Airlines debate passing carbon offset cost to customers

As global airlines prepare for the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) rollout in 2027, Indian aviation players say that the cost of buying carbon credits to offset carbon ultimately must be borne by customers.

CORSIA is a global initiative of the United Nations-run International Civil Aviation Organization (ICAO) to limit carbon emissions from international aviation. It enters a mandatory phase for most major aviation countries.

CORSIA requires airlines to offset emissions that exceed 2020 levels by purchasing eligible carbon credits, and they can reduce their offsetting burden by using sustainable aviation fuel (SAF) that meets ICAO standards. However, the availability of SAF globally is negligible compared to demand.

India has set a target of 1% SAF blending with jet fuel in 2027, 2% in 2028 and 5% in 2030. However, most airlines say they are not yet prepared to meet the targets and that it does not make economic sense unless the government is ready to absorb the extra cost associated with the transition.  

Ajay Singh, CMD of SpiceJet, says airlines cannot be expected to bear the cost, keeping in mind the fact that fuel is the largest input cost in aviation and if airlines must pay 2.5x the cost of fuel then airlines will find it difficult to survive.

“SpiceJet had flown the very first SAF flight in India from Dehradun to Delhi. We made this sustainable aviation fuel at the Indian Institute of Petroleum. We’ve tried hard speaking to the Petroleum Ministry, trying to figure out ways in which SAF can be done at a reasonable cost. We haven’t found a solution. It can be done, but this is much more of a national effort than just an airline effort,” Singh said during a panel discussion at MakeMyTrip Foundation’s India Travel and Tourism Sustainability Conclave 2025.

India is the third-largest aviation market in the world and the industry account for about 1% of the country’s emissions, which is less than the global average.

Providing a cost analysis of SAF blending in airfare, Aditya Ghosh, Co-founder of Akasa Air, says, “On a typical Delhi-Bombay flight, if you have 10% blended, it means that you are spending approximately Rs 150-200 more. Now, if you go all the way up to 50% blended, then that will jump to about Rs 1,000. On a base fare of Rs 5,000, that’s a lot of surcharge or premium that the passenger will have to pay.”

He further said that India will be flying the youngest fleet in the sky compared to the world by 2030, which means that we will be emitting the least.

“It is not a cause of the industry; it is what the consumers are willing to do. You buy something from Amazon, we pay more because they have gone from plastic packages to sustainable packaging. Today, you pay a surge price for an Uber. So, you must pay more, and passengers are paying for it. So, look in terms of the offsets, at some point in time, you must begin,” added Ghosh.

Indian domestic players say that they have been working to improve operational efficiency through technology. However, offset will add an extra burden to the highly competitive domestic market.

“If we are not going to have SAF production up, we are going to have this additional impact on us as an airline and I don't know what impact it will have on the final prices, and I don't know what impact it will have on demand. But we are not going to have easy choices, and it is closer than all of us think,” said Air India Express MD Aloke Singh.

He said that Air India Express is getting newer generation aircraft that bring fuel efficiency.

“In FY23 (pre-merger), only 10% of our aircraft were new generation; it stands at 50% in FY25 and will jump to 75% in FY26,” he said.