HNA to purchase stake in Virgin Australia

31 May 2016 by Clement Huang

HNA Aviation Group has agreed to purchase a 13 per cent stake in Virgin Australia.

Virgin Australia's international business class 

The A$159 million (US$114 million) deal will see direct flights launched between China and Australia, as well as codesharing routes and offer reciprocal frequent flyer benefits for customers. 

According to Virgin Australia’s chief executive John Borghetti, flights between China and Australia will start from 2017, operated by both Virgin and HNA aircraft.

HNA’s portfolio of airlines includes: Grand China Airlines, Hainan Airlines, Tianjin Airlines, Lucky Air, West Air, Yangtze River Express.

While the group has not revealed which airlines will begin flying to Australia, Hainan Airlines and Tianjin Airlines are the likeliest candidates. The former already operates a seasonal service to Sydney, while the latter appears to be targeting long-haul routes, as seen from the upcoming launch of flights to London (see here) and Moscow. 

Lucky Air and West Air could also make interesting options; both low-cost carriers are part of the U-Fly Alliance (see here) which does not currently have a presence in Australia. By providing non-stop links between China and Australia, Lucky Air and West Air would be able to leverage the strong regional network of their alliance members and compete with LCCs such as Scoot and Jetstar that do fly down under. 

It should be noted that the 13 per cent stake that HNA is purchasing is not part of the 26 per cent stake held by Air New Zealand, which the airline is looking to sell. Instead, the shares held by Virgin Australia’s four major stakeholders, Air New Zealand, Etihad Airways, Singapore Airlines and Virgin Group will be diluted in order to accommodate HNA.

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Clement Huang

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