Virgin Australia sells stake to China's HNA Aviation
China's largest private airline operator will buy a 13% of Virgin Australia in a deal the Australian airline says will help it capitalise on the growing Chinese travel market.
HNA Aviation Group and Virgin will introduce direct flights between Australia and a number of Chinese cities, as well as co-ordinate code-sharing, frequent flyer programs and lounge access.
HNA Aviation, part of the HNA Group - a Fortune Global 5000 conglomerate - will take a 13 per cent stake in Virgin Australia worth $159 million as part of the deal.
Virgin said on Tuesday morning that HNA would increase its stake in the company to 19.99 per cent over time.
Virgin Australia chief executive John Borghetti said the China was Australia's fastest growing and most valuable inbound travel market, growing at about 18 per cent a year since 2010.
Flights will start in the first half 2017, Mr Borghetti said, and be serviced by a mix of Virgin and HNA aircraft.
HNA company controls Hainan, China's fourth largest airline and flies over 77 million passenger a year on 700 routes between 200 destinations within China and abroad.
HNA will be able to nominate a director to Virgin's board as part of the deal.
Virgin continues to undertake a capital structure review to look at ways to cut debt and optimise its mix of long-term debt, short-term debt and equity to support its rebuild strategy.
The review was launched on the back of growing concerns about the airline's financial position.
Analysts had pointed to Virgin not receiving the full benefits of the fall in the oil price because of its hedging strategy, and it was hurt further by its high US-dollar debt load at a time when the Australian dollar has weakened.
Air New Zealand, Virgin Australia's largest shareholder, said in March it would look to sell all or part of its 26 per cent stake in Virgin after it failed to oust its chief executive John Borghetti.
Aviation watchers tipped Singapore Airlines as the most likely buyer of Air New Zealand's stake, with China Southern, Hainan Airlines and Cathy Pacific also floated as possible buyers.
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