AIR New Zealand has flown ahead with plans to sell 20 per cent of its stake in Virgin Australia Holdings (ASX:VAH) with the Kiwi carrier entering into a sale and purchase agreement with Nanshan Group.
Under the agreement, Air New Zealand will sell shares held in Virgin Australia at 33c per share and upon completion, Nanshan Group will have a shareholding of 19.98 per cent of Virgin Australia.
In March this year, Air New Zealand first announced its intent to sell its share while at the time Virgin Australia shrugged off the airline's plan, arguing the company had significantly evolved over the past five years.
Virgin reported a rebound in earnings over the first half of FY16, posting a $62.5 million profit from a $47.8 million loss a year earlier. It was its best bottom-line result since FY10, as costs were trimmed and revenue grew.
However, Air New Zealand says the decision to opt out of the investment in Virgin Australia will help the company park its money elsewhere.
"The sale will allow Air New Zealand to focus on its growth opportunities, while still continuing its long-standing alliance with Virgin Australia and the trans-Tasman network," says Air New Zealand chairman Tony Carter.
Nanshan Group is a privately owned Chinese conglomerate with interests across a range of industries. Its aviation interests include its own emerging airline Qingdao airlines, launched in April 2014.
The sale is subject to receipt of Nanshan Group regulatory approvals from Chinese authorities.
Virgin Australia says it looks forward to meeting with Nanshan Group over the coming weeks to discuss the proposed acquisition.
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