Same Mandate, Different Reality: Why SAF Policy Mistakes "Airline" for One Kind of Business
Elvis Ebikade, PhD · June 30, 2026
An airline-business primer for the people designing, funding, and writing the rules for sustainable aviation fuel.
Airlines absorb cost through their unique business models, and that gap is one of the most important affordability questions in sustainable aviation fuel which is often missed because the public policy conversation treats "an airline" as one kind of business.
At the IMPACT Forum in London, I had a conversation with a friend that stayed with me. We shared from different positions in the same aviation ecosystem, discussing the rising expectations being placed on airlines to uplift sustainable aviation fuel and the lighter expectations often placed on the energy companies that make, blend, price, and supply the fuel. While airlines are the visible face of aviation emissions, they carry the passengers, publish the climate targets, and are on the hook for many of the Net Zero policy obligations. The companies upstream, with refining systems, trading desks, fuel infrastructure, and large balance sheets, also shape how quickly SAF can scale and how much it ultimately costs.
That conversation clarified something I have felt for some time: much of the SAF conversation rests on a simplified understanding of how the airline business works. As someone who has worked both sides of the producer/buyer aisle, I believe aviation must decarbonize, not just to lower emissions intensity, or to guarantee returns on a project, but so we as humans have a habitable world to live in, now and for posterity. Earlier in my career, I sat inside a major US airline working on fuel infrastructure and procurement, and I have moved across the SAF value chain from the buyer's side, now sitting on the producer side trying to finance and commercialise new supply. That vantage point has made one principle hard to ignore: the customer's economics define the producer's market.
If compliance costs overwhelm airline margins, they eventually weaken the demand signal SAF producers need. Mandates give producers the demand certainty required to finance projects. The next stage is to make the allocation of cost more intelligent, so ambition can translate into durable demand, bankable projects, and real emissions reductions. The assumption underneath much SAF policy is clean and appealing: a uniform mandate or levy raises the cost of jet fuel, airlines pass that cost through to passengers, passengers pay slightly more, and the transition is funded. On paper, the burden is broad, neutral, and proportional to fuel use.
But inside an airline, the mechanics look different, with unique challenges.
Demand destruction
The airline industry operates on thin margins even in strong years. IATA's June 2026 outlook revised expected industry profitability down to a 2.0% net margin, or roughly $4.50 of net profit per passenger, after fuel-price shocks and airspace disruptions linked to the Iran conflict. That number is an industry average across an uneven field, with some carriers above it and others below it. It still sets the scale of the problem. When costs rise above what the market can bear, they show up as route cuts, parked aircraft, thinner schedules, and lost connectivity. The same period made the uneven exposure more concrete. Middle East carriers were expected to swing to a collective loss after regional airspace disruption, and Willie Walsh warned that smaller carriers with weaker balance sheets were most exposed. Reuters reported Walsh's view that high fuel costs would trigger more airline failures and consolidation, with Spirit Airlines identified as the first major collapse from the 2026 fuel shock. SAF did not cause Spirit's failure, and the case should be read carefully. However, it illustrates how conventional jet-fuel spikes, still below today's SAF costs, can overwhelm carriers with thin cushions. That is exactly the margin reality SAF policy has to understand.
Competitive distortion
A levy lands differently because airlines have different customers, revenue models, balance sheets, and fuel-supply positions. The same SAF obligation can be manageable for one carrier, painful for another, and structurally different for a third. The word "airline" hides several distinct businesses that happen to share runways:
Ultra-low-cost carriers, which sell a basic seat at the lowest possible fare and earn margin through density, utilisation, operational simplicity, and ancillary sales.
Low-cost and hybrid carriers, which combine price stimulation with some network complexity and selective product differentiation.
Full-service network carriers, which sell connectivity, premium cabins, corporate contracts, cargo capacity, loyalty programmes, and global alliance access.
Regional carriers, which often operate thin routes, feed hubs, and carry less pricing power than the network brands they support.
Cargo carriers, which sell to business customers whose own Scope 3 targets can make a SAF premium something they actively want to buy.
Charter and private aviation operators, which serve the most price-inelastic segment of the market and carry the highest emissions per passenger.
These are all different machines. Emirates and Ryanair offer a simple illustration: Emirates Group reported roughly 121,000 employees and about 260 aircraft in 2024 to 2025, while Ryanair reported a fleet of more than 600 aircraft and a far leaner operating model. The exact employee-per-aircraft comparison depends on whether one uses group or airline-only headcount, but the direction is unmistakable. One model sells a premium global service complex. The other sells extreme efficiency at scale. Both can be excellent businesses, and they become excellent through different operating systems.
How an airline earns its money sets its capacity to absorb cost
That difference matters because how an airline makes money determines its capacity to absorb a cost.
Passenger demand is not equally elastic. Leisure passengers are generally more price-sensitive than business passengers, and elasticity varies by market definition. Air-travel demand is more elastic at the route level than at national or supra-national levels, because travellers have more direct substitutes when a single route becomes expensive. A €10 increase can be marginal on a corporate long-haul itinerary and decisive on a €29 leisure fare.
Premium cabins change the economics again. The strongest evidence comes from the airlines themselves. Delta reported that its diversified, high-margin revenue streams represented 60% of total revenue in 2025, with premium revenue up 7%, cargo revenue up 9%, and loyalty revenue up 6% year over year. The same full-year results reported that American Express remuneration grew 11% to $8.2 billion in 2025. Put differently, the Amex relationship alone represented roughly 13% of Delta's GAAP operating revenue and about 1.4 times GAAP operating income in 2025, based on Delta's reported $63.4 billion of operating revenue and $5.8 billion of operating income.
These numbers show why premium cabins and loyalty matter in a SAF-cost discussion. They create revenue pools that are less directly tied to the lowest fare in the market and give some carriers more tools for absorbing or passing through incremental cost.
A full-service carrier with corporate demand, premium cabins, cargo, and loyalty revenue can spread a fuel-related cost across several profit pools. A ULCC has fewer places to put it.
Ancillary revenue adds another layer. Global airline ancillary revenue was estimated at about $157 billion in 2025, or roughly 16% of total airline revenue. For the large US network carriers, co-branded credit-card economics and miles sold to financial partners are major profit engines. Some airlines increasingly look like financial-services platforms with aircraft attached. Others remain much closer to the old model: sell a seat, sell bags and boarding, keep unit costs low, turn the aircraft quickly, and hope the margin survives. For a network carrier, a SAF levy may be a small line item inside a much larger commercial machine. For a ULCC, it may consume the margin on the seat. Knowing how an airline earns its money tells you whether it can absorb a cost. Knowing how it buys fuel tells you how that cost reaches it.
How an airline buys fuel changes the cost again
Fuel procurement also differs widely across the sector. Some carriers hedge years forward. Many US majors have historically avoided large forward hedge books, while others use hedging more actively. Hedging can smooth crude exposure, although it does not always protect against the jet-fuel crack spread. IATA's June 2026 outlook noted that roughly one third of expected global fuel consumption was hedged, while sustained price increases and crack-spread exposure remained a major risk. Then there is refinery ownership. Delta owns Monroe Energy, the operator of the Trainer refinery in Pennsylvania. Delta's filings describe Monroe as part of its fuel-supply structure, and Reuters reported in March 2026 that the refinery became more valuable during the jet-fuel squeeze because refining profits stayed within Delta's system and helped offset crack-spread volatility.
That distinction matters. Monroe is best understood as resilience against conventional fuel-price and refining-margin shocks. The SAF premium and ReFuelEU/UK compliance obligations are different exposures. The broader lesson is that airlines enter the transition with different degrees of fuel-market resilience, even before SAF-specific costs are added.
One airport, three airlines, three economics
In the UK and parts of Europe, the structure becomes even more important because of obligated-party rules. Under the UK SAF Mandate, parties supplying at least 15.9 terajoules of relevant aviation fuel in a year must register and are subject to the SAF obligation. Around 20 obligated suppliers are expected to be in scope nationally. Suppliers that own eligible SAF can earn tradeable SAF certificates. Some airline groups that self-supply at major hubs therefore sit closer to the obligation than carriers simply buying fuel from an airport supplier.
This creates a simple but underappreciated reality. At the same airport, three airlines can face three different economics for the same policy. A carrier buying fuel through a supplier may see the obligation reflected as a compliance charge. A carrier with early long-term SAF contracts may face a lower effective cost because it moved early and helped create supply. A group with network scale, procurement sophistication, and self-supply capabilities at key locations may be able to manage the obligation as a portfolio question rather than a simple invoice.
IATA Economics has argued that EU SAF compliance fees have exceeded the implied physical SAF premium, citing an average compliance fee of about $54 per tonne versus an implied real SAF premium of about $22 per tonne. Whether one agrees with every element of that critique, the underlying point is important. The cost an airline sees is shaped by supply-chain position, contractual access, and market power.
IAG is a useful example of that early-market dynamic: the group has said its airlines used roughly 12% of global SAF supply in 2023. British Airways has also continued to build long-term supply relationships as the UK mandate rises toward 10% by 2030, including an extension of its EcoCeres SAF supply agreement through the end of 2030 and a separate supply partnership with Phillips 66 at Los Angeles International Airport. Its experience shows why timing, procurement sophistication, and supply-chain optionality matter. Airlines that entered the market early, developed internal capability, and built long-term supply relationships can experience the same mandate differently from carriers with less scale, less optionality, or less room to absorb cost.
The deepest asymmetry: fuel volume versus absorption capacity
Both the EU and UK mandates scale the obligation by fuel volume. The more fuel uplifted or supplied into the system, the larger the obligation. That makes intuitive sense for an emissions policy because fuel burned drives emissions. Yet the capacity to absorb that obligation is set by business model: fuel volume and absorption capacity are not correlated.
Consider one airport. Delta may uplift more fuel than easyJet on a comparable footprint and therefore carry a larger absolute exposure. Delta also has premium cabins, cargo, loyalty economics, and corporate demand that can create greater capacity to absorb or pass through incremental cost. Separately, its Monroe refinery gives it some resilience against conventional fuel-price and crack-spread shocks, which is a different exposure from the SAF premium. easyJet may have a smaller absolute exposure, but that exposure lands on a lower-fare, high-utilisation, largely economy model with a different customer base and less room to pass through cost. IAG may face the obligation through another structure again, with early procurement, network economics, and supply-chain sophistication changing the effective price.
The policy lesson is straightforward: different airlines arrive at the SAF transition with different commercial architectures. A policy that sees only litres of fuel will miss the differences that determine how easily a carrier can carry the cost.
Geography compounds the problem
Geography compounds the problem, as fuel logistics are local. In the United States, a pipeline-fed hub such as Houston has a different cost structure from a trucked market such as Austin. SAF supply is even more geographically concentrated than crude-derived jet fuel, so the cost of getting fuels to the right airport can become a decisive part of the delivered price. Infrastructure, in this sense, becomes part of the policy design. Cross-border geography is even more consequential. ReFuelEU Aviation applies to fuel supplied at Union airports and to departures from those airports, which means the first leg carries the policy effect. On a Europe to Asia itinerary, routing through a non-EU hub such as Istanbul or Dubai can move much of the journey outside the direct scope of the mandate. A Deloitte study for Airlines for Europe estimated that current EU sustainability policies could widen cost gaps on key EU to Asia routes by around 15% by 2030, increasing the risk of hub-switching and carbon leakage.
Europe can preserve SAF ambition while taking network behaviour seriously. This ensures that policies deliver the most efficiency when they recognise how passengers, airlines, and hubs respond to cost differences across borders.
Charter and private aviation
The segment that most exposes the logic is charter and private aviation. It is the most price-inelastic part of the market and has the highest emissions per passenger, yet much of it sits outside the main ReFuelEU aircraft-operator thresholds. ReFuelEU defines an in-scope aircraft operator by reference to at least 500 commercial passenger flights, or 52 all-cargo flights, departing from Union airports in the previous reporting period. If cost were allocated by ability to absorb, this is where the conversation would start. The current design often places more visible pressure on commercial carriers carrying much more price-sensitive passengers.
Tools to allocate the cost more intelligently
There are tools that can narrow the gap between where physical fuel is supplied and where environmental value is needed.
Book-and-claim
The first is book-and-claim, and ReFuelEU already contains the seed of this idea. Article 15 establishes the flexibility mechanism and directs the Commission to assess possible improvements, including a system of SAF tradability that would allow supply in the Union without being physically connected to a supply site. The same provision explicitly notes that such a system, incorporating elements of book-and-claim, could allow aircraft operators, fuel suppliers, or both to purchase SAF through contractual arrangements and claim SAF use at Union airports. The sustainability attribute already lives partly on paper. SAF moves with sustainability certification, chain-of-custody documentation, and Proof of Sustainability at batch level. Registries already track environmental attributes. Book-and-claim completes a separation the market has already begun. The precedent is familiar, as the renewable electricity markets use power purchase agreements and renewable energy certificates to separate physical electrons from environmental claims under strict accounting rules. SBTi's Corporate Net-Zero Standard Version 2.0, published in June 2026, recognises market instruments, including commodity certificates using chain-of-custody models such as mass balance and book-and-claim, subject to guardrails. Companies can begin submitting targets under Version 2.0 during the Q1 2027 transition period, and all new target submissions must align with Version 2.0 from 1 February 2028. For aviation, the caveat remains important: airline Scope 1 treatment still needs alignment through sector guidance and the GHG Protocol. Integrity depends on registries, retirement, double-counting prevention, temporal matching, and conservative claims.
Modular and distributed blending
The second tool is modular and distributed blending. Companies such as FlyORO are attacking the infrastructure problem from the hardware side, using containerised blending systems that can be deployed at production sites, terminals, or airport fuel farms. This matters because the physical bottleneck is often more than SAF production. It is storage, blending, certification, documentation, and access to the airport hydrant system.
Cheaper production
The third tool is cheaper production. Every dollar removed from the cost of SAF is a dollar of policy scaffolding, compliance friction, and competitive distortion that never needs to exist. Producers should care about this as much as airlines do. The customer's economics define the producer's market.
The ReFuelEU 2027 review
The ReFuelEU 2027 review deserves its own article. Article 17 requires the European Commission to present a report to the European Parliament and Council by 1 January 2027, and every four years thereafter, on the application of the regulation. The report must assess the aviation fuels market, competitiveness, connectivity, cost-effectiveness of lifecycle emissions reductions, investment needs, and the case for amendments. That review should be treated as an opportunity to improve the machinery while preserving the trajectory.
That distinction matters, and the quota trajectory gives producers the demand certainty needed to finance projects, which should be protected. The design question is how the cost of getting there is allocated.
Effort should track capacity, across the whole value chain
Some airlines have more capacity and should be expected to do more. Carriers that have moved early on SAF, built procurement expertise, invested in long-term supply, or developed stronger customer pass-through channels are helping create the market producers need. Their experience should be studied carefully because it shows what becomes possible when policy certainty, commercial capability, and balance-sheet capacity come together. However, that experience should not become the assumed baseline for every airline. A carrier with premium cabins, corporate contracts, cargo customers, loyalty economics, and sophisticated fuel procurement is operating with a different toolkit from a leisure-focused or ultra-low-cost carrier selling highly price-sensitive seats. The policy challenge is to recognise those differences while preserving ambition.
The same logic should extend up the value chain. If effort should track capacity, then airlines are only one part of the assessment. Oil and gas majors have the refining systems, trading desks, infrastructure rights, capital access, and balance sheets that can move this market. Airports, fuel suppliers, financiers, governments, producers, and corporate customers also shape the cost curve. The policy conversation should ask who across the whole fuel value chain has the capacity to act, rather than placing most of the visible obligation on the customer-facing airline.
Back to first principles
Let us come back to first principles: aviation decarbonisation matters because the world has to remain habitable. Affordability is central to that goal because cheaper solutions deploy more widely, scale faster, and abate more emissions; therefore, affordability needs to remain a part of ambition.
I produce SAF, so I want the market to grow. I also know from the airline side that a market grows only when its customers can carry the cost. Uniform mandates can create demand certainty, and demand certainty is essential. The next stage is to make the allocation of cost more intelligent. That begins by retiring the idea that "an airline" is one kind of business. Airlines are radically different machines that share runways, fuel farms, and airspace, and I opine SAF policy will work better when it sees those differences clearly.
This is a single practitioner's perspective, shaped by work on both sides of the table and sparked by a conversation with an industry leader in London.
For those sitting inside airlines, fuel suppliers, airports, regulators, producers, and corporate travel buyers: where do you think SAF policy most misreads how the cost actually moves through the system?
