China: HNA to buy Virgin Australia stake

Virgin Australia on Tuesday said China’s HNA Aviation will buy a major stake, giving a vital cash injection and greater access to the surging Chinese tourism market just as top shareholder Air New Zealand plans to sell out.

The proposed deal will see HNA Aviation, the largest private operator of airlines in China, invest $114 million through an equity placement, giving it a 13 percent stake with plans to go up to 19.99 percent.

The pair plan to introduce direct Australia-China flights and co-operate on frequent flyer programs and code-sharing. While the deal bolsters Virgin Australia’s finances, it gives HNA Aviation, owner of China’s 4th-biggest carrier, access to a lucrative market as its parent extends a $10 billion push overseas to rival the country’s state-backed airlines.

“This is a strategically important alliance,” Virgin Australia Chief Executive John Borghetti told reporters. China was Australia’s fastest-growing and most valuable inbound travel market, he said.

“They’ve discussed their desire to get (to 19.99 per cent) as quickly as possible.”

New Virgin Australia shares will be issued to HNA Aviation at A$0.30 each, representing a 7.1 percent premium to Monday’s closing price. The shares closed at A$0.30 on Tuesday.

Virgin Australia requires the cash injection to cut debt amassed, in part, by its expansion out of the low-cost carrier market to compete with Qantas Airways Ltd.

The deal is separate to Air New Zealand’s plans to sell its stake in Virgin Australia, which will represent 22.5 per cent of the airline after the diluting impact of the new share issue is taken into account.

Full Content: Reuters

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