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CORRECT(6/10): US Aviation-Biofuel Production Could Be Poised To Take Flight

("US Aviation-Biofuel Production Could Be Poised To Take Flight," at 3:34 p.m. EDT on June 10, misspelled the name of UOP LLC in the eighth paragraph. The correct version follows:) By Ben Lefebvre Of DOW JONES NEWSWIRES HOUSTON -(Dow Jones)- Biofuel production in the U.S. has a mixed track record. But for the aerospace sector, it is a dead serious business. Fuel represents about 40% of airline carriers' total cost--and oil that costs $100 a barrel is a major incentive for airlines and aviation companies to find an alternative. Companies such as Boeing Co. (BA), US Airways Group Inc. (LCC) and Alaska Airlines are aggressively pursuing renewable jet fuel, or "biojet," made from waste grease and vegetable oil to replace some of the 17 billion gallons of petroleum-based fuel the aviation industry consumes every year in the U.S. "Our goal is to have 1% of all aviation fuel have some bio-content within the next five years," said Billy Glover, vice president of environment and aviation at Boeing, which has funded biofuels studies and participated in test flights using renewable jet fuel. The aviation sector's keen interest in biofuels contrasts with that of the greater consumer market, where renewable fuels seem to have stalled. Corn ethanol, which represents 10% of fuel consumption in the U.S., has been criticized for having a dubious environmental record, and auto makers and refiners are resisting U.S. government attempts to increase the amount of ethanol blended into gasoline. Biodiesel production, a hot industry in 2007, has ground to a halt. Some point to electric cars as being a better alternative than biofuels to reduce fossil-fuel consumption in the U.S. But airlines, unable to electrify their planes, have been pushing biojet fuel forward. On June 6, the renewable replacement won approval for use in jet engines from ASTM International, the international technical standards-setting group. Biojet fuel is an advanced biofuel, chemically indistinguishable from petroleum-based jet fuel. The high cost and decades-long lifespan of aircraft make major changes in engine design impractical, making "drop in" liquid biofuels that work with existing infrastructure the best alternative, said Paul McElroy, spokesman for Alaska Air Group Inc. (ALK), which operates Alaska Airlines. "There are many details that need to be addressed [with biojet], but we believe this is certainly worth pursing," McElroy said. One such detail is obtaining steady supply. Only a handful of producers make the fuel, mostly in relatively small batches for testing with the U.S. military. These include Solazyme Inc. (SZYM), Honeywell International Inc. (HON) subsidiary UOP LLC and Dynamic Fuels, a joint venture co-owned by Tyson Foods Inc. (TSN) and Syntroleum Corp. (SYNM) that converts chicken fat into biojet. Although Astmi's seal of approval for use of the fuel should help to coax investors to the industry, production issues still remain, including developing raw materials that will yield the most amount of fuel. And some in the aviation industry believe the military might have to prime the biojet production pump before the fuel can conquer the wider market. Biojet currently can cost up to five times more than petroleum-based jet fuel and won't fall in price until production increases enough to reach economy of scale. Congress is currently mulling over bills introduced in May that would allow the Department of Defense, the single-largest energy consumer in the country, to extend its biofuel supply contracts to 15 years from the current five years. If renewable jet-fuel production can ramp up enough to displace even 1% of total aviation fuel needs, further growth would be almost guaranteed, said Steve Lott, spokesman for airlines trade group Air Transport Association. "That first 1% is going to be the hardest," Lott said. "Once we reach economy of scale, it will go that much faster." -By Ben Lefebvre, Dow Jones Newswires; 713-547-9201;

Stock News for Us Airways (LCC)
03/23/201712:56:54Confidential Treatment Order (ct Order)

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