Oily nuts not just snacks on Air New Zealand

Fairfax

ALTERNATIVE JETFUEL: Air New Zealand boss Rob Fyfe says he can see a scenario, in theory, where the airline's entire domestic fleet could be run on 100 per cent biofuel.

Relevant offers

Jet fuel has become so expensive biofuel is now a cost competitive alternative, says Air New Zealand chief executive Rob Fyfe.

He says biofuel development is cracking at such a pace he could see, in theory, Air NZ's entire domestic fleet run on biofuel in the not too distant future.

The airline is doing commercial biofuel trials in a joint venture with aircraft manufacturer Boeing and engine-maker Rolls-Royce.

It plans a test flight using a blend of biofuel and kerosene in the first half of next year.

Oily nuts from the non-edible jatropha plant and algae are its fuels of choice. They're categorised as second generation fuels because they are not edible crops and don't encroach on crop lands.

Jatropha curcus is sustainable because it is a second generation, non-food crop grown on arid wasteland in tropical climates.

Fyfe said it looked as if Air NZ could achieve the technical criteria for biofuels such as jatropha.

"I see a scenario, in theory, where we could run the entire domestic fleet on 100 per cent biofuel."

Boeing has been working closely with the  Hawaiian Agricultural Research Centre to research and cultivate jatropha for mass airline commercial use.  It is used as vehicle biodiesel fuel in countries the Philippines and India.

Last week jet fuel reached US$172 a barrel and the rising price shows no sign of abating. The escalating cost forced Air NZ to schedule smaller aircraft, holding fewer passengers on its long-haul services such as Auckland to London a potential saving of US$100m a year on that route alone.

It has also announced fare increases.

Fyfe said the airline burns nine million barrels of oil a year equal to about 70m gallons of fuel. On today's fuel price that equates to $2 billion but Air NZ pays less because it has hedged its currency on fuel at good forward rates.

Fyfe said the fuel bill was, however, a big ask for an airline making an average $200m annual profit. The airline revised its profit forecast in May for the year to June 30 from $220m to $200m when jet fuel was hovering around US$150 a barrel.  "You either cut other costs in the business or increase prices," he says.

"The cost of fuel has now gone up to such a degree we can't offset it by cutting costs.

He hoped the airline would be able to avoid another profit downgrade with only four weeks to go until the end of the financial year but said, "we will take a view over the next few weeks".  He noted that when he came to Air NZ just over five years ago, fuel was US$30 a barrel.

"If you told most people in the airline business then  fuel would reach US$70 a barrel in three years they would have contemplating jumping out of the window." Fyfe says refining biofuels such as jatropha was cheaper than refining petrol.

The sustainability buff has his own jatropha tree growing in his office.

One hectare of jatropha plants produces up to 3000kg of oily nuts. A harvest of 2000kg of nuts produces 540-680 litres of oil for conversion to fuel.

Fyfe said though algae was also firmly in Air NZ's sights as a biofuel ingredient, refining algae was still at a test laboratory stage.

"They haven't yet figured out how to turn it into mass production whereas they have with jatropha."