The Financial Reckoning in Montreal
Montreal just closed its doors. The diplomatic polish of the 42nd ICAO General Assembly has faded, leaving airline CEOs with a brutal spreadsheet reality. Gone are the days of voluntary net-zero pledges. The mandatory phase of the Carbon Offsetting and Reduction Scheme for International Aviation, known as CORSIA, is no longer a future threat. It is a current liability. Based on the final resolutions passed yesterday, October 29, 2025, the industry is now locked into a compliance cycle that will cost an estimated 300 billion dollars by 2035.
The assembly confirmed that the baseline for emissions will remain at 85 percent of 2019 levels. This is a tightening of the noose for carriers in emerging markets. According to data released by Reuters during the summit, international passenger traffic has officially surpassed 2019 peaks by 7 percent as of Q3 2025. This means every additional mile flown now carries a direct carbon price tag that was not on the books three years ago.
The Sustainable Aviation Fuel Supply Mirage
Fuel is no longer just kerosene. It is a compliance nightmare. The 42nd Assembly highlighted a staggering disconnect between policy and production. While the European Union’s ReFuelEU mandate requires a 2 percent Sustainable Aviation Fuel (SAF) blend starting this year, the global supply is currently hovering at less than 0.5 percent of total jet fuel demand. This scarcity has sent SAF prices to 2,400 dollars per tonne, compared to 810 dollars for standard Jet A-1 fuel, as noted in the Bloomberg energy price index yesterday.
The investigative reality is that airlines cannot buy their way out of this easily. The technical mechanism for SAF production is currently bottlenecked by a shortage of HEFA (Hydroprocessed Esters and Fatty Acids) feedstocks. Investors who bet on a rapid scaling of synthetic fuels are facing a reality check as capital expenditure for new refineries has ballooned by 40 percent due to sustained high interest rates throughout 2025.
Winners and Losers in the Post Assembly Landscape
The 42nd Assembly effectively created a two-tier aviation market. Carriers with younger, more fuel efficient fleets are gaining a massive competitive edge. For every 1 percent improvement in fuel burn, an airline now saves not just on fuel costs, but on a compounding carbon credit obligation. The following table illustrates the projected margin compression based on the new CORSIA obligations verified in Montreal.
| Carrier Region | Est. Carbon Cost Impact (% Revenue) | Average Fleet Age (Years) | SAF Procurement Coverage |
|---|---|---|---|
| European Union | 4.8% | 9.2 | 65% |
| North America | 2.1% | 12.4 | 30% |
| Asia-Pacific | 3.4% | 8.1 | 12% |
| Middle East | 1.9% | 7.4 | 18% |
Legacy carriers in North America are particularly vulnerable. While they have the capital, their fleet age averages are lagging behind Middle Eastern competitors. This creates a technical debt that will be called in by 2026. Companies like Delta and United have made significant SAF prepurchase agreements, but as the assembly discussions revealed, the physical delivery of these gallons is far from guaranteed. The Official ICAO CORSIA Registry shows that only 15 percent of promised SAF capacity for 2025 has actually reached airport fuel hydrants.
The End of Voluntary Compliance
The assembly has ended the era of environmental ambiguity. We are moving into a period of hard data and legal accountability. The mechanism for monitoring, reporting, and verification (MRV) was significantly strengthened in this session. National regulators are now required to enforce penalties for non-compliance, moving aviation carbon from a corporate social responsibility report to a primary line item in the 10-K filing. The shift from voluntary to mandatory is the single largest structural change to aviation finance since the deregulation of the 1970s.
The next critical milestone is January 1, 2026. This date marks the deadline for the first full year of mandatory emissions reporting under the revised CORSIA framework. This data will provide the first unvarnished look at which airlines are truly decarbonizing and which are merely buying time. Watch for the February 2026 earnings calls, where the first actual carbon liability provisions will likely appear on balance sheets, fundamentally altering airline valuations.
