The stock of SpiceJet crashed 6.55 per cent to Rs 37.80 and that of Jet Airways tumbled 4 per cent to Rs 559.90 on Thursday after Malaysia's AirAsia Bhd said it plans to launch a regional airline in association with the Tata Group.

According to analysts, this could put further pressure on the avaition sector, as it is already in the midst of pricing war.

"We think this is negative for the Indian carriers, especially SpiceJet given its major presence in Chennai and Tier II/III cities exposure. With traffic under pressure, it would be challenging to sustain higher yields. The entry of new players could put pressure on pricing," said JP Morgan in its report.

The earnings impact on AirAsia could be limited in the near term but investors’ reaction to this deal will likely be mixed or on the negative side, added JP Morgan report.

Jet Airways early this week offered discounts on 20 lakh seats to garner volumes during the impending lean season.

SpiceJet had offered similar concession to customers last month. Reports suggests even Air India is likely to join the price war.

The debt-ridden Kingfisher Airlines, however, jumped 5 per cent, as investors expect a deal soon particularly after the company settled wages for some of its employees.

Kingfisher Airlines, which has not flown since October, has been gaining at the bourses after its group holding firm United Breweries (Holdings) hiked its loan limit for the ailing carrier to Rs 750 crore from Rs 300 crore.

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