Malaysia Aviation Group said on October 19 that it is examining ways to share the steep cost of sustainable aviation fuel, including through a green surcharge levied on passengers.
Group chief Nasaruddin A. Bakar said carriers must strike a balance between emission-reduction targets and what passengers can afford, warning that passing the full burden of excessively high fuel costs onto consumers could dampen demand for air travel. Neighboring Singapore has already announced it will introduce a mandatory aviation green levy starting in January 2027.
Sustainable aviation fuel is costly, and airlines are considering passing part of the expense to passengers
Speaking on the sidelines of an aviation sustainability conference in Kuala Lumpur, Nasaruddin said the group is assessing various options, including a green surcharge to help cover the extra outlay on sustainable aviation fuel. He noted that consumers must be able to afford tickets, while airlines must also be able to procure fuel that meets emission-reduction requirements.
Sustainable aviation fuel is typically made from renewable feedstocks such as used cooking oil, waste animal fats and agricultural residues, and can be blended with conventional jet kerosene without major modifications to existing aircraft. However, SAF costs significantly more to produce than traditional aviation fuel, and insufficient output and limited supplies of sustainable feedstock also hold back its adoption. According to International Air Transport Association data, SAF still accounts for less than 1% of global aviation fuel consumption.
Nasaruddin said the decision on whether to impose a green levy ultimately rests with the Malaysian government, and that regulators, fuel suppliers and airlines need to work together to bring down SAF costs.
Singapore to roll out aviation green levy in 2027, with charges tied to route and cabin class
In Southeast Asia, Singapore has taken the lead by announcing it will implement a government-mandated aviation green levy from January 2027, becoming the first country in the world to declare such a measure. The charges will vary depending on the traveler's destination and cabin class, and are intended to support the aviation industry's use of sustainable aviation fuel.
As the aviation sector pursues a 2050 net-zero emissions goal, SAF is seen as a key tool for cutting aviation carbon emissions. International Energy Agency data show aviation accounts for roughly 2.5% of global annual carbon emissions. The International Civil Aviation Organization has set a target of achieving net-zero carbon emissions by 2050. ICAO estimates that adopting sustainable aviation fuel could reduce the aviation industry's emissions by about 65%.
Still, the gap between SAF prices and conventional jet kerosene means airlines will face persistent cost pressure as they scale up its use.
Malaysia Airlines orders 95 new aircraft as Iran war pushes fuel costs higher
Beyond considering greater use of sustainable aviation fuel, Malaysia Aviation Group will also cut fuel consumption by renewing its fleet. The group has already ordered 40 Airbus A330neo widebody jets and 55 Boeing 737 MAX aircraft, planning to use next-generation, high-fuel-efficiency models to drive emissions reductions.
At the same time, the Iran war has driven up conventional aviation fuel prices, further adding to carriers' operating costs. Nasaruddin said Malaysia Airlines can pass on only a limited amount of fuel costs through higher ticket prices, and sustainable aviation fuel faces the same problem. He pointed out that if the extra cost of SAF is relatively low, airlines may pass on a larger share to passengers; but if the cost is too high, airlines will struggle to fully recover it through fare increases.
On the future direction of ticket prices, Nasaruddin said further increases cannot be ruled out, though the extent will depend on how fuel costs evolve. With conventional jet kerosene prices rising due to Middle East conflict and sustainable aviation fuel still facing production-cost and supply constraints, Malaysia Aviation Group is bearing both the energy price shock and the funding pressure from aviation emissions reduction.
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