Editor's note: Read more coverage about the race for a sustainable aviation fuel here.
Lufthansa will team up with Australian biofuels company Algae.Tec to build a large-scale plant producing aviation fuels from algae.
The two companies signed a collaboration deal earlier this week for the facility, which is due to be sited in an unnamed European country adjacent to an industrial CO2 source.
Under the terms of the deal, the German airline will arrange all of the funding and purchase half of the fuel produced. Algae.Tec will manage the project and receive license fees and profits.
Algae.Tec said the agreement forms the base for "long-term cooperation" between the two companies for "the industrial production of crude algae suitable for conversion into aviation kerosene and conventional diesel fuels."
A Lufthansa spokeswoman told news agency Reuters the plans are still in the early stages and yet to be given final approval by the Lufthansa board.
No details have yet been given as to when the plant will begin producing the fuel, how much it may cost or how large it will be.
Algae is one of a number of feedstocks being considered for greener fuels that avoid the land use change and sustainability issues of crop-based biofuels.
Lufthansa had been conducting tests of a biofuel mix during domestic and international flights, but said in January it was canceling the experiment after being unable to find sufficient sustainably-sourced supplies.
Next page: British Airways takes on reducing the transatlantic flight footprint