China’s HNA to buy Virgin stake as Air New Zealand looks to exit

By: |
Sydney | Updated: May 31, 2016 10:23:36 AM

The proposed deal will see HNA Aviation, the largest private operator of airlines in China, invest A$159 million ($114 million) through an equity placement, giving it a 13 percent stake with plans to go up to 19.99 percent.

New Virgin Australia shares will be issued to HNA Aviation at A##IMG-CONTENT##.30 each. (Reuters)New Virgin Australia shares will be issued to HNA Aviation at A##IMG-CONTENT##.30 each. (Reuters)

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 A$159 million ($114 million) through an equity placement, giving it a 13 percent stake with plans to go up to 19.99 percent.

The pair planned to introduce direct flights between Australia and China and co-operate on operations such as frequent flyer programmes, code-sharing and lounge access.

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

“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 share price rose as high as A$0.30 shortly after the announcement, before easing to A$0.295 by midday.

“Strategically, any involvement in the China market is very much a positive for them and clearly the additional capital will be useful,” Bell Potter analyst John O’Shea said, referring to Virgin Australia.

Virgin 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.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.