This is Dana Perkins and you're listening to Switched on the BNAF podcast, and on today's show, we have a special episode for you because we're going to bring you an interview from the BNAF Forum in Houston from the fifth of March. The theme of this event was the Barrel of Tomorrow, where the agenda highlighted the parts of the economy that are transforming in many respects, from hydrocarbons to electrons. One of the topics we touched upon was
how aviation is changing. The aviation industry's pathway to net zero is far from certain. Operational improvements and technologies such as sustainable aviation fuels and zero mission aircraft could offer substantial emissions reductions, but questions revolve around timing, scalability, and customer willingness to pay. Airlines will play a pivotal role in implementing these solutions as the aviation industry looks to
reach its decarbonization goals. So on stage we were joined by United Airlines Chief Sustainability Officer Lauren Riley and she was interviewed by Jade Patterson from bn EF's Renewable Fuels team. She shares United strategy and how their recent ad campaign with Oscar the Grouch plays into it. She also gets into the role of policy as well as venture capital in reducing aviation emissions. To find out where BNF's forums and summits are taking place around the world, you can
find links in our show notes. Now to Jade's conversation on stage at the BNA Forum in Houston with United Airlines Chief Sustainability Officer Lauren Riley.
Lauren, thank you so much for joining us.
I was definitely talking to some people beforehand, a lot of United fans in the crowd, and I got to say, we're a little disappointed you didn't bring a chief trash officer Oscar, but you know, we're excited you're here, so, you know, just to kick things off. You know, United has been super involved in aviation decarbonization. You guys are very active in the soft space and and really pushing
the envelope there. Can you just start off with a little bit of an overview of your roadmap to net zero and reducing your missions.
Sure, and it's great to be here. Thank you to the Bloomberg team for having me. I think it's a little bit of a different discussion with me. This afternoon as a customer, because I'm hearing all about the supply and how we get to pay for it and who wants what. But there are absolutely constraints on the customer side, and I look forward to sort of exploring that today. So as a heartwobate industry, we're kind of in a pickle.
We need to transition, but we don't have the marketplace and the solutions at scale to really make a difference yet. But yet we have these commitments to net zero by twenty fifty. United has a commitment to reduce our carbon intensity fifty percent by twenty thirty five compared to twenty nineteen. Sour most recent normal year of flying before the pandemic, that is SBTi certified, and we can talk about sort
of the value of third party credibility and validation. But we need a plan to get there, and so we started publishing about two years ago our transition plan, our roadmap to net zero, and effectively you can think of it in sort of two categories. First and foremost is how do we simply just use less? So how do we burn less fuel? And we hear a lot about fuel in the context of aviation, because when you look
at United's greenhouse gas inventory. Ninety eight percent of my inventory across the entire global operation is from jet fuel. So when you talk about climate leadership and transitioning to low carbon, you can't really have any integrity and sincerity in the discussion unless you're talking about replacing that jet fuel. So let's start by using less. And we're really trying to figure out how do we look at the value
of fleet modernization. So United has invested in more than eight hundred new aircraft that are going to be coming online in the next decade. Each one of those aircraft that we introduce into our fleet twenty five percent more fuel efficient than the aircraft are replacing. So when you talk about a decarbonization plan, at least for this decade, fleet modernization is really crucial. I mean that is really actually a climate strategy. We also talk about next generation aircraft.
How do you look at the new engine design? How do you look at new aircraft design? With some of the blended wing stuff you're seeing out there that super cool, but actually very very important when I'm looking at what happens when we hit twenty thirty, what kind of aircraft can we actually bring into our operation that can not just hit that twenty five percent reduction, but actually go further. And then of course there's operational efficiencies, so single engine taxing.
You see those super tugs that pull the aircraft off the gate, those are important, they're electric, they're charged, they cause us not to have to burn fuel. Those all make a difference when you have the number of flights
that we have in any given day. And then of course there's the alternative propulsion, so electric hydrogen that all of those are going to be i'll call them customer enhancement, So an opportunity for us to think a little bit differently about the services that we give to our customers, but we do it in a way that's low carbon and so that's a ton of fun and so that allows us to actually reduce the emissions from flight just use less. But then we get to saf and SAFF
is the other fifty percent of our decarbonization plan. So when you think about twenty fifty, what is our portfolio going to look like? Well, I think you heard the panel before us and throughout the day that with alternative fuels, not every alternative fuels the same. There's many different technologies
and conversion technologies out there. There's many different feedstocks out there and they all create alternative fuels in different ways, and so we took the time to actually break down for you and you can find it on United dot Com what we think will be sort of the contribution of these sort of generations of SAFF towards our net zero targets. So you hear a lot about half of that's renewable diesel converted to sustainable aviation fuel. Good stuff
that's going to be important to us. We do have to solve for feedstock, So that was really interesting to hear Diarling and some of the other folks talking before me. But that's going to be about, you know, another twenty twenty five percent of our reduction. And then we talk about advanced biofuels. So think about ethanol. If you go fill up your tank and your car, you've got an ethanol blend and the gas that you put in there. Why are we not doing that for jets? Could we should?
We've got a lot of ethanol in the United States. You talked about cover crops. I also heard that talked about this third season for farmers. That's also an opportunity for us to think about converting advanced biofuels into sustainable aviation fuel. And then there's the fuel of the future,
which is power to liquid. So this is let's pull CO two out of the atmosphere, let's blend it with some a lot of renewable power right now and some green hydrogen, and poof, you've got a really beautiful sustainable aviation fuel. Doesn't work yet at scale, the economics are terrible. We're going to figure out a way to get there, but give me fifteen years. So there's different ways that we're actually going to realize our path to net zero, and we need all of them. We have asolutely need
all of them. And frankly, as a customer that uses fuel, we can't do it alone. So having this conversation in a group like this around really truly what is the fuel of tomorrow? This is really important dialogue to have because we've got to do this together.
Yeah, and I think, yeah, I really want to drill in on SAFF a little bit given the audience and what we've been talking about today, And I think it's probably safe to say that it's still early days for SAF, very low volume. So from an airline's perspective, what do you think is needed to see scale.
So let me give you some context. Today United and I will caveat we have a massive growth plan. But today we use about four and a quarter billion gallons of fuel in a given year, So four and a billion gallons for one year for one operator. So keep that in mind. The equivalent of that in emissions forty two million metric tons of carbon emissions in the atmosphere.
If we grow and I do not change the way I fly, I do not do the FLEA modernization, I do not in bed sustainably aviation fuels, I will more than double my emissions by twenty fifty. I should be going down to that zero, but I'm actually going to go up to more than ninety million metric tons. That's not okay, And so we do need to figure out a way to really draw that down, and that's really crucial.
In twenty twenty, United used just a million gallons of sustainable aviation fuel just one last year we used seven million gallons. Doesn't sound like a ton, but it is a sevenfold increase. In the United States, twenty five million gallons of staff were available, so either produced here or imported, got roughly a third two quarter of that good but
not great. But if you think about seven million gallons against a four and a quarter billion bogie, we really don't have a marketplace yet, and so this is all about how do you create a marketplace for these alternative fuels? How do you make it economically viable for an industry like ours to prefer to purchase that over a commodity product like Jeta. And that's what we're trying to solve for.
And that's yeah, that's kind of a question that I think we get a lot these days is around kind of willingness to pay. So we'd love to hear your thoughts a little bit around you know, I think it's no secret STAFFA is more expensive than traditional jet fuel. Do you have an idea of kind of what's the demand elasticity when it comes to burning cleaner fuels? Like our customer is willing to pay for this? You know, who's going to put the bill here?
Yeah? You know, it's actually been really interesting. We've had a long standing program at United it's called the Ecosky's Alliance, and we effectively partner with our corporate customers and that includes cargo, so you know, similar to maritime the ability to ship your your product low carbon is something that a lot of folks are very interested in supporting right now, and they can monetize that, which is really exciting. But we've been working with corporates for some time now to
help pay that premium. And it's two to four times the cost of conventional jet fuel. An industry like aviation has maybe a four percent margin, so high revenue, low margin, we cannot carry that kind of exposure and stay competitive. It is a super sensitive industry. When it comes to pricing. You all go buy your ticket, You look for the lowest one, see if it works, and you buy it.
And so when you introduce some of these two to four times costs for a commodity product, you suddenly create uncertainty and it could really impact your revenue and create these competitive distortions. We can't have that. So we've been working with some of these climate leading corporations to really help us finance that transition. And there's a great willingness to do it. I mean, I give them a tremendous
amount of credit. They've been out there working with us to really put their money where their mouths are, and they want to reduce their scope through emissions and their greenhouse gas inventories, and they want to do and feel proud and confident around the solutions they're backing, and so they're willing to put dollars into things like sustainable aviation fuels.
The challenge for them right now is that it's a bit of a fragment to market and they're kind of trying to figure out how they can streamline those things. But the willingness is there. The other example I'll give you is that just last year, United introduced for our leisure travelers, so takeout corporates, average traveler, you're going on vacation, when you go through the booking path, you have the ability now to contribute to sustainable aviation fuels that United
invests in. I was super dubious because you know, carbon offsets. We had a program for a while, it didn't really work. Nobody really cared, and I get it because there's a lot of skepticism out there. But then we introduced this capacity around investing in staff supporting insect or reduction. We had a whole host of communication activity with Oscar the Grouch, our chief trash officer, explaining what is going on, why are we talking about staff. Why is it important? And
I'll tell you. So, we've had this opportunity now for customers about twelve months, one hundred and fifty thousand customers and about a half million dollars. Doesn't sound like a live It's not really about the numbers themselves. It's about the engagement of customers and trying to educate them about the right solutions. It's working, and so I don't know if that converts long term into sort of tacking stuff
onto tickets. I assure you my CFO wants nothing to do with that, but it does show there's a more there's a greater sophistication and appreciation for doing the right thing, in particular for these hard to abate industries like aviation. And that's really exciting.
That's super cool.
And I'm kind of curious your thoughts on that. Sounds like the carbon Offsets program maybe wasn't as successful. But why do you think customers are more willing to opt into this sustainbleviation fund or feels fund?
Then?
Yeah, so United launched a sustainable flight fund last year. And let me just explain that for a minute, because this is a bit of an un orthodox role that United has played in financing our transition. We stood up a venture fund maybe two three years ago, but last year we kind of did a focus in unsustainable aviation fields. We were seeing that nobody, nobody was really put money into and it was frustrating, so we went out and created a fund and opened it up to other investors.
Today we have about twenty two investors, including United in this fund. It's two hundred and thirty million dollars and the fund reason just closed about two weeks ago. I think what's interesting about that is on the twenty two investors, we have the whole value chain, so it's anything from Ge and Boeing and Saffran all the way to on the other hand, corporates like BCG, Bank of America, Google
and are Peers. We have four airlines that basically raise their hands and we want to be a part of the United train and really figure out how to do this right. So we have Air Canada, Air New Zealand, Jet Blue and Hawaiian and we're working together to identify what we believe are the technologies that are not only novel and interesting in decarbonization, but as an operator, we can uniquely look at and say can this scale, can
bed this and how we actually run the airline? And if the answer is yes, we go ahead and invest in it. And so that's been a really amazing opportunity. You heard earlier today from Moji, who's the CEO of some Vita that's one of our investment companies. They essentially take a microbe and synthetically bioengineer it and crack it open with some crisper. I don't know. It's fascinating, but it's a feedstock play that allows us to actually address
a constraint in the market today. High integrity feedstock, low CI everyone benefits, no land use issues. And so these kinds of innovations are coming forward now, thanks in great part to the Inflation Reduction Act, and it's really exciting. And so we've really stepped in not just purchasing the fuel, but working upstream to help finance some of these companies that are innovating around producing the fuel or a component of the fuel.
Yeah, that's super cool.
I mean it's also great to hear that other airlines are joining you. I think that's a testament to know the direction you guys are had, and that's that's really awesome.
Do you mind.
You kind of touched on it a little bit on kind of some of the barriers are trying to overcome, but really, can you explain a little bit more of what's the objective of this fund, what you guys are trying to achieve, and maybe are there any companies you're super excited about.
Oh, there's tons of companies I'm super excited about. So I think there's maybe eight or ten investments currently in the fund. Some of them are what I talked about before, the power to liquid, so capturing CO two and converting it into a jet fuel of the future. Some of them are like Sivita, where they're really focused on that feedstock and creating a high integrity lipid. Just the other week, I tried butter created from one of these you know,
created genetically created lipids. That was so fascinating. But you know, Butter's a lipid lipids we need for fuels. It's complementary upstream product. You know, how do we look at the ecosystem to enable the transition for sustainable aviation fuels? And so what's been interesting about it and hearing the dialogue today, you know, for us to succeed in aviation we're sort of this niche, smaller market, lots of planes, but not a super big industry. But for us to succeed, we
need abundant renewable power that's cost effective. We need green hydrogen everywhere, we need some of these technologies like electrolyizers to really really work, and not like these little intibity ones, but like big and so we're thinking about how do we put all those component parts together to eventually allow us to be successful downstream when the market's mature to
go to aviation. And so it's really again going back to this whole theme of ecosystem, how do we work the ecosystem to allow us to do decarbonize aviation once we get the right formula to incentivize investment in our space.
Yeah, I'm really glad you've brought in the investment piece of it, because I think you guys have been really crucial to kind of coming up with more creative ways around investing in newer technologies. So, I mean, from your point of view, like, how do we need to change our way of thinking around investing in these projects in order to I guess see this industry scale. Do you think we need to kind of readdress the model here or what needs to change.
I mean, if you can answer that question, please, that's the question. So what we're seeing right now and this is these are just my observations. There's a lot of interest in new climate tech. There's so much going on in sort of finding different ways to solution for industries like ours and all the other industries that need to transition,
super interesting, lots of venture capital out there. Money is flowing, But what is not happening is going from that demonstration in the lab let me show you a cool project to the ten million gallon plant that I need to actually prove to Wall Street that they should put their billions in to make me the foreign quarter billion that I need a fuel. So there's kind of like this stalling that's happening in the sort of the moving from pilot to demonstration. And I get it because it's super expensive.
I mean, that ten million gallon plant isn't cheap anywhere from five hundred million to a billion dollars. You don't want to put that kind of capital for that little product that comes out, and by the way, it's competing with the commodity product. So that to me really fundamentally goes back to policy I mentioned before. The Inflation Reduction
Act really changed the whole paradigm around innovation. It's really not though, addressing sort of driving capital for long term sustainable shifts in aviation, unlike some of these other credits. You know, we talked about hydrogen sustainable aviation fuel had a tax credit for two years, not ten, And now we move to this next clean fuels production credit for I think it's three years, not ten. And so in
terms of creating curiosity around aviation, it's there. But in terms of de risking and making our industry more bankable and making the financial institutions come to the table and say, yeah, I have confidence and I feel like I can really make a return in this mark it, it's not there.
And so that's really fundamentally what I spend my day solving for is talking to policymakers, talking to banks, talking to investors, and saying, how do we put this puzzle together in a way that it allows us to all succeed.
Yeah, that's super helpful, And I'm glad you mentioned the IRA and the policy piece there, And I think it's a lot of times we kind of compare and contrast the EU to the US on you know, they're going more demand side, and I'm curious, from the airline's point of view, what do you think is the best model in terms of growing and incentivizing demand and kind of
creating that certainty for the market. Is it more kind of the production tax credit type model or is it having more mandates to really ensure airlines buy that.
Yeah.
I texted my friends in Europe and they have IRA envy, which is kind of fun. But they're also buying up all the SAFF. So in terms of who's getting the SAFF now, it's the people with the mandate. So that's a conundrum that we've got to figure out. My point of view is market based incentives do work right now. We need a space to allow the smart people to innovate because we didn't have the solutions before, or at least the diversity of solutions that are really going to
make a difference for aviation, and that's happening now. I do think we can sort of shift the policy suite to allow that durability, that long term confidence that's missing for real capital and I'm talking like project finance type stuff,
infra stuff to come to sustainable aviation fuels. But while we're waiting for that to happen, all of these component parts, the hydrogen, the greening of the grid, and all these transition component that is happening, and so we are dependent on all of that, as I mentioned before, and so until that happens, there's not really a play for sustainable
aviation fuels quite yet. What I like to see and where United sits in terms of policy advocacy is that we are performance based in our advocacy, meaning if you can allow the policy incentives to encourage greater reductions over time, so the lower CI, the lower the reduction, the better the incentive you get. Then you allow the market to sort of solve what innovations, what technologies are actually going
to thrive and can be economical. You know, you hear a lot about some of these other pathways that maybe maybe are sort of smaller conversion technologies. You hear about coprocessing and whatnot. Those are fine, but they shouldn't get the same incentive as maybe, you know, the power to liquid that is actually a true sustainable aviation fuel of the future, and that's going to transform the way we fly.
So if there's a way that we can actually build a policy suite that allows sort of this graduated performance based approach to incentivize the higher integrity solutions but then also enable more pragmatic entrance. That's great. That's that's where we sit. So that's our view on what I'd love to see happen with policy, but we're certainly not there yet.
I'd love to kind of zoom out a little bit and not just talk about SAF because, as you mentioned in your intro, SAF is a piece of the puzzle, but there's a whole suite of other opportunities out there, freet modernization, net zero aircraft, operational efficiencies. So can you talk a little bit about I know United has made some purchases and investment in like hybrid aircraft. I'd love to hear thoughts around zero aircraft? Is that under hyped, overhyped?
Where are we going with that? Is that something you guys are actively.
I mean, is there anything cooler than electric vertical takeoff and landing?
Sounds pretty fun to me.
I would love to go get in an EV call after this and go to the airport to avoid all that traffic in Houston because it's gnarly. But what's cool about some of these new technologies that are coming on with alternative propulsion is that it is allowing industries like ours to provide a different service. And I kind of hinted to that in the beginning. Suddenly we're extending our
experience with the customer. And if there was a helipad outside and I could get on an EV tall and I could fly to the IH for the same price as an uber XL low CA one hundred percent, I would do that. And that's sort of the vision of the future. There's a lot of uncertainty around how we're
going to get there, but it's not insurmountable. And what I mean by uncertainty, you know, you've got to be certified by the FA to operate, and the safety issues there you need to negotiate again the ecosystem of the airspace. We need to figure out where we're going to build the infrastructure. And I'm not just talking about the helipad or vertiport. I'm actually talking about the electrical infrastructure where you're going to charge these things. That's a big, big deal.
I mean, part of my portfolio is the ground equipment at the airports and converting those from diesel to electric. I can't even get enough charge to convert our fleet of ground equipment, so talk to me about electric aircraft. So there's some of these really really practical hurdles that we need to overcome, and all of those things are being negotiated with the States and the airport authorities to make sure that we're considering and building toward. But it's going to take some time.
It sounds like it's kind of the inverse problem with SAFA is dropped in you don't need a lot of infrastructure change, but feedstock limited with high ydrogen electricity, it's a matter of infrastructure, can you get the fuel there? Do you have the ability to fill up?
That is true. There is some infrastructure required for staff too, but it's not nearly as complicated. It's more like blending tanks and whatever, and so those are those are lesser of a hurdle, but still one super cool.
We're getting close to times. I want to I want to ask one or two more questions. But in general, when you think about your zero trajectory, what keeps you up at night in terms of not meeting that goal?
What are you what are you most concerned about?
Well, that's a bit of a loaded question. I am concerned about perfect being the enemy of the good. There's a lot of progress that can be made, but there's almost an intolerance for good, and we need to figure out a way to celebrate good and then continue towards great Today, you know, the greenwashing claims, the regulations around what you can and cannot say. Everything's now going in our ten k. I mean, there's just transparency everywhere, which
I fully support. I think it's really important to be clear about what's going on, but not at you know, not by causing inertia to happen in spaces where we just need fast innovation today and then we need to scale today. And so that's that I think will settle out. I'm not worried about that in the long term, but immediately it suddenly becomes what was voluntary ambition is now becoming sort of corporate risk, which is just stupid.
Yeah, and kind of final question of the day is you have the last say, which I think is great. I want to hear your thoughts on You have a room full of investors, policymakers, energy producers. What's your ask of them? What can they do to help move this industry along?
I love that question. We need creative finals dancing solutions, We need creative financing solutions. And what I mean by that is that in a four percent margin, I'm eyes wide open about how United is adopting staff compared to my peers, and we are we adopting too fast or
too slow? And how do we make sure that there's parity and costs because we are such a super price sensitive industry that actually shouldn't be a barrier, and that shouldn't be how we're thinking about building a marketplace for something that doesn't exist, and the only way to address
that is creative financing. And that's a lot policy. But then it's a lot you know, the financial institutions coming to the table and helping us sort of share risks, spread that out, figure out mechanisms that allow us to actually step into this space materially without asking me to sign a ten year off take agreement, which I'm not going to do. So we need to continue to sort of nudge and push and shape what is a bit of a different approach for financing for industries like mine
that needs a transition. And I think we're going to get there, and I'm really excited about that, so thank you to all of you out there. They're going to open up your check book after this conversation.
I think that's a great note to end on. Lauren, thank you so much.
Pleasure.
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