Biofuel companies still on shaky ground despite wins with airlines

December 15, 2009 – When it comes to biofuel adoption, the airlines are way ahead of the automakers. In August, synthetic fuel maker Rentech signed a deal to produce 1.5 million gallons of diesel made from sewer sludge to power ground equipment for eight airlines at LAX. Today, that same company and competitor AltAir landed preliminary contracts to supply 15 airlines with renewable fuels.

But even deals of this size aren’t enough to give biofuel companies the financial boost they need for the industry to explode.
Today, Rentech also reported that its fourth-quarter losses are going to be higher than anticipated due to the tight economy. Even though it supports its biofuel operations by selling fertilizer and industrial chemicals, it still lost $6.4 million in the third quarter, more than the $2.9 million it lost during the same period in 2008. Revenue also fell 67 percent to $24.7 million.

This is all to say that biofuel, despite its unique advantages — namely that it is a drop-in alternative that could be used in existing cars and planes — is still far from rivaling petroleum-based fuels. Airlines deciding to convert to biodiesel is a good sign for the environment, but until the automotive segment of the business gets its act together, companies like Rentech, LS9, Synthetic Genomics, Coskata, Fulcrum Bioenergy and others may be in for a rough time.

The memorandums of understanding signed today by Rentech and AltAir could supply more than 100 million gallons of biodiesel over the next decade to big name airlines such as American, Delta, JetBlue, United Airlines, U.S. Airways, Hawaiian Airlines and AirTran.

VentureBeat