China's biggest private airline operator set to take a 13 per cent stake in Virgin Australia, boosting the Australian carrier's access to the burgeoning Chinese travel market.
Australia's second-biggest airline has agreed to form a strategic commercial alliance with HNA Aviation Group, with HNA also making a $159 equity investment in Virgin to take a shareholding of about 13 per cent.
HNA Group plans to progressively increase its stake in Virgin to 19.99 per cent, the Australia carrier said in an announcement on Tuesday.
The development comes as Virgin's biggest shareholder, Chinese investment in Virgin Air New Zealand is looking at a full or partial sale of its 26 per cent stake.
Chief executive John Borghetti was upbeat about the opportunities that lie ahead.
'The Chinese travel market represents Australia's fastest growing and most valuable inbound travel market, with inbound passengers from China increasing by approximately 18 per cent per year since 2010,' Mr Borghetti said on Tuesday.
In 2015, more than one million Chinese travellers visited Australia, spending about $8.3 billion. By 2020, almost 1.5 million Chinese travellers are expected to visit Australia in a market expected to be worth up to $13 billion, according to Mr Borghetti.
HNA through its subsidiary, HNA Innovation, will buy shares in Virgin Australia at 30 Australian cents a share under the equity investment.
That represents a premium of 7.1 per cent to Virgin's closing share price on May 30.
Virgin Australia said its capital structure review is ongoing and that HNA was committed to supporting the outcomes of the review and plans to increase its shareholding over time up to 19.99 per cent.
HNA's member airlines fly more 77 million passengers annually on nearly 700 routes to more than 200 destinations in China and around the world.
The Chinese giant also has strategic investments in other aviation supply chain businesses, including aircraft leasing, cargo, ground handling services, hotels and travel agency chains, according to Virgin Australia.
Virgin shares were up on cent to 29 cents in early trade.
Sky News Australia
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