John D,
Yes, it is possible but I think unlikely.
Could they produce enough to supply the airlines ?
Would they be allowed to use it, or would it be reallocated to food
production and food transport ?

One figure I saw for algae production was that to supply Europe would
require an area the size of Ireland.
That was using ponds, if I remember but tanks might be different.
Either the Energy Bulletin or the Oil Drum has a algae production
archive on the subject.

Anyway they would have to produce 6.8 Million barrels a day and
distribute it separately. 85 Mbd x 8%.
Have you seen any production quantities quoted ?
Algae is probably one of the only viable possibilities but I just
can't see it being done on the scale required.

You may be right about the area required for Europe - but I am not sure what this means in terms of % land area. The algae option would become more attractive if it worked with saline water. There are large parts of Australia, for example, that could be converted to algae production without chewing up agricultural land.
Keep in mind too that planes are unusual in that they really do appear to need liquid fuels. Most of the other applications can be replaced by clean electricity and/or the use of bio-wastes. So the future algae area requirement for Europe might drop to less than 10% of the land area of Ireland.
In addition it is worth noting that the efficiency of planes is improving all the time. The high percentage of airline costs that are fuel related is going to put even more pressure on fuel efficiency and the move to radical designs. See, for example, http://www.gizmag.com/go/7710/

John,
I read that link, Interesting but somehow I don't think the
industry is going to have the funds for such a massive restructure.
It might be something that will keep the very rich flying but the
rest of the mob will be going by sea.

The problem is without growth, there will be no extra income to
finance loan repayments. This is what has caused the credit squeeze.
Who would lend money to airlines now ?
Hence the plane order cancellations.
Which gets us back to the proposed new additional Sydney Airport.
By the time it is built it won't be needed.
Kingsford Smith will by then be much bigger than needed.

This a classic watch this space job.

Apart from the odd yankee submarine & aircraft carrier, modern ships all run on fossil fuels, so they will be just as difficult to justify in the future as aircraft. I can't imagine it would be practical to build commercial liners with nuclear reactors, so its likely that ships as we know them will disappear around the same time as commercial aircraft. I believe it may be possible to keep light planes in the air indefinitely even with dramatically reduced space to grow crops for ethanol, but the use-by date for Boeing & Airbus products must be fast approaching. The effects of climate change are likely to hit much earlier than most realize too, putting extreme pressure on agricultural production .... maybe not far from the time when fossil fuels becone financially impractical.

kadaitcha;
Well ships are the most efficient users of fuel.
I did see a figure that compared them with trucks, but I have forgotten
what it was. I remember that it was similar to trains but better, and
trains use 1/8 the fuel per ton mile than trucks.

In any case what is wrong with wind jammers ?
The world was explored and globalisation started with them.
Which reminds me, an English naval architect was given a contract a
year or so back to design a full rigged ship.

Wind powered ships were a mere fraction of the size of contemporary passenger liners. There is no way wind powered ships could replace fossil fuelled ones given present population, usage, labour costs & time constraints, mind you that won't be a problem when the world population is down to two billion or less. One has to wonder how much life is left in big ships anyway, seems the GFC might well spell the end of such frivolity.