By Brenda Goh
China's aviation regulator will cut flights by Air China's Boeing 737 fleet by 10 percent and cancel the licenses of the pilot and co-pilot involved in an emergency descent last week, Chinese state television said on Wednesday.
The Civil Aviation Administration of China (CAAC) will also launch a safety crackdown on the state-backed Chinese flag carrier for three months and fine the airline 50,000 yuan ($7,460), China Central Television said on its WeChat account.
The cuts to the carrier's Boeing 737 flight hours amount to 5,400 hours a month, it added. It also suspended the licenses of other staff involved in the emergency incident, which was linked to a co-pilot smoking in the cockpit.
Air China shares fell as much as 1.4 percent in Hong Kong in response to the safety crackdown, before recovering slightly, against a 0.5 percent rise in the Hang Seng index . The stock is down nearly 40 percent in Shanghai so far this year, amid a falling yuan and higher oil prices.
BOCOM International analyst Geoffrey Cheng said the punishment would likely have an impact on Air China's flight schedules, especially as it entered a peak travel season, but could also prompt the airline to rationalize its network to cut poorly performing routes.
"It could have pros and cons," he said.
The airline and the CAAC did not respond to Reuters' requests for comment.
An Air China Boeing 737 aircraft was flying to the Chinese city of Dalian from Hong Kong on July 10 when it dropped to 10,000 feet (3,048 m), with oxygen masks deployed. Then it climbed again to continue to its destination.
Air China operated 269 Boeing 737s out of its 655-strong fleet at the end of December, according to its full-year report issued in March. It has 311 Airbus 320 and 321 jets.
The CAAC often levies punishments when it finds airlines or aviation staff guilty of violations.
Last year, it fined Gulf airline Emirates [EMIRA.UL] 29,000 yuan for committing two safety violations in Chinese airspace and barred the carrier from expanding its operations in China for six months.
In 2015, it ordered Beijing-based Okay Airways to cut its flights by 20 percent and fined it 500,000 yuan for overworking its pilots.
(Reporting by Brenda Goh and Beijing Monitoring Desk; Editing by Stephen Coates)