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VIRGIN Australia Holdings (ASX: VAH) and China's HNA Aviation Group have inked a new commercial alliance to bolster the carrier's presence within the Chinese travel market.
HNA will make a $159 million equity investment in Virgin Australia in the form of new shares as part of the agreement.
The placement will be issued to subsidiary HNA Innovation for 30 cents apiece, which will boost HNA's total stake in the company to about 13 per cent.
As the airline continues to review its capital structure, HNA has signalled intentions to increase its shareholding to 20 per cent over time.
The Chinese aviation powerhouse will also be nominating a director to the Virgin Australia board under the agreement.
The companies will work to establish direct flights between Australia and China, as well as cooperate on commercial functions including code-sharing, frequent flyer programs, lounge access and promotion of tourism and business travel.
Virgin Australia CEO John Borghetti says the company will invest further into the key market by making the most of its new company ties.
"We are pleased to welcome HNA as a new shareholder and strategic alliance partner," says Borghetti.
"The alliance will see us leverage the opportunities offered by China as well as the synergies of HNA's comprehensive aviation supply chain."
According to Borghetti, China represents Australia's most valuable inbound travel market, with the total number of inbound passengers increasing by approximately 18 per cent per year since 2010.
The new alliance will be subject to ACCC authorisation, regulatory approvals from Chinese authorities and other commercial conditions before being finalised.
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