UPDATE 1-Airline body hails Big Oil backlash as catalyst for green fuels

(Adds Airbus CEO comment, detail, background)

By Laurence Frost and Sarah Young

PARIS/LONDON, May 28 (Reuters) - The increasingly effective
green backlash against oil majors by activists and shareholders
is a welcome development for the aviation industry as it
prepares to raise its own environmental goals, the head of
global airline body IATA said on Friday.

Willie Walsh, director general of the International Air
Transport Association, said that challenges of the kind
encountered by Exxon, Chevron and Shell
this week could boost investment in the lower-emission fuels so
desperately needed by airlines.

"I think it's great that the oil industry has been
criticised. Anything that accelerates the production of
sustainable fuels is a positive," Walsh told Reuters.

Oil majors suffered a trio of defeats on Wednesday as 61% of
Chevron shareholders demanded end-use emissions cuts and Exxon
Mobil saw a pair of activist candidates elected to its board to
push climate demands. A Dutch court also ordered drastic
emissions cuts by Royal Dutch Shell.

The COVID-19 pandemic has increased the focus and pressure
on climate emissions, said Walsh, the former boss of British
Airways and its owner IAG.

Global airlines that have so far pledged to halve net
emissions by 2050 will be asked to go further at IATA's annual
meeting in October, Walsh said, confirming indications given by
his departing predecessor, Alexandre de Juniac.

Walsh said the previous 2009 goal had been overtaken by the
Paris Agreement and resulting pledges from governments and
companies - including many airlines - to eliminate net emissions
by mid-century.

"Anything less than net-zero by 2050 will be disappointing
for the industry and will leave us open to criticism that we're
not doing enough," he said while acknowledging that some states
including China still consider the target too ambitious.

Raising the aviation goal will require investment
burden-sharing by energy companies and aerospace manufacturers,
as well as removal of fuel-wasting air traffic control
inefficiencies that are particularly acute in Europe, Walsh
said.

A new push to replace Europe's airspace patchwork with a
"single European sky" has foundered on diplomatic and military
objections, a senior Brussels official said this week.

The European Union plans to require airlines to use a
minimum percentage of sustainable aviation fuels (SAF), made
from waste oil, biomass or synthetically with renewable power.

But SAF prices remain prohibitively high because the volumes
produced by fuel companies are inadequate, Walsh said.

"It shouldn't be for the airlines to fund research and
development into sustainable fuels," he said. "It should be for
the companies that are making the unsustainable fuels to start
investing."

Latest-generation jets are certified to run on anything up
to 50% SAF - a proportion that could be increased to help
aviation meet its goals until new propulsion technologies
arrive, Airbus Chief Executive Guillaume Faury told
Reuters.

The European planemaker wants to "trigger investments so
that we increase very significantly the percentage of SAF with
the planes we are delivering today," he said on Thursday.

Rolls-Royce this month announced a business jet
engine that runs on pure SAF, and sources say work is underway
to extend the capability to larger aircraft engines this decade.

Airbus has also pledged to put a hydrogen-powered airliner
into service by 2035, with technology that CEO Faury described
as "less challenging that what we saw two or three years ago".

Airlines are now counting on the Airbus hydrogen programme
to deliver, IATA's Walsh said.

"We're going to hold them to that, because it's a big part
of the solution."

(Reporting by Laurence Frost and Sarah Young
Additional reporting by Tim Hepher
Editing by David Goodman and Louise Heavens)