The impact of sustainable aviation fuel quota mandates on the optimal on-airport fuel facility ownership

Sustainable Aviation Fuel (SAF) is a cornerstone of aviation decarbonization in the short-to-medium term, prompting governments to adopt policies like SAF quota mandates. However, the aviation fuel supply chain—particularly the role of fuel suppliers and the ownership of on-airport fuel facilities—remains understudied. This paper develops a theoretical model to analyze how SAF quota mandates influence the optimal ownership structure of on-airport fuel facilities, comparing three observed arrangements: third-party, airport-owned, and airline-owned. Our findings reveal that airport or airline ownership increases traffic volumes and profits for off-airport suppliers, airports, and airlines compared to third-party ownership. Notably, while third-party ownership maximizes social welfare under low SAF quotas and small market sizes, higher quotas favor airport or airline ownership, suggesting a potential need for ownership transitions as SAF mandates escalate. Furthermore, with intensified airline competition, the choice between airport and airline ownership hinges on market size and the SAF quota level. Extending the analysis to test several real-world constraints reveals crucial sensitivities. For instance, finite SAF production capacity imposes a fundamental trade-off, rendering ambitious mandates incompatible with large-scale aviation activity. Furthermore, a more competitive upstream fuel market raises the market-size threshold at which integration becomes socially optimal. Finally, alternative stakeholder objectives can introduce significant market instability; a welfare-maximizing airport, for example, can create an equilibrium that is vulnerable to exploitation by a profit-maximizing supplier.