HNA/Hainan stake in Virgin Australia its most significant acquisition yet; & a smart move by Virgin

HNA/Hainan Airlines' 13% stake in Virgin Australia for USD114 million expands HNA's equity airline network outside mainland China to nine airlines on five continents - two airlines more than Etihad has invested in. Even once HNA grows the Virgin Australia stake to 19.99%, as it intends, it will not be HNA's largest in equity or percentage; but it is the most momentous and strategically important yet. It is accompanied by a strategic alliance, subject to approval, through which Virgin Australia will fly to mainland China and Hong Kong.

HNA's past investments have either not met their originally anticipated strategic value (Aigle Azur) or are airlines (Africa World, Comair) that do not have HNA services and are unlikely to be significant in the near future. HNA's Virgin stake is different: Australia is China's largest outbound long haul market after the US but Hainan has had a limited presence. Hainan has previously focused on the US market while regulatory constraints (in both mainland China and Hong Kong) and lack of partnerships have restricted growth.