Aviation Fuel Market

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The Aviation Fuel Market size is expected to grow from USD 249.9 billion in 2022 and is projected to reach USD 696.2 billion by 2030, at a CAGR of 13.7% during the forecast period. Demand to reduce emissions and rising initiatives by governments to adopt sustainable aviation fuel are expected to drive the growth of the market.

Aviation Fuel Market Forecast to 2030

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Aviation Fuel Market Dynamics:

Driver: Demand to reduce emissions

Sustainable aviation fuel (SAF) is a key component in meeting the aviation industry’s commitments to decouple increases in carbon emissions from traffic growth. SAF gives an impressive reduction of up to 80% in CO2 emissions over the lifecycle of the fuel compared to fossil jet fuel, depending on the sustainable feedstock used, production method, and the supply chain to the airport. According to the IATA fact sheet, SAF will be an eligible option for aircraft operators to meet their obligations under the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). Production of SAF using biomass, biological, and non-biological resources allows it to be approximately carbon-neutral over its lifecycle. Furthermore, SAF contains fewer impurities (such as sulfur), which enables an even greater reduction in sulfur dioxide and particulate matter emissions than present technology has achieved. While hybrid and electric vehicles are viable alternatives for other transportation needs, electric propulsion on aircraft appears to be several years away when it comes to air travel and is currently limited to small aircraft and medium-range flights. The development of SAF will allow the use of existing aircraft, including long-range models, but with a substantial collective reduction of GHG emissions.

Driver: Increasing Air traffic Passenger

US airline passenger counts are estimated to have almost regained 2019 levels in recent months, according to the Transportation Security Administration, but the US average jet fuel consumption so far in 2022 has continued to lag that of 2019. According to the weekly product-supplied data from the Weekly Petroleum Status Report, the average daily jet fuel consumption so far in 2022 stood at 1.5 million barrels per day. While in 2019 it reached the annual average consumption of 1.7 million b/d, according to ACI, in 2021, global passenger traffic was 4.6 billion, and will reach up to 6.6 billion passengers in 2022.

Meanwhile, US and foreign airlines carried a record 116.1 million passengers  between the U.S. and the rest of the world, says the US International Air Passenger and Freight Statistics Report, up 264% versus last year. Less aviation fuel is available now, and this tightness in supply and demand raises prices. Following Russia's invasion of Ukraine this spring, stocks plummeted. Refineries took utilization of their inputs to the fullest extent possible to make all the liquid fuels through the high prices of this summer, and jet inventories only grew to marginally below the five-year average. According to IATA, air travel continued recovering in October 2022. Overall, revenue passenger kilometers accounted for total traffic increasing 44.6% from October '21 to October '22. Comparatively for the world, for October '19, traffic has surged to 74.2%. With such an impressive rise in travelling through airways, the number of airlines also rose and so is the requirement of aviation fuel.

Restraint: Price difference between SAF and conventional aviation fuel

SAF must be competitive both technically and economically, and it must have characteristics similar to traditional jet fuel. All pathways use energy throughout the production process, from hauling feedstock to the production facility to maintaining a safe and healthy work environment to the power required to affect the physical, biological, and chemical processes in the facility on an industrial scale, to delivering the completed fuel product to the distribution infrastructure. Sustainable jet fuel can be produced at USD 0.9/liter to 2.4/liter, depending on the choice of the pathway and the feedstock-to-fuel efficiency. Fossil jet fuel is priced approximately at USD 0.3/liter, the cost of sustainable jet fuel falls within a price range that is roughly 3–9 times higher than conventional jet A-1. Considering that fuel costs make up 30–31% of airlines' operating expenses, an increase in fuel price creates barriers for airline operators to demand sustainable jet fuel. The availability of very limited technologies and infrastructure for the sustainable aviation fuel market also leads to an increase in the total production cost of sustainable aviation fuel. Though SAF has been emphasized as a viable option for carriers to fulfill their obligations under the International Aviation Carbon Offsetting and Reduction Scheme (CORSIA), it is far more expensive than conventional jet fuel. In addition to this, due to political and social crises, there is a surge in the price of jet fuel since 2021.

Restraint: Rising electric and hybrid aircraft

The latest developments in electric aircraft technologies have opened enormous opportunities for both electric aircraft themselves and component manufacturers. The studies that aircraft makers are undertaking are mainly on the generation and distribution of large power sufficient to carry an aircraft over a long distance. Some of the emerging technologies for aircraft include high-energy-density batteries, high-performance electric motors, distributed architectures, and power electronics in the starter/generation system of the main engine. The lithium-sulfur battery is expected to perhaps provide the answer to propulsion in aircraft, as key industry players invest actively in developing new lithium-based batteries with high power density.   The current state of the art in batteries is such that they are in the development phase and can power small-sized passenger aircraft, flying short distances. Advanced aircraft applications are power-consuming and require batteries with higher-power storage, along with better safety features that could be assured by lithium-sulfur batteries. There is also a development of other electric power sources like hydrogen fuel cells. The numbers are anticipated to go even higher with an increase in the number of the global aircraft fleet size and air travel. There has, therefore, been a pressing need for electric aircraft, which will play a significant role in reducing the carbon footprint of the aviation industry. Such organizations and governing bodies, including the International Civil Aviation Organization, Federal Aviation Administration, and European Union Aviation Safety Agency, have called for alternatives that are sustainable to fuel aircraft since they estimate that the volume of aircraft-generated emissions is expected to be three-fold by 2050. Noises associated with the jet or combustion engines do not occur in the electric engines; thus, they result in no aircraft noise levels. In the case of electric aircraft, at least, some manufacturers seek efficiency through the exchange of hydraulically-controlled systems for electric ones. For electric aircraft manufacturers such as Airbus, Eviation, Zunum Aero, and Pipistrel, there is a great opportunity for cleaners in the near future.

Opportunity: Growing need for alternative aviation fuel by airlines

The global demand and substantial challenges to reduce emissions of greenhouse gases and improve environmental sustainability in the face of rapid growth have led to the emergence of the SAF market significantly. Several agreements, contracts, partnerships, etc., have been made for a certain period of time by various stakeholders of the entire demand and supply chain of the SAF market. Several airlines have concluded long-term offtake agreements with biofuel suppliers, many of which are reported as commercially competitive. Several airports have agreed to supply SAF through their hydrant systems.  This opportunity of offtake agreements between researchers, airlines, airports, fixed base operators, fuel producers, fuel suppliers & distributors, feedstock providers, technology providers, etc., will give immense growth prospects to widen the usability of SAF and provide new visibility to the connected markets as well.

Opportunity: Increasing Crude Oil Prices

Fuel is a serious factor in the aviation business, since prices keep on changing, it affects airlines and their profitability to a great extent. Increased price of aviation turbine fuel ATF on account of increasing rate of crude oil is likely to result in financial effects and impacts on airlines. This price rise now comes precisely in the wake of an improving operating and yield environment for the airlines, as revenues were normalizing and passenger load factors were rising post-pandemic. Oil prices, inching closer to USD 100 a barrel now, remain one of the big hurdles for the airline business. The A380 can carry about 315,000 liters of fuel. Thus, it would take around USD 215,078 to fill an A380 full of fuel. Early in 2022, Jet A1 cost about USD 816 a metric tonne. That is approximately USD 0.82 per KG, using the fact that there is 1,000 KG or 2,204 lbs in a metric tonne. This represents nearly a doubling of the price compared to January 2021, placing the price of Jet A1 at approximately USD 430 per metric ton, or USD 0.43 per kilogram. The entire increase in the price of conventional fuel thus comes from a rise in crude oil prices.

Challenge: High investments for approval and certification of SAF

SAF requires strict technical certifications to be fully approved for utilization in aircraft engines. The entire value chain of the SAF market faces stringent approval procedures for the phases of SAF, for application purposes. However, the involvement of various stakeholders and the quantity of fuel required for the testing parameters add to the cost of the approval of SAF. For instance, the OEM-led ASTM D4054 approval and evaluation process is expensive and time-consuming, which is one of the major hurdles in the growth of the sustainable aviation fuel market.

Along with the existing approved pathways, the newer pathways are still in the approval stages and at different phases. Thus, the overall cost is widely impacted due to the expensive technologies and their approvals that are time-consuming.

Challenge: Large production of SAF required to meet fuel demand

SAF is being tested with strict technical regulations and various phases of approval processes. The amount of fuel to be blended with petroleum-based fuel gets decided and measured with more precision through various parameters involved with the regulatory and approval committees, such as technology used for the production of SAF, feedstocks, refineries involved, etc. The five approved technologies of SAF provide different capacities of the blend, depending on the processes used for the production and the application of the fuel. Hence, the OEMs of aero-engines and air-framers test their components in the initial stage of the fuel with SAF for various properties like performance, operability, drop-in functionality, and feasibility in order to find out how much blend is required. The fact that SAF is still in the very initial phase of acceptance by various airlines and OEMs of airframe and aeroengines makes this high blending capacity a big challenge. The blending of the fuel with petroleum-based fuel requires several additional testing and quality checks, which again constitutes a cost-enhancing factor for SAF. With ATF accounting for 40 percent of the total cost of an airline business, there is apprehension that carriers will negate the hard-won progress in recent months after passenger load factors grew manifold as a lot of people took to flying. Corporate travel, for one, recovered to 70 percent of well-before levels and was forecasted to reach 100 percent in 2022, according to Edelweiss.

Based on fuel type, the conventional fuel segment holds the largest market share in 2022

Increase in air passenger traffic has lead to the rising demand of conventional jet fuel. This demand is greatly created by the various airlines who require jet fuel to run their aircrafts. Although governments are creating initiatives to switch to sustainable aviation fuel, but due to low cost of jet fuel in comparison to SAF, airlines are more dependant on conventional jet fuel. Increase in tourism industry is also leading to the growth of the conventional fuel segment of the aviation fuel market.  

Based on aircraft type, the narrow body aircraft segment holds the largest market share in 2022

Narrow-body aircraft segment is expected to lead the aviation fuel market, s they have highest share of the world's air traffic which is the short- to medium-haul routes. Aircrafts  in this category, such as the Boeing 737s and Airbus A320s, are able to carry more passengers in relation to fuel usage and thus are preferred by airlines with a view to cost optimization. In addition, low-cost carrier growth also propels fuel consumption for this aviation segment, since they essentially fly narrow-body fleets. Narrow-body aircraft have continued to dominate markets with the airlines upgrading their fleets with more fuel-efficient models such as the Airbus A320neo and Boeing 737 MAX. With such heavy usage, considering their regional and domestic routes, adding in the rise of air travel demand, they always seem to have highest market share in the list for aviation fuel consumption. 

North America is expected to account for the largest share of aviation fuel market in 2022

North America is estimated to account for the largest share of the aviation fuel market in 2022. North America is considered to have the largest aircraft fleet with a large number of passengers per year, leading to a substantial increase in aircraft emissions. To cater to the need for a reduction in carbon footprints due to increasing air traffic and air passengers, the US and Canada are focused on various initiatives to utilize sustainable aviation fuel. With supportive policies and initiatives to decarbonize aviation emissions, the North American market is deemed to be one of the strong demand centers for sustainable aviation fuel (SAF). Switching to more energy-dense biofuel to reach the goal of decarbonizing the aviation sector is expected to play a significant role in reducing GHG concentration across the region.  

Aviation Fuel Market by Region

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Europe is expected to account for the second-highest market share of the aviation fuel market in 2022

There are factors that are contributing to the second largest market share position of Europe in the Aviation fuel market. The region hosts a few of the busiest international airports in the world when it comes to managing high volumes of passenger and cargo traffic. With the dense network across the continent, major carriers like Lufthansa, Air France-KLM, and British Airways for example, flying within the continent and across the Atlantic carry considerable fuel demand. Besides, there's a regular low-cost carrier market across Europe, with just a couple of key players, namely Ryanair and easyJet, flying missions on narrow-body aircraft that consume plenty of fuel. Whereas the huge volume of flights and passengers keeps fuel consumption high irrespective of how strict the environmental law may be for encouraging SAF, emission reduction, and other sustainable efforts. On the contrary, the post-pandemic gradual recovery of Europe's aviation sector propels the share of this region in the fuel market. More coupled with these, serious investments in the air transport infrastructure make Europe a forerunner within the global aviation fuel market.

Key Market Players

Major players operating in the aviation fuel companies include Exxon Mobil Corporation (US), Chevron Corporation (US), British Petroleum (UK), Shell (UK), TotalEnergies (France), Neste (Finland), Gazprom (Russia), World Fuel Service (US), Indian Oil Corporation (India), and Valero Energy Corporation (US) among others.

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Scope of the Report

Aviation Fuel Market Highlights

This research report categorizes the Aviation Fuel Market based on fuel type, aircraft type, and region.

Recent developments

• In August 2022, British Petroleum introduced a next-generation new model all-electric refueller for customers lifting Jet A-1 at Brisbane Airport (Australia). The refueller can carry approximately 16,000 liters of fuel and has been designed to operate for a full day with overnight charging.
• In June 2022, Shell announced the launch of Avelia, one of the world’s first blockchain-powered digital sustainable aviation fuel (SAF) book-and-claim solutions for business travel. It is one of the largest SAF book-and-claim solutions that can offer around 1 million gallons of SAF.
• In June 2022, Exxon Mobil Corporation and Qatar Energy signed an agreement to develop Qatar’s North Field East project, which will expand Qatar’s annual liquified natural gas (LNG) capacity from 77 million tons to 110 million tons by 2026.
• In May 2022, Chevron Corporation partnered with Pertamina to explore potential lower carbon business opportunities in Indonesia.

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