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Aeroflot stock takes off after Russia grounds rivals over coronavirus

MOSCOW (Reuters) - Russian state carrier Aeroflot’s shares have surged 10% since authorities in Moscow suspended commercial flights to China by its Russian rivals to prevent coronavirus spreading.

The logo of Russia's flagship airline Aeroflot is seen on an Airbus A320 which landed after an inaugural trip at the Marseille-Provence airport in Marignane, France, June 1, 2019. REUTERS/Jean-Paul Pelissier/Files

Aeroflot now holds an effective monopoly on Russia-China flights at home and is likely to receive additional volumes of passengers travelling through Moscow to Europe, analysts say. Several rivals have stopped flying to China.

As of Friday, only Aeroflot and four Chinese airlines are allowed to fly commercial routes between Russia and China. Those flights are being routed through a separate terminal at Aeroflot’s home airport to screen passengers for infection.

China has grown into an important market for Russian carriers as the Chinese middle class has boomed. Last year, more than 2 million Chinese holiday-makers travelled to the country.

“Aeroflot has basically become the only carrier for passengers to China, which means even with the fall in overall passenger traffic there could be an increase in its flight load,” Mikhail Ganelin, an aviation expert at Aton, said.

Graphic: Aeroflot's shares outperform MOEX in 2020

Russia’s flights with China are regulated by a bilateral agreement and Aeroflot cannot increase the number of its flights to China or the size of the planes that fly those routes without Russia signing a new deal.

“The maximum that can be extracted from this situation is to fill up the flights they have,” said Boris Rybak, head of the Infomost consultancy.

Aeroflot declined to comment about its flights to China.

Ties between Moscow and Beijing have grown closer since President Vladimir Putin announced a pivot to China as ties with the West plunged in 2014 over Moscow’s annexation of Crimea.

Several of Aeroflot’s rivals on transit routes from China to Europe are no longer flying, including Russia’s S7 and Ural Airlines, and Finnair, Air France and KLM.

“...Given many European airlines have cancelled flights to China, we can assume Aeroflot’s transit passenger traffic could increase at the expense of Chinese passengers who will fly through Moscow to Europe,” Rybak said.

The fall in the price of oil triggered by the coronavirus outbreak could also make fuel cheaper for the carrier.

Aeroflot is one of the best performers on the Russian stock market this year and has risen more than 14% year-to-date, outperforming the broader MOEX index with 2.7% increase.

Reporting by Gleb Stolyarov, Tom Balmforth, Andrey Ostroukh, Alexander Marrow and Olga Popova; Writing by Katya Golubkova; Editing by Tom Balmforth and Lisa Shumaker