By GILLIAN RICH, INVESTOR'S BUSINESS DAILY
Posted 09/17/2014 08:02 AM ET
If you fly out of LAX on a United plane early next year, chances are you'll be on a flight using alternative fuel — an area of increasing innovation as airlines try to lower their carbon footprint and cost volatility.
United Continental (NYSE:UAL) plans to become the first U.S. carrier to use alternative fuels consistently in commercial flights and has a 15 million-gallon agreement with supplier AltAir for fights out of the Los Angeles airport.
"Long term, we want to manage restrictions around petroleum and don't want to depend solely on petroleum," said Angela Foster-Rice, managing director of environmental affairs and sustainability at United Airlines. "We want to have stable resources."
The carrier acknowledges its effort is just a "drop in the bucket" vs. the 18 billion gallons of fuel U.S. airlines burn a year, and not all of its flights out of LAX will have the new fuel.
But other airlines are exploring similar moves, and additional fuels derived from trash, tobacco and sugar are under development as regulators look to cut the industry's emissions.
The European Economic Area requires all flights in the region to meet emissions caps or pay a fine and eventually will cover all flights into and out of the area. The U.S. Environmental Protection Agency has also signaled it will establish aircraft emissions standards.
But carriers are trying to stay ahead of the regulatory game, while they try to grow capacity without expanding their carbon footprints.
The International Air Transport Association, a trade group, is seeking to cut net CO2 emissions from the industry in half by 2050 vs. 2005 levels, with 6% of the world's jet fuel being biofuels by 2020.
By that year, KLM hopes to lower its CO2 emissions by 20% from 2009 levels and wants a 1% mix of sustainable biofuel throughout its fleet by 2015. The Dutch airline has had successful test flights with fuels made from camelina, a flower, and recycled cooking oil.
To be sure, airlines have been spending hundreds of billions of dollars to refresh their fleets with fuel-efficient Boeing (NYSE:BA) and Airbus planes, which feature new turbo fan engines from General Electric (NYSE:GE) and United Technologies (NYSE:UTX).
But there is only so much improvement to be had from such technology, and greener jet fuel could provide further emission reductions, said Nancy Young, VP of environmental affairs at Airlines for America.
Aerospace companies are eyeing fuels too. Boeing and South African Airways are cooking up a biofuel made from tobacco, and Honeywell's (NYSE:HON) energy technology unit has a green fuel derived from fatty acids.
Unrest in the Middle East also has heightened worries about depending on foreign oil, playing into the cost calculus for the greener options.
Most are pricier than traditional fuel, as the alternatives are made in small batches for pilot programs and haven't yet achieved economies of scale, Young noted. But the benefits won't necessarily come from savings.
"We are seeking price comparability vs. traditional based fuel," she said. "If you have an alternative fuel you can reduce price volatility."
Airlines will have a wider variety of ways to get alternative fuels as well, adding to the three processes approved by ASTM International, a standards group. One process produces the fuel United will use.
Another is the Fischer-Tropsch process, which converts natural gas or gasified coal into fuel. It was used by Germany during World War II and is currently being used by South African energy company Sasol to make blends for all flights departing from the Johannesburg airport.
Earlier this year, ASTM approved a process that uses microbes to covert sugars into various chemicals, including some that are identical to the molecules that comprise jet fuel.
California-based Amyris is championing the field. In July, Brazilian airline GOL (NYSE:GOL) used Amyris' farnesane fuel blend on a flight from Orlando to Sao Paulo.
Six more pathways are waiting for approval, with more on the horizon, said Steve Csonka, the executive director of the Commercial Aviation Alternative Fuels Initiative.
That includes the alcohol-to-jet conversion process, which the Air Force Research Lab has been testing, as well as a new procedure for using municipal waste. British Airways has a project with Solena Fuels to turn London's garbage into jet fuel.
Amid all the innovation efforts, will alternative jet fuels take off or just stay on the margins? United's Foster-Rice said it could take some time.
"Hopefully we'll have more success to further alternative fuels and turn a corner," she said. "But it could be a good five years before you see many airlines getting into the space."
Read More At Investor's Business Daily: http://news.investors.com/business/091714-717646-airlines-look-to-sugar-...
Follow us: @IBDinvestors on Twitter | InvestorsBusinessDaily on Facebook