Southwest divests SAF tech company SAFFiRE

opinion

by Fayaz Hussain

August 26, 2025

Southwest Airlines last week sold sustainable aviation fuel (SAF) technology company SAFFiRE Renewables. This sparked questions about the airline’s commitment to decarbonisation and particularly SAF adoption.

But this divestment is a reflection of the airline’s changes to SAF policy and not necessarily a step back from SAF. In its 2024 sustainability report, Southwest warned that a “clear line of sight into parity of SAF to Jet A is a critical driver” for increased adoption as it focuses on “fiscal responsibly” in achieving its SAF goals. This change has dictated its approach to separate environmental goals from operational realities.

In response to questions from SAF Investor regarding its divestment of SAFFiRE, the airline said it “continues to source SAF for operations” and remains “focused on our plan toward net zero carbon emissions by 2050.”

Last year, the airline signed a supply agreement for 12m gallons of neat SAF to be delivered at Chicago Midway International Airport by 2025 with an additional 12m gallons in 2026. The airline has entered offtake agreements with Velocys, LanzaJet, Marathon Petroleum and Neste. It ranks eighth on Transport & Environment’s Global Airline SAF Ranking Index.

But investing in a SAF producer is a different operational reality to buying SAF from companies that have expertise in production.

Peter Gastreich, MD of energy and sustainable investing at Water Tower Research says airlines’ initial approach to decarbonisation may have been rushed. “For some time, airlines have had to respond to investor demands and show they are taking action on decarbonisation strategies,” he explains. “Those first solutions were in many cases quick fixes (throwing money at a problem) and may not have been the most practical.”

Vertical integration has long been the next step for companies looking to de-risk their supply chain, but doing so in sustainability is something that many are finding challenging. “Certainly, for an airline, producing renewable fuels is not a core competence,” says Gastreich.

“In the case of Southwest, it looks like the project will continue under a new structure and Southwest will still have access to the SAF.”

This is not far from true. Airlines excel at route optimisation, fleet management, customer service and regulatory compliance within aviation. They will struggle to succeed in biochemical engineering and agricultural feedstock processing exposes them to different risk profiles.

Southwest said its decarbonisation strategy involves “key initiatives across several focus areas, including fleet modernisation, operational efficiency, air traffic control modernisation and obtaining SAF.”

While SAF remains their top lever to decarbonise, the airline said: “Progress is needed to increase supply and reduce costs, which requires government support and collaboration across entire aviation and SAF value chain.”

The airline is right to raise concerns about government support in the US. Despite bi-partisan agreement on the benefits of SAF to agriculture, the rural economy and home-grown energy, the introduction of the “Big Beautiful Bill” has significantly altered the policy support for SAF producers.

“When compared to 12-18 months ago, the appetite for imminent investment in SAF projects in the US has moderated slightly,” said Gastreich.

“The largest event impacting investor appetite for SAF this year was the Big Beautiful Bill. The maximum 45Z credit was reduced from $1.75 per gallon to $1.00 per gallon, which is a setback … Moreover, the credit itself is still on the table and will, in all likelihood, come back for review in the future.”