by Aria Velasquez
Delta Airlines (DAL) has agreed to buy 250 million gallons of sustainable aviation fuel from Aemetis (AMTX) over the next 10 years, the companies announced on September 30.
The deal is worth an estimated $1 billion through 2030 including tax credits, Aemetis said in a press release. The purchase agreement is part of Delta’s ongoing campaign for sustainability.
The airline said in a recent blog post that it became carbon neutral on a global basis in 2020, but the post didn’t detail how it made that calculation. Delta’s 2020 sustainability report highlights retiring old aircraft, purchasing carbon offsets and allowing customers to purchase carbon offsets as part of its overall plan
“Today you’ve got a feel good announcement,” says Henry Hardevelt, a travel industry analyst at the Atmosphere Research Group. “What Delta and other airlines have announced is an intention to buy more [sustainable aviation fuel] as it becomes available.”
Delta’s gestures toward purchasing sustainable aviation fuel (SAF) brings the company in line with other large air carriers like American Airlines and United Airlines, both of which announced commitments towards purchasing sustainable fuels for their fleets earlier this year.
“It shows a commitment by leading carriers to put their money where their mouths are,” Hardevelt continued. “But until they use the fuel, nothing changes.”
Although Delta has made this public signal toward a sustainable future, at present, the company still owns its own oil refinery, the Trainery Refinery, through its subsidiary Monroe Energy in Trainer, Pennsylvania.
In spite of the Trainer Refinery hemorrhaging money in recent years, CEO Ed Bastian emphasized in the company’s second quarter earnings call in July that there were no plans to sell it.
“We continue to operate Trainer, and the team does a very nice job there,” Bastian said on the July 14 conference call.
Hardevelt noted these investments aren’t compatible in the long-term.
“If anything, those [plans] are at odds with one another,” Hardevelt says. “Sustainable aviation fuel makes traditional fuel less relevant.”
But as a newer product, SAF is also limited in its availability, leaving airlines with promises and commitments for the future and a need to fuel their fleets in the present.
Pressure has been mounting on corporations to cut their carbon emissions in recent years and airlines aren’t exempt.
According to Hardevelt, Delta’s commitment could ultimately make it more attractive to travelers and eventually boost its share price.
“It’s not so much Delta’s customers, it’s society,” Hardevelt says. “No one cares about the fuel that goes into the wings of the airplane, they care about climate change.”
By the close of the markets on September 30, both companies’ share prices had slipped a few cents, with Delta down 45 cents to end the day at $42.61 and Aemetis down 24 cents to end the day at $18.28. However, share prices ticked up for both companies on October first, with Delta closing at $45.38 and Aemetis closing at $19.70.