Like so many other businesses in the aviation sector, United Airlines is largely banking on sustainable aviation fuel to power its transition to net-zero emissions. Now the company’s VC arm, United Airlines Ventures, is taking a bet on direct air capture to help produce this fuel using carbon extracted straight from the atmosphere. Today, UAV’s Sustainable Flight Fund announced an equity investment in legacy DAC player Heirloom. This builds on Heirloom’s recent $150 million Series B funding round and will allow the fund to purchase up to 500,000 tons of CO2 removal from Heirloom, either to produce sustainable fuel or to sequester permanently underground. (The two companies didn’t disclose the size of the latest investment.)
Right now, producing green jet fuel — whether via biomass or captured carbon — is much more expensive than producing jet fuel the standard way, by refining crude oil. And making sustainable fuel using direct air capture, which usually costs upwards of $600 per ton of CO2 removed, would likely be the most costly method possible. DAC-based SAF might not make economic sense for a decade or more, which is why the fund is waiting to see where the carbon removal market goes in the coming years before finalizing its carbon removal purchase.
While there are well over 100 direct air capture companies at this point, UAV’s managing director, Andrew Chang, told me that United took a bet on Heirloom because the company has secured contracts with major buyers such as Microsoft and Frontier. It also has a flexible business model that allows it to either sequester carbon underground or use it as an input to make valuable end products such as SAF.
“They've demonstrated an early ability to go out and get some of these paying customers for that CO2 offtake,” Chang said. “They have a working pilot plant out in California that we visited, and they're planning to do their next scale-up facility in the Gulf Coast region, probably. So there's a lot of tangible points that the company has demonstrated.”
While the Heirloom investment represents United’s first foray into direct air capture, it isn’t the airline’s first rodeo when it comes to carbon removal. The Sustainable Flight Fund, which launched in 2023, has also invested in Svante, which makes filters and machines for carbon capture, and Banyu Carbon, which seeks to remove excess CO2 from the ocean. Altogether, the fund totals over $200 million in investments, about a third of which comes from United itself and the rest from its corporate partners, which include Air Canada, JetBlue Ventures, Google, and Bank of America. This means that Heirloom’s carbon removal credits wouldn’t accrue specifically to United, but rather to the fund itself.
“We're not smart enough to know what the silver bullet is,” Chang told me of the fund’s diversified approach to sustainable fuel investments. UAV has also backed hydrogen companies, an algae-based biofuel company, and companies making fuel using cooking oil, fats and grease. “I actually don't think there is a silver bullet. I think you need to run as hard as you can across all possible alternatives.”
Right now, only about 0.1% of United’s fuel is sustainably made. In order for the airline to reach its 2035 goal of decreasing carbon intensity by 50%, that number needs to ramp astronomically in the coming decade. And that also has to happen without raising the cost of flights for consumers, which Chang told me is simply not an option.
“You have higher prices, people are going to fly less, or we're going to go out of business,” Chang said. As he’s been told, United will not pay a premium for SAF. Thus, this fuel must be subsidized by other players, which can include large corporate customers eager to address emissions from their employees’ business travel or fuel companies that produce SAF simply as a byproduct.
“People are chasing higher value, higher volume products — gasoline, diesel, naphtha,” a petroleum-derived liquid used as a feedstock for fuels and petrochemicals — “what have you. No one optimizes for jet,” Chang explained. He doesn’t think producing SAF alone is a viable business model, which is why he views Heirloom’s multiple potential revenue streams as an attractive option for UAV’s portfolio. As he told me, “The best way for you to have a chance to execute on SAF commercialization and production is to not focus on that exclusively.”
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