HNA Group Buys Virgin Australia Holdings Stake
31st May 2016
With speculation and rumor as to who (if anyone) will buy Air New Zealand's stake, Virgin Australia Holdings Ltd has agreed to sell a 13 per cent stake to HNA Group for AUS$159 million (US$114 million).
HNA Group, owned by billionaire Chen Feng, is also of a mind to increase its stake in Virgin Australia over time to 20 per cent. By entering VA's pool of shareholders, it has effectively diluted Singapore Airline's stake from 23.1 per cent to 20.1 per cent, Etihad's from 25.1 per cent to 21.8 per cent, Virgin Group's from 10 per cent to 8.7 per cent and Air New Zealand's stake from 23.1 per cent to 20.1 per cent. Again, Air NZ has decided to sell its stake in the Australian airline.
Speaking of major shareholders, Singapore Airlines was consulted and agreed to the deal, while Air New Zealand wasn't, given that it no longer holds a seat on Virgin Australia's board. Neither company agreed to comment on the deal with HNA Group.
In a statement from Tuesday, HNA Group said it will soon appoint someone to Virgin Australia's board.
After the announcement, Virgin Australia's stock went up 7.1 per cent to 30 Australian cents. Despite the rise, the stake was still 46 per cent lower than what it was in April, 2015.
Speaking about the new alliance with HNA and what it would bring to Virgin Australia and its customers, John Borghetti, Chief Executive Officer of the airline said:
"We carry almost no traffic from China on our domestic network. This will change the dynamics. The way that China is growing, direct services in and out of China are very important."
Currently, Virgin Australia's rival Qantas Airways dominates the Australia-China routes, but with the partnership with HNA Group, VA is planning to add direct flights to and from China of its own. This should happen next year.
HNA Group is in somewhat of a shopping spree when it comes to airlines. Just last month, they bought Gategroup Holdings AG, an airline catering company from Switzerland for AUS$1.4 billion, while yesterday Air France revealed it is in talks with HNA to sell 50 per cent of its catering unit Servair to it.