HNA Aviation Group, China’s largest private airline operator, is buying a major stake in Virgin Australia for $159 million.
Virgin says the deal, to bring HNA’s holding to 13%, will bring with it access to the rapidly growing Chinese travel market.
“The Chinese travel market represents Australia’s fastest growing and most valuable inbound travel market,” says CEO John Borghetti.
A short time ago, Virgin shares were up more than 4% to $0.292.
In 2015, more than one million Chinese travellers visited Australia, spending $8.3 billion.
HNA says it’s expanding in the airline industry through strategic investments in companies with strong market positions and excellent management teams.
“We are excited to support the Virgin Australia Group through our investment and the strategic alliance,” the company says.
“We look forward to working together to create a seamless travel experience between Australia and to China and to deliver further choice, value and excellence to travellers worldwide.”
The equity investment will in the form of a $159 million placement of new shares at $0.30 each for 7.1% of the company, bringing HNA’s holding to 13%.
HNA Group is a Fortune Global 500 multinational conglomerate. Its member airlines fly 77 million passengers a year on nearly 700 routes to more than 200 destinations in China and around the world.
The China company also has strategic investments in other aviation supply chain businesses, including aircraft leasing (Avalon), cargo, ground handling services (Swissport), hotels and travel agency chains.
HNA intends to increase its shareholding over time up to 19.99%.
Air New Zealand is also exploring options for its 26% slice of Virgin Australia, including a possible sale of all, or part, of its shareholding.
Virgin has returned to profit, with better returns per seat, after a long battle with Qantas. Last month it posted a $62.5 million half year profit, its first since 2010, compared to a loss of $47.8 million the year before.
In March, Virgin announced a 12-month $425 million loan from its major shareholders Air New Zealand (26%), Etihad Airways (24%), Singapore Airlines (23%) and Virgin Group (10%).
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