Malaysia Airlines parent company may consider a green tax as sustainable fuel strains airlines

KUALA LUMPUR, Malaysia (AP) — The head of Malaysia Airlines' parent company said Monday he doesn't rule out a green tax on passengers to help offset high costs of sustainable aviation fuel — a move that would only further raise ticket prices.

The comments by Malaysia Aviation Group’s Capt. Nasaruddin A. Bakar came as airlines worldwide are trying to cut carbon emissions while grappling with prohibitive costs and limited availability of sustainable aviation fuel, known as SAF.

Neighboring Singapore was the first in the world to announce a government-mandated green aviation tax from January 2027, with charges varying by destination and cabin class.

“We are looking at all options,” Nasaruddin told The Associated Press on the sidelines of an aviation sustainability conference. “Consumers must be able to afford it. The airline must be able to afford to buy it."

The International Energy Agency says aviation emissions contribute about 2.5% of the annual global carbon emissions. With aviation demand rising, the U.N.-backed International Civil Aviation Organization has set a goal of zero net carbon emissions for 2050.

Using SAF could cut about 65% of the industry’s emissions, it says.

SAF is generally produced from renewable feedstocks such as used cooking oil, waste fats and agricultural residues. It can be blended with conventional aviation fuel for use in existing aircraft. But it is much more expensive than conventional jet fuel, and production capacity and access to sustainable feedstocks are key constraints on its wider use.

SAF currently accounts for under 1% of global jet fuel use, according to the International Air Transport Association.

Nasaruddin said his group will focus on fleet renewal and also on the use of SAF as part of its commitment to cut emissions. Malaysia Airlines is already modernizing its fleet with orders for 40 fuel-efficient Airbus A330neos and 55 Boeing 737 MAX jets.

While the decision on a green tax is up to the government, Nasaruddin said regulators, fuel suppliers and airlines must work together to lower SAF costs, warning that passing the full expense to consumers could make air travel less attractive.

He said the group faces pressure from higher conventional jet fuel prices amid the Iran war, and has limited scope to recover increases through ticket prices. The same principle would apply to SAF, he said, adding that the extent to which costs could be passed on would depend on the price of the fuel.

“If the cost is not that high, maybe some more of it can be passed on to the passenger,” he said. “If the cost is just too high, we won’t be able to do that.”

He added that he doesn't rule out further price increases.

“I don’t have a crystal ball,” he said.