European airline giant IAG and tech firm Microsoft have agreed a new extended deal to co-fund the purchase of alternative aviation fuels until the end of the decade.

IAG, which owns British Airways, Iberia and Aer Lingus, originally struck a co-funding deal with Microsoft for what the aviation industry calls sustainable aviation fuel (SAF) in 2023.

In a statement, the two companies said the new five-year deal was the ¡°largest and longest¡± agreement between an airline operator and a corporate client to reduce Scope 3 emissions from the company¡¯s business travel.

The new deal will see Microsoft co-fund an additional 39,000 tonnes of SAF, which would reduce ¡°lifecycle¡± carbon emissions by approximately 113,000 tonnes. The fuel will be manufactured in the UK by Phillips 66 and at LanzaJet¡¯s Freedom Pines Fuels production facility in the US.

Alternative aviation fuels can be produced from a variety of feedstocks and can reduce carbon emissions by up to 80 per cent compared with traditional kerosene-based fuels. Phillips 66 converts used cooking oil and food waste into jet fuel, while Lanzajet creates bioethanol from alcohol.

As well as reducing Microsoft¡¯s emissions from business travel, the funding for alternative aviation fuel will also cut CO2 from the company¡¯s freight carried by IAG¡¯s airlines.

Julia Fidler, Microsoft¡¯s environmental sustainability fuel and materials decarbonisation lead, said the extended deal with IAG would bring the company ¡°closer to our goal of being carbon negative by 2030¡±, as well as helping to increase production of alternative fuels.

"We are pleased to work alongside IAG on efforts to increase demand and make SAF more widely available through our shared long-term purchase agreement,¡± she added.

IAG has set the target of using at least 10 per cent alternative fuel for its flights by 2030 ¨C these fuels made up 1.9 per cent of the group¡¯s total fuel mix during 2024.

Jonathon Counsell, IAG¡¯s group sustainability officer, added: ¡°We¡¯re pleased to work with like-minded organisations such as Microsoft to expand efforts to reduce flying lifecycle emissions.

¡°Long-term agreements help encourage much-needed funding in SAF production, something that IAG is championing through our investment in global SAF projects such as LanzaJet.¡±