Virgin Atlantic (Virgin), the British airline, received approval by the UK Civil Aviation Authority (CAA) to use 100% Sustainable Aviation Fuel (SAF) for the first ever long-haul test flight across the Atlantic Ocean from London Heathrow to New York JFK on November 28, 2023. We are of the opinion that this long-haul transatlantic flight would represent an important milestone toward the ultimate long-term goal of SAF transition at scale, providing a high-profile demonstration of the viability of the technology.

“Despite this positive development, broad 100% SAF usage at scale will take years as significant hurdles remain.” said Rohit Kumar, Assistant Vice President, Diversified Industries. “Technology questions regarding whether modifications to current SAF properties and/or existing aircraft will be required remain unanswered at this stage. In addition, higher cost of the fuel and production bottlenecks are also material challenges”.

We believe SAF will play an important role in the airline sector’s strategy to achieve its long-term decarbonization targets and credit implication for airlines will depend on the impact from the higher cost of SAFs on air travel demand and airlines’ margins.