Video apparently from inside the plane shows an elderly man standing in the aisle face-to-face with an air steward
He becomes heated, pointing his finger at passengers and shouting at one: 'Say it!'
A 'scared' passenger on the MH122 Airbus-a330 flight from Sydney to Kuala Lumpur said the man 'unzipped his backpack, put his hands in, made barely veiled threats about having something dangerous in it screaming at the top of his lungs right next to my seat'.
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It is understood that members of the flight crew subsequently examined the bag and did not find anything dangerous in it.
The plane landed back in Sydney just before 4pm and was isolated at the end of a runway, while the other passengers were moved to another part of the jet.
After the situation was brought under control, a 45-year-old man was arrested by Australian Federal Police (AFP) and other passengers were safely evacuated from the plane.
He is expected to be charged later tonight, an AFP spokesman said.
'An emergency response plan was enacted and an evacuation was initiated once it was deemed safe for passengers and crew,' they said.
A passenger on the flight tweeted that 'every one has been off the plane safely, and in a lounge. Police will interview everyone before further instructions.'
A video taken on board the plane showed the passenger being confronted by an air steward.
A traveller on board the flight captioned the video: 'Sydney Airport is suffering at the hands of this lunatic.
'Praying for everyone's safety and well being. Where is airport security?! It's been well over an hour since the plane has landed back!!!'
In a second video later he added: 'This lunatic is getting aggressive & poor people on board are still waiting for security to get in and take him to Allah through the right process.
The man who has caused a Malaysia Airlines flight to return to Sydney on Thursday is pictured
Another passenger onboard the flight also tweeted: 'This guy should have been stopped at the gate before boarding, his actions were unsettling from start.'
The captain of a separate plane that was supposed to leave Melbourne for Sydney told passengers their flight would be delayed for at least a couple of hours.
'He just announced the situation in Sydney just got worse and is a high risk security situation. Our flight has been delayed two hours,' a passenger on the flight told Daily Mail Australia.
A passenger on the Malaysia Airways flight tweeted that the 'Airport is put under restriction since we are blocking main taxi way out of Runway 16R.
'Fire trucks all around. Fool that threatened staff must be blacklisted.'
The plane left Sydney at 1.40pm but landed back at the airport at 3.47pm when the Australian Federal Police (AFP) was called to meet the plane on arrival.
'The AFP is responding to an emergency incident at Sydney International Airport,' an AFP spokesperson told media.
A Sydney Airport spokesperson said: 'As a result of this afternoon's incident, there have been 32 domestic flights cancelled (16 inbound + 16 outbound), with delays of up to 90 minutes for other domestic flights.
'Currently no international flight cancellations. Passengers are encouraged to check with their airline regarding the status of their flight.
In a statement, Malaysia Airlines said: 'In the interests of safety, the commander of the flight made the decision to return to Sydney.
'The flight, carrying 194 passengers and five crew onboard, landed safely at 3.47pm hours.
'The safety and comfort of our crew and passengers are of upmost importance to Malaysia Airlines.'
The plane - which can seat between 250 and 406 passengers - is currently sitting on the end of the runway with emergency vehicles nearby.
Passengers were told they would be bussed to the terminal once authorities were onboard but have since allegedly been moved to a separate part of the jet.
One traveller posted on Twitter: 'All passengers are being moved to the back of plane now.
'People are being moved to another zone in the plane, far away. I think security will be here soon.'
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