DSV, United Airlines, Microsoft and Phillips 66 Sign Sustainable Aviation Fuel Agreement to Scale Low-Carbon Air Transport

A group of major corporations spanning logistics, aviation, technology, and energy has announced a new agreement to scale up sustainable aviation fuel, marking another step in efforts to decarbonize one of the hardest-to-abate sectors.

The deal brings together DSV, United Airlines, Microsoft, and Phillips 66 in a coordinated initiative to increase the production and use of sustainable aviation fuel. The agreement reflects a growing recognition that aviation decarbonization requires collaboration across the value chain, from fuel producers to end users.

How the SAF Agreement Is Structured

Under the agreement, Phillips 66 will produce and supply sustainable aviation fuel to United Airlines, which will then use the fuel across its flight operations. DSV and Microsoft will help finance the use of SAF by purchasing its environmental attributes, even if the fuel is not physically tied to their specific shipments or travel.

This type of arrangement is increasingly common in emerging low-carbon fuel markets. It allows companies to support decarbonization efforts without requiring direct control over fuel logistics. By aggregating demand, the partners aim to create stronger and more predictable market signals for SAF producers.

Sustainable Aviation Fuel and Its Role

Sustainable aviation fuel is produced from non-fossil sources such as used cooking oil, agricultural residues, and other waste-based feedstocks. Depending on the production method, SAF can reduce lifecycle greenhouse gas emissions by up to 80% compared to conventional jet fuel.

Despite its potential, SAF currently accounts for a very small share of global aviation fuel use. Limited production capacity and higher costs remain key barriers. Scaling supply is therefore a central priority for both industry and policymakers seeking to align aviation with net-zero pathways.

Corporate Demand Driving Market Growth

The involvement of companies like Microsoft and DSV reflects a broader shift in how corporations address indirect emissions. Both firms are targeting reductions in Scope 3 emissions, which include those generated through logistics and business travel.

Microsoft has committed to becoming carbon negative by 2030 and eliminating its historical emissions by 2050. Supporting SAF deployment is part of its strategy to tackle emissions that cannot easily be eliminated through electrification.

DSV, as one of the world’s largest freight forwarders, faces significant emissions from air cargo operations. The company has set a net-zero target for 2050 and sees SAF as a critical tool for reducing emissions in the near term while other technologies remain under development.

Airline and Fuel Supplier Strategies

United Airlines has been actively investing in SAF as part of its long-term decarbonization strategy. The airline aims to achieve net-zero emissions by 2050 without relying on traditional carbon offsets, focusing instead on technological solutions such as alternative fuels.

Phillips 66 is also repositioning its business to align with energy transition trends. The company has been investing in renewable fuels and converting existing refining infrastructure to support SAF production. Agreements like this provide demand certainty, which is essential for justifying large-scale capital investments in new fuel capacity.

Addressing the Cost Challenge

One of the main obstacles to wider SAF adoption is cost. Sustainable aviation fuel can be significantly more expensive than conventional jet fuel, often by a factor of two to five depending on the production pathway.

By sharing the cost burden across multiple stakeholders, the agreement helps make SAF deployment more economically viable. Corporate buyers willing to pay a premium for emissions reductions play a key role in bridging this gap, particularly in the early stages of market development.

The Role of Book-and-Claim Systems

The structure of the deal reflects a book-and-claim approach, where the environmental benefits of SAF are separated from the physical fuel and allocated through certificates. This allows companies to claim emissions reductions even if the fuel is used elsewhere in the system.

While this model supports scalability, it also highlights the need for robust accounting frameworks and verification mechanisms to ensure transparency and credibility. Standardization efforts are ongoing across the aviation and sustainability sectors to address these challenges.

Policy and Market Context

Governments are increasingly introducing policies to accelerate SAF adoption. In the European Union, mandates under the ReFuelEU Aviation initiative require a gradual increase in SAF blending. In the United States, incentives such as tax credits aim to boost both production and demand.

However, policy measures alone are unlikely to achieve the required scale. Industry-led collaborations like this agreement play a complementary role by mobilizing private capital and accelerating market development.

Implications for the Aviation and Logistics Sectors

The agreement illustrates how coordinated action across industries can address complex decarbonization challenges. Aviation remains responsible for around 2 to 3% of global carbon dioxide emissions, and viable alternatives to liquid fuels are still limited for long-haul flights.

For logistics providers, airlines and corporate customers, SAF represents one of the most practical near-term solutions. Partnerships that aggregate demand and share costs are likely to become increasingly important as companies work to meet climate targets and regulatory requirements.

Outlook for SAF Scaling

While sustainable aviation fuel is not a complete solution, it is widely regarded as essential for reducing aviation emissions over the coming decades. Continued investment, supportive policy frameworks, and cross-sector collaboration will be critical to scaling production and lowering costs.

Agreements such as this one demonstrate how market participants can work together to accelerate progress. As more companies commit to net-zero targets and seek credible pathways to reduce Scope 3 emissions, similar partnerships are expected to play a growing role in shaping the future of low-carbon aviation.

Source: www.esgtoday.com