Cathay Pacific Group is investing in a US biofuel developer to provide the airline with low-carbon fuel that will amount to an annualised 2 per cent of its fuel consumption for 10 years.
Cathay, which is aiming for carbon-neutral growth from 2020, said it was the first airline to invest in Fulcrum, a California-based waste-to-fuels developer, but declined to disclose the amount of the equity investment.
The carrier said it negotiated a long-term supply agreement with Fulcrum for 375 million gallons of sustainable aviation fuel over 10 years. The fuel would be supplied in "a few years' time", it said.
Fuel is the most significant cost for any airline and it accounted for 39 per cent of the group's operating cost last year. Cathay Pacific Airways and Dragonair together spent HK$37 billion on fuel last year, compared with HK$40 billion in 2012.
The price of jet fuel jumped over 30 per cent between 2010 and 2011 and remains at US$130 per barrel. The continued high price of jet fuel is a major challenge for Cathay, the company said in its annual report.
Fulcrum specialises in converting municipal solid waste into low-carbon diesel and jet fuel. It said Cathay shared its plan to bring "a whole new source of sustainable fuel to the airline industry" that had 80 per cent less life cycle carbon emissions compared to traditional fuel.
Fulcrum said it would expand its plant network in North America this year, including locations that were strategic to Cathay.
Cathay chief executive Ivan Chu Kwok-leung said the company was committed to reducing its environmental impact and was pleased to have Fulcrum as a strategic business partner.
Biofuel is expected to help the airline industry reduce its heavy carbon footprint, but the challenge is in bringing down its cost, analysts say. Boeing said it had started working with South African Airways to make jet fuel sourced from tobacco plants.