There is nothing wrong with Teflon tape if it is used properly. Just make sure it is all captured between the threads so that of it comes loose inside the fitting.
As an alternate you can use thread sealing Loctite. It is an anaerobic bonding and once it is cured, it is inert. Again, you only put it on the male threads, a thread or two away from the air passage.
As
@Perryed mentioned, this fitting doesn't have the sealing nipple, therefore there is no chance of making a metal to metal seal.
I don't know if a Teflon washer will work inside. I just ordered one fitting to take a look at it. I don't know if there is a nice flat surface for the washer to seal. It may work, but I will not know until I actually see one.
I am also going to try an O-ring. That will be my preference. I often use Metric O-rings because they come in a variety of thickness (1mm, 1.5mm, 2mm, etc.). I have found a lot more flexibility in finding the best fitting O-ring when I look at the Metric selection. I buy them from McMaster Carr. They have a great selection. I do have to buy them in bags of 50 or 100,but they are not that expensive and I end up with a few spares.