China's largest private airline operator will buy a 13 per cent of Virgin Australia in a deal the Australian airline says will help it capitalise on the growing Chinese travel market. 
HNA Aviation Group and Virgin will introduce direct flights between Australia and a number of Chinese cities, as well as co-ordinate code-sharing, frequent flyer programs and lounge access. 
HNA Aviation, part of the HNA Group - a Fortune Global 5000 conglomerate - will 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. 
Flights will start in the first half 2017, Mr Borghetti said, and be serviced by a mix of Virgin and HNA aircraft. 
Mr Borghetti said at least eight flights a week would depart from major Chinese cities to Australia, and while details have not been finalised, he mentioned Beijing and Hong Kong as attractive options.  
HNA company controls Hainan, China's fourth largest airline and flies over 77 million passenger a year on 700 routes between 200 destinations within China and abroad. 
HNA will be able to nominate a director to Virgin's board as part of the deal.
The Chinese company will pay 30&cent; for each Virgin share - a 7.1 per cent premium on the stock's Monday closing price. Shares jumped 5.3 per cent to 29.5&cent; after the announcement. 
The deal will come as a blow to Air New Zealand, which is trying to sell its 26 per cent stake in Virgin - since diluted to 22.5 per cent by the HNA deal. 
Virgin continues to undertake 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. 
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