The industry is intensifying its multifaceted approach to decarbonization as demand increases.

Airlines took a hit during the pandemic, as did so many global industries. But in 2024, annual air travel returned to pre-pandemic levels and according to Bain & Company's July 2025 report Air Travel Forecast to 2040: Geopolitics and the Carbon Challenge, the long-term outlook for air travel is expected to remain stable. The management consultancy expects global revenue passenger kilometers (RPK) to reach 14.8 trillion by 2040 or 178 percent of 2019 volume. This demand will be driven by both mature and emerging markets. The International Air Transport Association's (IATA) February 2025 report Air Passenger Demand Forecasting: The Future of Global Air Travel (2024 to 2044) expects demand to be driven by both mature markets like Europe where the compound annual growth rate (CAGR) of annual passenger traffic is expected to be 2.5 percent and emerging markets such as Asia-Pacific where CAGR is slated to hit 5.1 percent through 2043.

But there are headwinds as far as the industry's ability to scale up and meet this increased demand. The first issue is aircraft supply, which isn't keeping up with demand due to issues with aerospace supply chains and skilled labor shortages. McKinsey & Company points out in its February 2025 report How Severe Is the Aircraft Shortage and What Happens Next? that airlines are keeping older aircraft in service longer.

The other pressing issue? Sustainability.

Mandated Sustainability

"It's not just an environmental imperative, it's actually an economic survival strategy," said Pedro de la Fuente, IATA's senior manager, sustainability, The Americas. "From an industry standpoint, we need to ensure that we reduce lifecycle emissions in a way that will help aviation maintain a license to operate as we see more governments tightening climate regulations."

Governments around the globe began implementing regulations following the signing of the Paris Agreement at the 2015 United Nations Climate Change Conference. Nearly 200 countries signed a Nationally Determined Contribution (NDC), outlining their plans to reduce carbon emissions in order to reach the agreement's goal to limit global warming to 1.5 degree Celsius above pre-industrial levels so emissions can reach net zero by 2050. This has since led to various net zero coalitions such as the UN-backed Race to Zero, which has been signed by thousands of companies, cities and educational institutions.

Alternative Aircraft

One way of addressing sustainability issues and the scarcity of new aircraft is by looking to electric, hydrogen-powered and hybrid aircraft. While these technologies are still in development and show some promise, de la Fuente noted that they also face an uncertain future due to scalability and adoption. "We don't have the capacity today to charge an aircraft at a speed that allows for a quick turnaround flight, nor do we have the capacity to supply green hydrogen in our airport fuel supply," he said.

Nevertheless, these alternatively-powered aircraft are expected to have a place in the broader aviation landscape. Medical supply delivery, passenger transport and natural disaster response in remote locations can all benefit from the efficiency of global Advanced Air Mobility, which the World Economic Forum makes a case for in its 2024 whitepaper Advanced Air Mobility: Shaping the Future of Aviation. This new air transportation system deploys automated aircraft including drones and Electric Vertical Takeoff and Landing (eVTOL) air taxis that are electric and sustainable. They also have the ability to shuttle passengers between urban and suburban locations as well as potentially offer more regional transit.

Aviation's Reduction Efforts

After the Paris Agreement took effect, the International Civil Aviation Organization (ICAO) launched the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) in 2016. Now voluntary, this program will become mandatory for all international airlines in 2027. Intended to control carbon emissions from international flights as demand increases, CORSIA requires airlines to purchase sustainable aviation fuel (SAF) or carbon offset credits. This is no small commitment.

The carbon emissions produced by the aviation industry have garnered particular attention. In September, World Travel & Tourism Council President Gloria Guevara said that transport accounts for 40 percent of the travel industry's emissions. According to the International Energy Agency (IEA), carbon emissions from aviation grew faster than rail, road or shipping between 2000 and 2019. By 2023, the IEA put aviation-produced carbon emissions at 90 percent of their pre-Covid peak.

The Carbon Offset Market

One approach to reaching net zero is the purchase of carbon offset credits or certificates. Organizations like Sustainable Travel International (STI) give both businesses, individuals and even destinations the ability to do this. The organization's website features a calculator that can be used to measure the total carbon footprint of any given trip, including corporate travel, or business operation such as an event and then purchase an equivalent number of credits to mitigate that footprint. Credits go towards a variety of projects that ultimately provide a balance to the amount of carbon we produce. This includes reforestation, marshland and mangrove preservation, clean energy production and new climate technology.

STI's CEO Paloma Zapata encourages travel for the experience to connect with other people and experience different cultures. She also adds "it's important for people to be aware of the transition away from fossil fuels and to support it so that in the future, it's not 'sustainable travel,' but simply how we travel."

Sustainable Aviation Fuel

Among the new climate tech that credits can support is sustainable aviation fuel or SAF. Unlike fossil-derived fuel, SAF is comprised of renewable or even waste products such as cooking oil, agricultural waste or captured carbon dioxide combined with hydrogen produced by solar or wind-generated electricity. SAF is purposefully designed for today's commercial aircraft, but both expensive and limited in availability. According to the IATA roadmap, sustainable aviation fuel can represent up to 65% of the emissions reductions that the industry can achieve by 2050. "The scalability of where we are today in 2025 is mainly driven by SAF and addressing any residual emissions with carbon offsets to compensate," said de la Fuente.

Scaling SAF production requires a greater volume of the materials used to produce it as well as greater development of and investment in the advanced technologies needed to scale up. Governmental support can accelerate SAF production at scale, but political involvement is largely limited to emissions regulations and in some cases, imposing relatively new taxes on a business' carbon emissions.

To counter this, the aviation industry has turned to SAF certificates. Somewhat similar to purchasing carbon offset credits, SAF certificates directly and exclusively fund SAF production and the technologies and materials needed to produce it at scale. The Sustainable Aviation Buyers Alliance (SABA) is a prominent organization selling SAF certificates. "We're focused on keeping the investment in the value chain, so SAF certificate investment goes directly to SAF production facilities and more importantly, it promotes technology change," says Andre de Fontaine, managing director at the Center for Green Market Activation, which serves as SABA's Secretariat. "Investment in SAF certificates creates a new revenue stream for these fuel producers to scale production."

A Challenging Regulatory Environment

While SAF certificates are certainly beneficial, they simply aren't enough. Some airlines give travelers the option to purchase a higher cost "green fare," which is effectively the purchase of a SAF certificate with their ticket. But at this year's IATA general meeting in New Delhi, CEO of Airline-FedEx and FedEx International told an audience that Americans are too cost-conscious to pay an additional cost while Europeans are more likely to make the investment.

The good news is that IATA expects SAF production to double to two million tons in 2025. That accounts for 0.7 percent of total aviation fuel demand. With EU and UK mandates taking effect at the start of 2025, the majority of that production will go to Europe. Those mandates have also led to a spike in Europe's SAF costs.

What's more, Bain & Company's December 2024 analysis Sustainable Aviation Fuel: The Supply Race Is On found that European production is expected to hit a 20 percent shortfall of mandate requirements by 2030. On top of that, the EU prohibits SAF production that relies on certain feedstocks such as corn, soybeans, cooking oil and animal fats because this may cause land use and food production to compete with SAF production. Without one of the most developed means of SAF production, the industry will have to quickly ramp up development of alternative feedstocks and latent technologies. The alternative is to import feedstock. As any importation generates carbon emissions, this would negate the purpose of SAF mandates. Although the UNFCCC only requires reporting of greenhouse gas (GHG) emissions resulting from domestic production, not imports. So on paper, importing SAF materials could potentially show a net positive.

"Coordination at the regulatory level globally would be helpful," said de Fontaine. "Different regulatory jurisdictions have different views of what is sustainable and the EU has taken an aggressive view on keeping SAF focused on waste residues and avoiding associated feedstocks, which is creating some confusion among investors in SAF production. Different requirements in different jurisdictions is fragmenting the market a bit."

At the aforementioned IATA conference, Pieter Elbers, CEO of India's largest airline IndiGo, pointed out that SAF isn't available in the country and he doesn't see the point in importing. Instead, he looks to other means of driving sustainability, including maintaining a newer fleet and turning to electric ground operations.

In addition to those options, airlines globally are also looking to improve sustainability efforts by recycling plastics used onboard, composting food waste, improving flight planning and optimizing routing.

The Green Initiatives Fueling Air Canada

In early October, Air Canada announced a new Airbus A321XLR will join its fleet in 2026. The plane will not only usher in a new era of international growth for the Montreal-based airline, but it will also mark a shift to more sustainable aircraft. Because the A321XLR is made with composite materials, its structural weight is lower than older planes and so it uses 30 percent less fuel consumption per seat. It is also approved to fly with as much as 50 percent SAF.

Air Canada expects SAF to account for 1 percent of the airline's total fuel use this year. To meet that objective, Air Canada purchased 77.6 million liters of Neste MY Sustainable Aviation Fuel last November.

Net Zero

"The path to net zero is complex and subject to significant risk and uncertainty," says Chelsea Quirke, Air Canada's manager, environmental sustainability engagement. "Air Canada along with other major Canadian companies, have been engaged with governments in Canada to advance the availability of SAF and encourage support for the development of a cost-competitive Canadian-made supply of SAF for commercial aviation. Achieving this will require a regulatory approach that balances demand with supply, in order for aviation to decarbonize through energy transition while mitigating impacts on consumers."

As part of its efforts to support Canadian SAF development, Air Canada became a founding member of C-SAF, a not-for-profit organization focused on accelerating the commercial production and deployment of SAF in Canada. One of C-SAFs objectives is to identify the strategic, economic and social benefits of developing a SAF market and industry in Canada and taking actions to overcome the barriers and constraints in achieving these goals.

A Leadership Role

Quirke further explained that Canada is uniquely positioned to lead in the production of SAF with its abundant renewable feedstocks, advanced refining capabilities, and innovative technology providers, according to C-SAF. By leveraging these strengths, the country can create a resilient supply chain that not only supports its environmental goals but also drives economic growth and job creation.

Among the airline's environmental objectives are its mid-term targets to reduce net GHG from air and ground operations by 20 percent and 30 percent respectively from from 2019 baselines by 2030. To achieve these goals, Air Canada is focusing on four carbon reduction opportunities: fleet and operations; innovation; SAF and renewable energy; and carbon reduction and removals.

Already, a $50 million investment in new SAF and carbon reduction and removal technologies as well as new aircraft is a demonstration of Air Canada's commitment to minimizing its carbon emissions. Also among its sustainability initiatives, Air Canada has made a $5 million investment in Swedish startup Heart Aerospace, which develops hybrid-electric regional planes, and placed an order for 30 ES-30 aircraft.

Leave Less and Carbon Offset

Additionally, the Leave Less Travel Program, powered by carbon offset platform Chooose and available on Air Canada's booking website, allows individual travelers, corporate customers and cargo freight forwarders to voluntarily purchase carbon offset credits along with environmental attributes that support SAF. The total cost of this combined purchase is calculated on the basis of an estimate of the GHG emissions of their flight.

These continuous efforts to reduce GHG were also supported during Earth Month 2025 when Air Canada launched its #OurPowerOurPlanet campaign to promote SAF's role in reducing GHG emissions and the partnership with Neste to procure SAF. The campaign also served as a means to educate the public on Air Canada's climate initiatives, including efforts to further develop the SAF supply chain, in order to meet its 2050 net-zero emissions goal. Users were also directed to the Air Canada Leave Less website for more information on the airline's sustainability work.

Earth Month

Air Canada also celebrated Earth Month 2025 by announcing that its ground operations at Québec City Jean Lesage International Airport (YQB) will fully electrify its main ground support equipment (GSE) by the end of 2025. The transition is a milestone for the airline as it will move all baggage and ramp tractors, belt loaders, power stows, container loaders and aircraft tractors from fossil fuel power to electric alternatives. The Québec airport specifically was selected for this project to align with the provincial government's move to renewable hydroelectric power in the 1960s.

Quirke notes "Air Canada cannot achieve them alone; governments play an essential role in these efforts, and industry and others in the climate action chain must each play their part." So partnering with the YQB airport authority to develop the necessary infrastructure to support the move to a zero direct emission electric (eGSE) fleet powered by the province's renewable energy grid was a logical step in reflecting Québec's long-standing commitment to sustainability.

Environmental Stewardship

The Canadian national carrier's environmental stewardship goes beyond reducing GHG emissions. Air Canada works with the Jane Goodall Institute of Canada to promote and expand community efforts that bring people together with animals and the environment. Given its zero-tolerance approach to illegal wildlife activities, the airline also holds IATA Illegal Wildlife Trade certification and is a member of the United for Wildlife North American taskforce. This fall, Air Canada is partnering with select airports to educate travelers on how they can play a role in ending illegal wildlife trafficking.

The children of Air Canada employees and affiliates can also have the opportunity to compete for the carrier's sustainability scholarship, now in its 9th year. Applicants write a 500-word essay detailing their own sustainability initiatives as they relate to their education while Air Canada's maintenance team raises the program's funds through a metal recycling program.

Sweeter still, when tens of thousands of bees take flight across Canada each summer, they can take refuge in any of the five beehives that Air Canada hosts throughout the country. The sponsorship doesn't just support pollination. It also gives the airline the opportunity to engage staff through interactive workshops on the issues of biodiversity and ecosystem regeneration.