Sunday, July 3, 2016

Is HNA the answer to Virgin Australia's fleet puzzle?
As Virgin Australia aims to spread its wings overseas, Chinese conglomerate and new partner HNA Aviation could step up to the plate with additional aircraft to expand Virgin's international fleet. 
Earlier this year HNA, which ranks as the largest private operator of airlines in China, bought a 13% stake in the Qantas challenger for A$159 million, with scope to extend this to almost 20% as part of an A$852 million capital boost from key Virgin shareholders.
Much of the discussion around HNA's involvement in Virgin has centred on the importance of the Chinese travel market to Australia and the opportunities this joint venture will open up.
Virgin Australia expects to launch daily flights to Beijing and Hong Kong from mid-2017 as part of the HNA alliance, although the airline is yet to confirm which Australian city (or cities) would anchor the two new services.

Virgin's flights would run on an Airbus A330-200, which Virgin Australia CEO John Borghetti describes as being a perfect fit for the route.

Planning ahead...

"The A330-200 is perfect for China, particularly the northern part of China" Borghetti told Australian Business Traveller during a media briefing earlier this month.
"When we initially got the -200s for domestic we did so with a view that we needed them for transcontinental flights but at some point we would need international coverage in Asia, the best A330 for that would be the -200 because it has the range... the A330-300 can't quite make Beijing."
While Borghetti says that "yes, we will categorically fly to China with the Virgin brand," he allows that HNA – through its part-ownership of Hainan Airlines and Hong Kong Airlines - may chip in on one of the two routes.
"Whether it's all Virgin Australia aircraft or not, let's see how that works out. It will be a joint operation, and that's what's important."
Even so, there are obvious questions over the impact of effectively removing even one of Virgin's six A330s from the domestic roster.
The jets, which all sport Virgin's newest business class, are primarily dedicated to the competitive east-west routes of Sydney-Perth and Melbourne-Perth in a fierce battle against a re-energised Qantas and its own A330-200 jets, all of which will have been upgraded with a new lie-flat business class seat within the next few months.

A fresh fleet?

This is where the many arms of HNA Group comes into play.
HNA is the world's fourth largest aircraft leasing company, having earlier this year bought out international aircraft leasing firm Avolon Holdings in a deal worth US$7.6 billion to merge with its existing leasing business Hong Kong Aviation Capital.
This opens the door to Virgin Australia leasing aircraft from partner HNA, beginning with Airbus A330-200s, so as not to crucially reduce capacity on the competitive transcontinental route at the same time as Virgin expands into China.
Beyond a short-term boost to its A330 fleet, and further down the track, HNA's Avolon could smooth the path towards Virgin's choice of its next-generation fleet – a decision repeatedly cast as being between the Airbus A350 and Boeing 787.
"As you go into the 2020s you're obviously looking at what equipment can you bring on, and we haven't made that decision yet" Borghetti says, although he's spoken particularly well of the Airbus A350 in the past.

Is HNA the answer to Virgin Australia's fleet puzzle?

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