KUALA LUMPUR (April 30): Capital A CEO Tan Sri Tony Fernandes said the low-cost carrier, which will soon merge with AirAsia X Bhd (AAX), to incorporate a “sustainability fee soon”.

“We're also incorporating a sustainability fee in our airfares soon, exclusively for carbon offset projects, prioritising investments in our region through initiatives like Corsia (Carbon Offsetting and Reduction Scheme for International Aviation) for a globally balanced approach,” he wrote a letter to shareholders that was filed to Bursa Malaysia.

However, Fernandes did not reveal details on this sustainability fee.

Fernandes said environmental, social and governance (ESG) is increasingly non-negotiable for responsible business and all stakeholders, especially the government, must play their part.

“Our approach to sustainability is threefold: maintaining profitability, managing tourism to preserve destinations, and targeting carbon neutrality by 2050 via carbon credits, technology, and fuel efficiency,” he said.

Fernandes said while sustainable aviation fuel (SAF) is a crucial area for the industry, such alternative jet fuel is not yet a viable reality as it is expensive and faces significant logistical challenges.

In February this year, Transport Minister Anthony Loke was reported as saying that the government had reached an agreement in principle to allow airlines to impose additional fees to cover their carbon emissions.

Loke said certain airlines would adopt this fee, which is not mandatory for all airlines, to buy sustainable aviation fuel, while others can use it to pay carbon credit to offset their carbon emissions. At the time, Loke was commenting on Singapore's decision to impose a green fuel levy on flights from 2026, and whether Malaysia would do the same.

Loke also said then that airlines had yet to charge the fee then as certain amendments would have to be made first under the Malaysian Aviation Consumer Protection Code 2016 by the Malaysian Aviation Commission.

Meanwhile, Fernandes said although global geopolitical turbulence continues and jet fuel prices rose in the first quarter, he is confident that Capital A can deliver improved returns and profitability to shareholders this year.

“I remain hopeful of a downtrend of jet fuel prices by year end. I am also optimistic for a favourable shift in the US dollar against key Asean currencies, which alongside market expectations of further interest rate cuts in 2025 would be a significant boon for us, given that 70% of our costs are denominated in US dollars,” he said.