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China Southern and Hainan Airlines evaluate Virgin Australia stake to grow tourism potential

Chinese visitors are reshaping tourism flows and aviation opportunities in many markets. This has been readily apparent in Australia, where China Southern in the space of a few years has become a household name, and Chinese tourists are the second largest visitor source. The next manifestation could be a Chinese airline purchasing the stake in Virgin Australia that Air New Zealand is looking to divest itself of. China Southern and Hainan Airlines are evaluating the opportunity, according to the Australian Financial Review.

China Southern would benefit from a stronger local partner after its previous partner Qantas formed a JV with the rival China Eastern. With every Chinese visitor taking two to three domestic Australian flights, an equity stake could allow the Chinese airline to capture back revenue streams. China Southern could also invest as a defensive move. Hainan serves Australia seasonally and its use of Virgin could be more radical, with an outcome of Virgin flying to mainland China and Hong Kong, accessing routes that Hainan's HNA Group (including Hong Kong Airlines) is unable to serve. Hainan already has an airline investment portfolio but Virgin would be its most significant. For China Southern, a Virgin stake could start state-owned Chinese airlines buying foreign airlines as they seek to be at the centre of most things in the world; including, one day, global consolidation.

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