Chinese companies strengthened their grip on Virgin Australia Holdings Ltd as a second conglomerate bought a stake in the carrier, handing a blow to key shareholder Singapore Airlines Ltd (SIA).
Nanshan Group (南山集團) would buy 811 million shares, or about 20 percent of Australia’s second-largest airline from Air New Zealand Ltd at A$0.33 apiece, the carrier said yesterday.
Nanshan’s assets stretch from aluminum to property and include the two-year-old Qingdao Airlines.
HNA Group (海航集團), the owner of Hainan Airlines Co (海南航空), last month said it plans to buy 13 percent of Virgin Australia and struck a code-share alliance with the Brisbane-based airline.
While the Australian carrier is now better placed to tap the Chinese travel market, its disparate shareholders — among them Etihad Airways PJSC — might be harder to manage.
“It’s not a marriage made in heaven,” said Neil Hansford, chairman of Strategic Aviation Solutions, a consultancy firm north of Sydney. “You’ve got two sophisticated legacy-type carriers in Singapore and Etihad mixing with start-up Chinese. I think it would be a very difficult board table to sit around.”
Singapore Airlines in an e-mail declined to comment and a spokesman for Etihad in Sydney had no immediate comment.
The sale is subject to regulatory approvals from Chinese authorities.
If the deal is approved, Nanshan Group would hold about as much as the other partners, making Virgin Australia’s shareholding unique with four airlines as key supporters.
Based in Longkou in China’s Shandong Province, the Nanshan Group also has interests in fabric and garments, real estate, finance, education, tourism and healthcare, according to its Web site, which mentions Shandong Nanshan Aluminum Co (山東南山鋁業) as its sole listed unit.
Last month, billionaire Chen Feng’s (陳峰) HNA Group said it wants to raise its holding to 20 percent over time.
After issuing new shares to HNA Group, Singapore Air was to hold 20.1 percent stake and Etihad 21.8 percent, according to the Australian carrier.
After the Nanshan transaction, Air New Zealand is to be left with 102 million shares, or the equivalent of a 2.5 percent holding in Virgin Australia.
Last month, Singapore Air chief executive officer Goh Choon Phong (吳俊鵬) described the Australian market as “very important.”
He said Virgin Australia was “commercially very important,” partly because the airline could reach remote parts of Australia more easily than Singapore Air.
“We are happy with our stake currently,” Goh said at the time.
Singapore Air has benefited from the Virgin Australia partnership by tapping corporate fliers and reaching Australia’s domestic market. Now the city-state’s flag carrier might risk losing some of that traffic to HNA and Nanshan.
After HNA bought the stake, Virgin Australia said it plans to start direct flights to and from China next year and fly some of those visitors on its network at home.
“This is going to impact SIA’s operations,” said Shukor Yusof, founder of aviation consultant Endau Analytics. “Australia is a huge market for SIA, and SIA has been under pressure from many different fronts and many different airlines.”
Air New Zealand, which had been considering selling all of its 26 percent stake in Virgin Australia, said in a statement the sale would allow it to “focus on its own growth opportunities.”
The carrier’s alliance with Virgin Australia on routes between the two nations would continue, it said.
Virgin Australia said in a separate statement that it looked forward to meeting with Nanshan in coming weeks and would consider an expected request for board representation.
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