SAF Production Growth to Slow as Policies Drive Airline Costs

Sustainable aviation fuel (SAF) production is expected to see strong growth this year before slowing in 2026, according to the International Air Transport Association (IATA), which warns that current policy frameworks are adding costs for airlines without delivering sufficient supply gains.

IATA says global SAF output in 2025 is set to nearly double compared with 2024 levels, reflecting new production facilities coming online and increased commitments from fuel producers. However, the pace of growth is forecast to decelerate from 2026 onward as policy-driven cost pressures and structural challenges begin to weigh on further expansion.

The airline industry body has been particularly critical of SAF mandates and regulatory approaches in Europe, with the UK singled out as an example where policy design is undermining affordability. IATA argues that some mandates are being introduced without adequate incentives for producers or safeguards for airlines, effectively forcing carriers to absorb higher fuel costs while supply remains constrained.

SAF currently costs several times more than conventional jet fuel, and limited availability means airlines are often competing for small volumes. IATA says that instead of accelerating production, poorly aligned mandates risk diverting resources, distorting markets, and slowing investment by increasing uncertainty for both airlines and fuel suppliers.

Despite near-term growth challenges, IATA maintains that SAF remains central to aviation’s long-term decarbonization strategy. The industry has committed to achieving net-zero carbon emissions by 2050, with SAF expected to deliver the majority of emissions reductions in the coming decades. However, IATA Director General Willie Walsh has repeatedly warned that current policy approaches make interim targets, such as a 10% SAF usage goal by 2030, increasingly unrealistic.

Airlines are urging governments to focus on policies that stimulate production rather than penalize consumption. These include capital support for new refineries, production tax credits, feedstock development programs, and long-term offtake certainty to reduce financial risk for investors. IATA argues that such measures would lower costs over time and allow SAF to scale sustainably.

The debate comes as airlines face mounting financial pressure from fuel price volatility, environmental compliance costs, and the need to invest simultaneously in fleet renewal, digital systems, and customer experience. Adding high-cost SAF mandates without adequate supply-side support, IATA says, threatens airline profitability and could ultimately slow progress toward climate goals.

As SAF production continues to expand in the short term, the industry is calling for closer coordination between governments, fuel producers, and airlines. IATA warns that without more effective, globally aligned policies, SAF growth may stall just as aviation needs it most to deliver meaningful emissions reductions at scale.

Related News: https://airguide.info/category/air-travel-business/airline-finance/

Sources: AirGuide Business airguide.info, bing.com