Air New Zealand is aiming to meet at least 10 percent of its annual fuel needs from "environmentally sustainable" sources by 2013.

Chief executive Rob Fyfe today said the airline was growing increasingly confident that commercial quantities of environmentally sustainable fuels that met all its stringent criteria would become available over the next few years.

An Air New Zealand executive had previously announced the airline would be using a biofuel made from the jatropha bush on a test flight later this year.

Today Mr Fyfe said the Boeing 747-400 Rolls Royce powered test flight, the first on a large passenger aircraft using fuel sourced from jatropha, was expected to be in Auckland in the last quarter of this year.

It was subject to final regulatory approvals and fuel testing by the engine manufacturer.

The jatropha oil being used for the test flight comes from south eastern Africa and India. It was sourced from seeds grown on environmentally sustainable plantations, Air NZ said.

The company's criteria for sourcing the jatropha oil was that the land it was grown on was neither forest land nor virgin grassland within the previous two decades.

The quality of the soil and climate was such that the land was not suitable for the vast majority of food crops. Also, the plantations were rain-fed and not mechanically irrigated.

"Jatropha satisfies all our criteria and furthermore it is likely to be available in the necessary commercial quantities to meet our needs within five years," Mr Fyfe said.

"The challenge in the next phase is to develop a robust supply chain model and we are quite open to working with like-minded partners, including the New Zealand Government, on the development of refinery and delivery opportunities."

He also pointed out that jet fuel prices had recently been as high as $US174 ($NZ225.50) a barrel, compared to a cost for jatropha that was at least 20 to 30 percent cheaper.

Jatropha was unlikely to be the only fuel that Air NZ was involved in testing, Mr Fyfe said.

"Algae presents some extremely exciting possibilities for the aviation industry and around the world hundreds of scientists are working to crack the process of turning it into commercial quantities of jet fuel."

Air NZ said it expected to use at least a million barrels of environmentally sustainable fuel annually by 2013.

Also today, Air NZ general manager airline operations Captain David Morgan said the airline was now using 36 million litres less fuel annually, compared to when it started a fuel savings initiative just over three years ago.

Based on current fuel prices that was saving $43 million a year, he said.

The flight operations programme had so far reduced carbon emissions by 91,000 tonnes.

Air NZ had a goal of topping 100,000 tonnes of savings within five years and now looked like beating that by almost two years, Capt Morgan said.