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Chinese move in on Virgin Australia

Virgin Australia seems destined to fall under Chinese control after its main shareholder, Air New Zealand, sold a major part of its stake to Nanshan Group, a conglomerate with multiple industrial interests. The deal will frustrate any ambitions other shareholders, Singapore Airlines or Etihad, may have had to take control of Australia’s second airline.

It is only two weeks since Virgin brought in the HNA group, which owns Hainan Airlines, as an additional shareholder, without telling Air New Zealand, even though it diluted down its stake from 25.9% to 22.5%, as well as that of other shareholders.

Air New Zealand has now made life more complicated for Virgin’s pressured CEO, John Borghetti, by introducing an entirely new shareholder, one with big trading interests in Australia, including aluminium, bauxite, textiles, finance, property, tourism and health. Its interests in Virgin are in developing the fast expanding tourism and educational links between China and Australia.

John Borghetti

The move can only benefit Australia’s number one carrier, Qantas, which is profitable, well managed. Qantas has a coherent marketing plan, a place in the One World structure and an alliance with Emirates on flights to Europe. By contrast Virgin Australia now has shareholders with diverse and conflicting interests: Persian Gulf based Etihad, South East Asia’s Singapore Airlines, and mainland Chinese carriers. The company also needs urgently to raise cash, which will dilute shareholders, (including a rump of private investors) still further.