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Shell, Rolls-Royce Sign MoU to Decarbonize Aviation Industry

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Royal Dutch Shell Plc (RDS.A - Free Report) signed a memorandum of understanding (MoU) with Rolls-Royce Holdings Plc (RYCEY - Free Report) as part of its efforts to decarbonize the aviation industry and reach net-zero emissions.

Per the terms of the agreement, Shell and engineering company Rolls-Royce will explore opportunities for bringing 100% sustainable aviation fuels (“SAF”) to certification. Both companies plan to enhance their cooperation on SAF and fully certify its use in planes as it produces 70% less carbon compared with conventional fuel.

The aviation industry is heavily reliant on SAF due to its much lower carbon footprint and is likely to remain that way until the electric- and hydrogen-based propulsion systems become widely available. Notably, Rolls-Royce aims to make all of its commercial engines compatible to run on SAF by 2023.

However, the challenge is the shortage of SAF supply, which the partnership is expected to help resolve. The collaboration aims to develop innovations and explore opportunities to unlock the net-zero emission potential of technologies.

Most importantly, the agreement strengthens the existing partnership between the companies in alternative fuels. Shell is the exclusive supplier for Rolls-Royce’s new SAFinity service, which enables business travelers to take carbon-neutral flights.

SAFs will not only power large aircraft and business aviation but also hybrid-electric versions of Urban Air Mobility (flying taxis), which is currently in the final stages of development. Moreover, the companies will look at opportunities to cooperate in shipping and rail.

The extensive cooperation between the companies will drive new solutions to help customers and the aviation industry navigate a pathway to decarbonization. Notably, this involves both companies’ contributing technologies and expertise to reduce operational emissions and meet their respective targets to achieve net-zero emissions by 2050.

Company Profile & Price Performance

Shell is one of the primary oil majors — a group of U.S. and Europe-based big energy multinationals — with global operations. The company is fully integrated, as it participates in every aspect related to energy from oil production to refining and marketing.

Shares of the company have underperformed the industry in the past six months. The stock has gained 15% compared with the industry’s 31.6% growth.


Zacks Investment ResearchImage Source: Zacks Investment Research


Zacks Rank & Stock to Consider

The company currently carries a Zack Rank #3 (Hold).

Some better-ranked players in the energy space are Baker Hughes Company (BKR - Free Report) and PHX Minerals Inc. (PHX - Free Report) , each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Baker Hughes’ earnings for 2021 are expected to rise 56.9% year over year.

PHX Minerals’ earnings for 2021 are expected to increase 25% year over year.

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