplanes and in our fuel systems today. And um, and and we need to be doing that. But it is too expensive. I mean, you re you said that's sort of an excuse. It's actually a fact. It's not an excuse. It is not possible for us to get enough supply, let alone afford enough supply to actually have a financially sustainable business at the current rates. So then the question is, what do we do about that? And if you think about the fact that it takes, even just from a new sustainable aviation fuel plant, from the idea of it to delivery of product, that could be five to seven to nine years, let alone thinking about next generation technology. That could be longer. In order to have this be a market that is commercially viable in the 2030s, we need to be taking action right now to make that the case, which is why we can't wait. It's also why we're not just focused on buying gallons, we're focused on coming at this from all angles. And that means policy to enable the cost curve to come down and enable the market to get kickstarted. It means partnering with producers and identifying new technologies. And we can get into the new fund that we just launched last month to do just that, to identify cost competitive next generation technologies that will help enable that cost down curve. And it also means collaborating with our customers and getting more people to both support and understand the opportunity for SAF. So for us, that looks like working with our corporate customers to help cover the cost through uh scope three credits, as well as our individual customers. There's an opportunity to support SAF in a booking path when you buy a ticket on AlasCAR.com. And we've been really excited at the number of people that have taken us up on that offer. About a third of all the SAF that we bought in 2024 was supported by our individual customers through that opportunity. Um, and we reward folks with what are called elite qualifying miles. So for those that are in our loyalty program, if you if you purchase um or support SAF to a certain level, we give you elite qualifying miles. And you know, that number goes up as your support goes up. Those aren't miles that you can uh redeem to fly further, but they are miles that get you to that next level of elite status. So the first, when we first launched it at the end of 2023, we said it was a sustainability-linked way to replace the year-end mileage run. So instead of actually going out and flying somewhere you didn't really need to go and turning around and coming back just to get the miles to get your next status, support SAF. And, you know, economically, it's the same. You get the benefit of a lot more of your time back and you get that status tier. So we've been excited to see that take off. But bottom line, that's sort of the like we just we gotta work on it now if we're gonna get there because it's so complicated and it takes long enough.

SPEAKER_00:

The that sort of reward and the um the miles and buying SAF, that you do that with Yeah, we do they're the tech needler, which which is integrated into the the booking system. So effectively you can either, as you go to to book flights, you can either choose to you know buy a percentage of SAF for that flight, or you can go in as you described and go in and just buy SAF to increase your the miles you get and therefore elevate your your SAF status. So, how important is sort of integrating that and making it easy and educating the not just the corporates, but uh you know, anyone that's that's setting foot on your aircraft into the uh the availability of SAF, making it as easy as possible, one for them to understand what SAF is, two to actually access it and make make a difference. Because presumably that is as you've you've shown, with a third of your your SAF being paid for through this, through this avenue, it's such a great way for airlines to both help with the cost of SAF but also grow the the amount of a of available SAF in the production supply.

SPEAKER_01:

Yeah, I think about it two ways. I mean, certainly there's the there's the direct enablement, but the big sort of unlocks for the long-term market, in addition to identifying and scaling new technologies, are going to be public policy and infrastructure. And both of those things require government action and multi-sector collaboration. And the more that individuals, the more that SAF can just be a um well-understood, sort of accepted run-of-the-mill technology like solar power, the more energy there will be behind the idea that we need to make that a cost-competitive and commercially viable market. And so the reason that we are doing this engagement with our guests, yes, some of it is to support the purchase of SAF, but some of it really is to grow that awareness and education so that somebody says, you know, well, what is this thing? And let me learn more. Um, and I, you know, you've probably had the same experience, but I feel like a couple of years ago, if I started talking about SAF, I'm sort of the strange aviation walk and really can just sort of talk to other people like me. Um, but the number of times that, you know, I've been at a cocktail party or a cross-functional gatherer, your cross-sector gathering, and somebody says, Oh, you work for an airline, do you use SAF? I it just makes me so happy that, you know, a broader array of people know what this is, understand that it's important. Um, I think that will pay dividends longer term.

SPEAKER_00:

I think it's it's more and more apparent that lots of people.

SPEAKER_01:

And it's becoming mainstream.

SPEAKER_00:

The sustainability of the airline that they're flying, and it's no longer becoming a, oh, this is an added benefit. It's becoming a almost a requirement that at the air levels they're flying are actively engaging.

SPEAKER_01:

I mean, we need to be realistic. Right now, that's not turning into the kind of change and market enablement that we need, but it does give me hope that we can get there.

SPEAKER_00:

On the market enablement piece, one of the big tools, probably the biggest tool that the airlines have at their sort of disposal is the capacity for offtake and demand signaling and allowing producers to guarantee production so that they can receive investment and all the you know the important cogs that allow SAF facilities to get financed. So you guys have been very active in signing off takes and um take uh uptaking fuel as well. Just from the top of my head, you've got you've had an ongoing one with Jivo. If we're talking both Hawaiian and Alaska, you've had Givo, you've taken fuel from Neste, you've had agreements with 12 alongside Microsoft. Um, I think you made an investment in Airco or um Air Company, as some people might know them as. And I think this year you did a deal with Cosmo oil. So there's there's a wide variety, not just of you know, geographies, but of feedstocks and pathways to SAF as well. What is your approach when you're you're going into making those sorts of off-take agreements? Are they they all very much individual in their nature, or are there broad strokes that you can sort of apply to all of them despite their differences?

SPEAKER_01:

So I think there's a couple things there. Uh, you're right. We have purchased SAF from World Energy, Nestie, Shell, um, via their partnership with Calumet. Uh, this year we purchased from P5 P66, and we have SAF delivered into our operation and used either at LAX or San Francisco. And Cosmo was a new deal uh out of uh Osaka this year. Um, and we're also partnering with Par Hawaii in um in uh Hawaii. They're the largest producer of energy products to support SAF in in Hawaii. Um and with 12, and I'll I'll talk about the 12 um example a little bit more. I think our approach has evolved because we do want gallons kind of on a year-over-year basis. But to some extent, you know, and I think there was that sort of dialogue over the last five years about demand signaling. Let's let's buy it so that we can demonstrate that there's demand and the market will start to take off. I'm not sure that's working, just to be perfectly frank. I don't think we have seen the level of change and market development that we need. And to, yes, there's more product on the market. There's more policy than there was before, and all of that is very hopeful, but it has not taken the kind of step-level change that we need. So our approach, um, we still want gallons and we definitely need them at the right CI score and at the right cost per gallon and the right cost per ton of carbon. Both of those metrics are critical to us. Having one alone does not um get us where we need to go. And so some of those principles are consistent. But increasingly, what we're looking at are deeper and broader relationships. So I'll give you an example with 12. Um, 12, we have an agreement to purchase the first gallons out of their first facility located in Moses Lake, Washington. And we've been working with them for years on policy in Washington state, on permitting. We're thrilled that, you know, we we've been working with them since before they had selected Washington as the site for their first plant. And we had a three-way agreement with that, with 12 and with Microsoft. And we still have a three-way agreement on that offtake with 12 and with Microsoft. And that one is really about enablement of a new technology in a new market with brand new production in gallons, but it requires having Washington State taken some major moves in policy and permitting. It requires us not just signing an off-take agreement, but being at the table with Microsoft so that both of us could support it at the same time to have this first-of-a-kind plant come to life. So we, I think we're that's an example of us just being a lot more aware that it's going to take not just buying gallons and having annual off-take agreements, but longer-term thinking, multi-party thinking, um, multi-party support from corporate customers, from government, and from us, and those bigger moves to actually make some of this stuff come to life. So I think that that's what you'll start to see more of in the future. Um, and this collaboration with One World and Breakthrough Energy Ventures is a good example of that of saying, okay, just buying gallons year over year through off-take agreements isn't working the way that we want it to. We need to make some um longer-term uh bets.

SPEAKER_00:

It sounds like there's sort of you've sort of got a dual approach to this. You're working with partners to uptake physical molecules here and now to help with your decarbonisation with people like World Energy and Neste. They've got a slightly different form of those agreements, those relationships take, because obviously they have sophisticated and ongoing commercial projects that produce fuel that you can sort of uptake. So they're they're slightly more transactional, let's say, in that in their nature. Whereas with first-of-a-kind projects that want like 12 and if you're talking sort of airco as well, they're a lot more hands-on, a lot more, like you said, partnerships where you you've got to be involved both on the policy side with other partners and also potentially follow up any commitments with with investments as well to help scale those those companies and help them develop whilst they they get through FID and all the proceeding stages for them.

SPEAKER_01:

Yeah, I think that's right. And and just to be candid, you know, there's there's a cap on both of those categories. There's a cap on how much we can do sort of traditional offtake, because at the cost that it is today, you know, we can we can buy so much and then that's it. That's the end of our financial tolerance. Um, on the working on sort of first of a kind and longer term, there's also a cap just from a capacity and expertise perspective, which is why we decided to partner with Breakthrough Energy, who are deeply experienced in this space of identifying technologies that can scale longer term for hard-to-abate sectors and make sure that we're uh placing smart bets for the long term.

SPEAKER_00:

So I'm sure most people listening this are aware, but those that aren't, a couple of weeks ago, just to clarify this this One World and Breakthrough Energy Ventures fund, um you announced, you sort of led alongside Alaska and Breakthrough Energy Ventures with involvement from other One World partners, um a fund$150 million to begin with, yeah, to um to help develop early stage staff producers and help scale new technologies in the space uh to help bring them through the early stages of development of um technologies and and facilities. How did that come about? Because as you mentioned earlier, you've already got the Alaska Star Ventures. Why is this new fund a requirement? Just and how long did it take to sort of work all this out? Because there's a lot of different partners involved. You've also got Singapore involved who aren't One World partners, but you've sort of opened it up beyond that. So it must have been massively complicated to get all these parties together to sort this out. So can you just give everyone a sense of how it all came together?

SPEAKER_01:

It's uh it has taken a while, but it's been really fun to work on uh and is really fulfilling to see it um come into fruition. And I know it's gonna grow. So um going back to your just particular question about Alaska Star Ventures, because it is part of the journey, we did uh establish this fund in 2020. And we have made a couple of equity investments in SAF, 12 and Airco are the two that you that um and that you had already mentioned. But what we realized is that most of SAF uh uh technology identification and and investment either requires larger dollar figures than our check sizes um traditionally are, and or needs to be so early stage that we you really have to be smart about the underlying chemistry and technology to make sure that you're placing the right bets.

SPEAKER_00:

And you know, we like to is that your way of saying that you're not you're not very I thought you might I thought you might touch on that.

SPEAKER_01:

You know, I'm not a I'm not a PhD chemist. I actually have an undergrad degree in chemistry, so I know enough to be dangerous about hydrocarbons, but you've got you've got BB.

SPEAKER_00:

I've got an undergraduate degree in classics of Roman history, so that's highly impractical in this space.

SPEAKER_01:

So you've got Yeah, but you really want somebody that has looked at tons of these technologies and that is an expert in liquid fuel technology. And so that sort of was one learning from ASV is we feel really good about the investments that we make and we are really thoughtful about which ones we place our bets on. But there was sort of a limit to how much SAF investment we were going to do through that vehicle. We also are we collaborate a ton with the One World Alliance. One World was the first alliance to set a net zero target. The the participating carriers sustainability leads work together really closely in an environmental sustainability board and you know, compare notes and are all pulling in the same direction along with the rest of the industry. And so we started to ask ourselves as we realized, okay, just sort of buying gallons with these off-take agreements isn't enough. We're not making enough progress. We started to think about what else we could do. And one, what else could we do is invest together. So sort of pooling more dollars early stage. And then we realized, okay, yes, and in order to do that well, we need deep expertise. And we essentially said, we think we need breakthrough energy because of their very unique and particular expertise and track record. Um, we were thrilled that they thought this was a smart idea. Um, if they hadn't thought it was a smart idea, frankly, we probably wouldn't have continued to pursue it. Um, but their hypothesis is that uh liquid fuels will continue to be in very high demand going into the future. And so increasingly lower carbon liquid fuels will continue to be in very high demand. So there is an investment thesis that is positive here, as well as a real opportunity to make a step-level change in lower carbon liquid fuels. Um, and the two investment principals at uh or managing directors at um at Breakthrough that we're working closely with both happen to be PhD chemists, so really smart about investments and really smart about the chemistry and the liquid fuels. And they're, you know, massive experts in the field, which it we just feel so fortunate for the opportunity to work with them. So we after kind of this analysis of what do we need to do? What are the models? Do we have a good partner? Yes. Then we started to think about okay, what does the fund look like? And um, you know, as you've seen at this stage, it's uh largely the One World Um Alliance Airlines. But our ambition and intent, and you know, I think when you when we um uh when we make the next close, because there will be another close, um, our our goal is actually to to include the whole ecosystem because we need the OEMs, we need the corporate customers that are not, you know, in aviation solely, we need that end-to-end look, and we all need to benefit from understanding what are the technologies that can have inputs and feed stocks that are at a cost and a technology process that is at a cost, that all of that can deliver cost competitive sustainable aviation fuel that can scale over the long term. So it's a it's the the investment thesis is that cost-competitive staff that can scale? And it's we want to make a return on our investment because those are going to be the businesses uh and new industry of the future.

SPEAKER_00:

Is there a mandate for the fund in terms of geography or pathways, or is it very much agnostic as long as it fulfills the cost competitiveness criteria?

SPEAKER_01:

We'd say agnostic with some parameters. And the parameters are we're investing in next generation staff, so not the technology that is scaling today, but the new technologies because we want to place a long-term bet. Um, and really we're gonna need all of it in the future. So we need to layer on those new technologies. And geographic diversity is an aspiration as well. We need this industry to take off around the globe. Um, we can't restrict ourselves to having, you know, specific allocations for continents or any of that. But geographic diversity is going to be better for the investment thesis because you've got a diversified portfolio. It's also going to be better for the long-term industry.

SPEAKER_00:

And in terms of those non-alliance members, I think currently there's Singapore is Singapore Airlines is one that that is not um that is involved and is not a one-world member. How do you go about, you know, what does the outreach and sort of the engagement with those look like? Is it very much an open arms? If anyone wants to be involved, they can, or are you slightly more sort of selective and look at their sort of overall sustainability um strategies within those those airlines? How how does that work in terms of getting their involvements, as you mentioned, with a a future round close mind?

SPEAKER_01:

So Singapore Airlines um is interesting in that they've had a long relationship with Breakthrough Energy Ventures on some other funds. Um right now, what we're focused on is expanding the aperture to um include the OEMs, corporate customers, uh the financial community, sort of that end-to-end view, because I think if we just focused on airline engagement, that's not going to get us where we need to go.

SPEAKER_00:

And so those sort of corporate customers, presumably, they will be, you know, the the ones that already have partnerships with those airlines that are already involved. And you can go to sort of the um the financial institutions and the OEMs that have already had engagements. Obviously, in sort of the airline world, it's predominantly Boeing and Airbus, are the two that have been active in the space in their own right, uh individually making investments, but then getting them involved in the in the funding.

SPEAKER_01:

Yeah, I mean, I think what's interesting over the last few years is that a lot of companies, even those that are not invested directly or that are not operating directly in the aviation space, have become more interested in this space because aviation emissions are their scope three emissions. And so, you know, the folks that have been ambitious in decarbonizing their end-to-end supply chain um have interest in this area. Uh, so you know, those are some of the conversations that we're in.

SPEAKER_00:

Does this lean into a th a line of uh view that Alaska Airlines and Hawaiian um don't just need to decarbonize their own operations? Aviation as a whole has to decarbonize, and you see that you have a big really big role to play in aviation decarbonization, not just your own operational emissions reductions. How much does sort of one play into the other and those two sort of ideas integrate together?

SPEAKER_01:

Well, I for sure the sustainability area and decarbonization is not a uh it's it's not a competitive issue. It's one that the aviation industry as a whole and our supply chain partners need to work on together. Alaska's ethos in general is that we need to do our part to make sure that we're moving in the right direction and to help lead the industry forward. Um, you know, uh there's sort of a related but but unrelated um area right now. Air traffic control in the United States needs tremendous investment and transformation. We put out a white paper and our CEO published an op-ed last week, or maybe it was two weeks ago, but laying out our view for a future course for air traffic control. Um, that's an analogous area where, yes, we all need it. And we have learned from our own experiences of serving remote communities and air service-dependent communities, and from our own aviation uh or for our own innovation history of things we've tried and things we've technologies we've developed that we feel like we can help uh push the whole conversation forward. So um I think the the work on staff is analogous. We've learned some things, we don't know everything, we can't do it alone. Uh, we need to work with everybody, but we need to do our part to move the issue forward.

SPEAKER_00:

And is this Alaska is and Hawaiian there sort of more on the regional side of airlines, admittedly covering a rather large region, but you're not sort of in the sort of the global, covering the global sort of well, Oscar.

SPEAKER_01:

I don't know if you saw the news, but we have announced that we're gonna be flying to Rome and London uh direct from Seattle and uh Reykjavik next year. So we are and we fly to um Asia and Australia and New Zealand. So we're we're not in India or the Middle East yet, but um we're we're we've gone from you know more domestic to global uh pretty quick here. So um we and we have to deal with a lot more regulatory jurisdictions than we ever did before. You know, I think though that um sort of uh joking aside, like we have an interesting opportunity and an interesting kind of identity that we can do regional and global. We have to think about the whole global picture because it is all connected and we need a globally aligned set of sort of standards and we need a global market to make this all work. Um, and increasingly we are in those markets with our own direct operation. At the same time, we have deep roots in very unique communities, Alaska and Hawaiian, uh Alaska and Hawaii being two, but certainly, you know, we're the only West Coast-based airline and you know, a lot of um deep roots in a lot of those communities. And so, one example of kind of where we're trying to take advantage of those um those local routes. 12 was one example. We've got a large presence here in Washington, and so we worked super closely with the Washington state legislature and 12 and others um in Hawaii. Uh, Hawaiian Airlines had partnered for a long time with PAR Hawaii, which, as I mentioned, is the state's largest supplier of energy products. PAR has committed to invest$90 million to convert a portion of its refinery facility on Oahu to produce renewable fuels. And it broke ground last year on the state's largest renewable fuels manufacturing plant. And we've worked with them to try to bring to life a SAF industry in Hawaii, which hasn't been done before. Um, and because, you know, we've got other partners in the community, PAR is also working to look at locally grown renewable feedstocks, which is a super exciting opportunity. And there's an entity called Pono Pacific that is conducting field trials of a plant called Camelina to determine its viability as a locally grown feedstock. And Camelina is interesting because it has high oil content and low water requirements. And you can take the oil and make renewable fuels. You can take the rest of the product and make animal feed, which is also necessary. So there's a really interesting opportunity here, you know, a good example of sort of a local ecosystem play to create SAF, to create um new economic opportunity and help diversify Hawaii's economy and to create this new um renewable feedstock as part of it. So I mean, I mentioned that partly just to sort of get to your question about like local meets global. Um we're gonna keep doing the local stuff, we're gonna keep doing the global stuff like breakthrough, and we need all of it, to be honest.

SPEAKER_00:

The whole par Hawaii um facility, I didn't know about the um the$90 million investment. That's that's really exciting. I knew there were sort of discussions around um scaling or looking at the potential to produce SAF on Hawaii, but I was actually gonna um gonna ask you about how those were progressing, and they sound like they're progressing tremendously. And it touches on one of the other aspects that that SAF can provide that isn't necessarily talked about so much in terms of energy security for more isolated or slightly in sort of a more challenging energy security environment. So and that has massive local local benefits that isn't necessarily No, it's super important.

SPEAKER_01:

It's energy security, it's new local industry, it's new local jobs, um, and economic diversification. And we we can't understate those benefits.

SPEAKER_00:

One uh final question uh before we wrap up. As we progress towards 2040, and you've got a lot of activity in the early stage of developing facilities, you've got this breakthrough energy ventures fund now, you've got equity investments in Airco and in 12. A lot of the gap, one of the biggest challenges that producers get into when they're they're looking to scale is getting into that that growth, that growth stage where they're looking for high levels of funding just before FID, and then when they're looking for it to get through FID and they're looking to bring on board debt, but they need enough equity there, and they need to meet all these different criteria in order to do that. And obviously, your big criteria is to increase the number of molecules of SAF produced. What how do you see Alaska's or just an airline role in doing that? Because we've discussed that you know off takes don't really work, aren't really working yet. We haven't necessarily found a you know a model that that has the required effect yet. We might sort of see it in a few years' time, and you're very active in the early stage. What about that middle bit? How do we go about solving that as a sort of sustainable aviation fuel industry and as an aviation industry?

SPEAKER_01:

Well, Oscar, if I had the answer, then I would be working on it and going to, you know, spending all of my time on it. Um, I don't think any of us have a perfect answer.

SPEAKER_00:

So so um I will I was hoping for just the golden ticket.

SPEAKER_01:

I know. I wish I had a silver bowl. But I'll tell you a couple things that I think about. So one is going upstream of that problem, which is the breakthrough energy ventures play. So let's start at the beginning when the technology is being developed and make sure that it is that there is a great investment opportun or thesis. Make sure that the inputs are at a cost that can be cost competitive long term, that it can scale and that the technology can scale. So that's part one. Part two is bringing multiple parties to the table. And the 12 Microsoft is a good example where it's not just us buying it, it's not just the producer. There's a third party that has a committed ambition to decarbonize. I mean, Microsoft is tremendous in what they've tried to do sort of across industries and the goals that they've set. And we just sincerely appreciate the leadership of folks like them that are willing to come to the table and help close this gap. We need growth capital that is willing to take some risk in being able to invest at that exact stage that you're looking at. Um, because you know, there's early stage venture and then there's sort of late stage financing, but with that growth capital um bridge is really critical. And then finally, in a place that we can play really directly is the policy and the infrastructure. The piece that I didn't mention as it relates to PAR Hawaii and standing up SAF in Hawaii is we do, we are advocating for policy to enable that in Hawaii, because it is going to be much more challenging and maybe not possible to do what we need to do in Hawaii to stand up SAF without policy enablement. And the risk is that we still that that PAR goes ahead and creates renewable fuels, but that they're exclusively renewable diesel for ground transportation, not for air transportation, unless the incentives between renewable diesel and SAF are realigned. Um, infrastructure is another sort of policy adjacent area to make sure, for example, that we actually can get SAF easily into the Honolulu fuel farm, into Seattle, um, into all of our major hubs. And right now, that's not as easy as it's not seamless. Uh and, you know, longer term fueling airplanes via with SAF via truck is not a viable solution. It needs to be integrated into the pipeline and the transportation end-to-end needs to be, needs to not detract from the carbon intensity score of the fuel. So I think those are a couple of areas going upstream, bringing parties to the table, advocating for growth capital, um, and then finally making sure that we've got the policy and infrastructure in place. Um, and we're uh taking an active role in that.

SPEAKER_00:

Dinah, it just remains for me to say thanks so much for joining us. That was an absolute tour of force in all things Alaska, all things Airlines and SAF. And we're wishing you all the best as you transition to your new role later this month and move over to Honolulu in in Hawaii. Thanks so much for joining us.

SPEAKER_01:

Thank you. Well, I really appreciate it, Oscar, and thanks for your leadership in making sure that we're having the right conversations and trying to tease out answers for the future.

SPEAKER_00:

It's always an absolute pleasure hearing from industry experts like yourself. So we'll long continue to do so. Thanks so much, Diana.

SPEAKER_01:

Thank you. Well