India's SpiceJet hits 2-year low after aviation regulator halves capacity

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FILE PHOTO: A SpiceJet Boeing 737 passenger aircraft takes off from Sardar Vallabhbhai Patel international airport in Ahmedabad

BENGALURU (Reuters) -Shares of India's SpiceJet fell as much as 9.3% on Thursday, a day after the country's aviation regulator ordered the budget carrier to slash its approved fleet to 50% this summer for eight weeks, citing multiple safety snags.

The Director General of Civil Aviation (DGCA) also said on Wednesday that the domestic airline will be subjected to "enhanced surveillance".

SpiceJet sought to reassure its customers and said there was "absolutely no impact on its flight operations" after the DGCA order.

Earlier this month, the watchdog had issued a warning notice to SpiceJet after a review of incidents, which included a side windshield outer pane that cracked mid-flight and a malfunctioning indicator light.

"SpiceJet is taking measures for arresting the trend of incidents. However, the airline needs to sustain these efforts for safe and reliable air transport service," the DGCA said in its order on Wednesday.

The move comes within days after India's aviation ministry told the parliament that the DGCA did not find "any major significant finding or safety violation" in SpiceJet.

SpiceJet shares, which touched on Thursday their lowest levels since March 2020, are down about 44% so far this year.

"Domestic air travel demand tends to be very weak in September quarter, and thus, fares tend to drop on a quarter-on-quarter basis. This year, with SpiceJet's capacity curtailed, the industry should be able to support better pricing," Morgan Stanley analysts said in a note.

Shares of InterGlobe Aviation, the operator of India's biggest airline IndiGo, rose as much as 2.9%.

Indian airlines, which are on the cusp of recovery after being choked by travel closures during peak COVID-19 pandemic, have also been affected by higher aviation turbine fuel costs.

(Reporting by Nallur Sethuraman in Bengaluru; Editing by Sherry Jacob-Phillips)

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