Virgin Australia will team up with China's largest private airlines operator in a deal it says will help it capitalise on the growing Chinese travel market. 
HNA Aviation Group and Virgin will look to introduce direct flights between Australia and China and co-ordinating code-sharing, frequent flyer programs and lounge access.  
HNA Aviation Group, part of the HNA Group - a Fortune Global 5000 conglomerate - will also 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. 
"The alliance will see us leverage the opportunities offered by China as well as the synergies of HNA's comprehensive aviation supply chain," Mr Borghetti said. 
The deal comes as Virgin undertakes 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. 
Virgin took out a $164 million loan in the first half of the financial year as its unrestricted cash balance fell to $544 million from $839 million a year earlier. That was followed by a $425 million unsecured loan in   March from its four major shareholders, Air New Zealand, Etihad Airways, Singapore Airlines and Virgin Group.
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. 
Air New Zealand had sought to replace Mr Borghetti with its own CEO, Christopher Luxon, but it failed to receive support from other directors and Mr Luxon resigned from the board.  
The kiwi carrier then appointed bankers to review its share, including the possibility of a sale. 
Etihad owns 25.1 per cent of Virgin Australia, Singapore Airlines owns 22.2 per cent and Richard Branson's Virgin Group owns about 10 per cent. 
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. 
More to come