Nanshan set to join Virgin Australia board for the long haul

Virgin Australia’s newest shareholder, Chinese conglomerate Nanshan, is set to bag a seat on the airline’s board.

Nanshan is expected to be joined at the Virgin board by HNA Group.

Virgin Australia’s newest shareholder, Chinese conglomerate Nanshan Group, is set to bag itself a seat on the airline’s board after its chairman confirmed it was a long-term investor in the airline.

In his first interview since Nanshan emerged as the surprise $260 million buyer of Air New Zealand’s stake in Virgin, the conglomerate’s chairman, Jianmin Song, confirmed it was in the ­process of attaining a seat on the airline’s board.

“Nanshan will seek a board seat. We understand that within Virgin’s constitution, any shareholder with 19.9 per cent of its shares is entitled to a seat on its board,” Mr Song — who is known by his English name Jeremy — said in an email interview with The Weekend Australian.

The arrival of Nanshan at the Virgin board will fill the vacant spot left by Air NZ chief Christopher Luxon, who dramatically resigned after he unsuccessfully tried to oust the airline’s boss, John Borghetti.

Nanshan is expected to be joined at the Virgin board by HNA Group, which has been promised a seat for taking a 13 per cent stake in the airline for $159m.

The addition of Nanshan to the Virgin register and the intention of HNA to increase its holding to 19.9 per cent means the Australian airline could soon be 40 per cent-owned by Chinese companies.

The agreement with HNA covers code sharing, loyalty programs, lounge access and promotion of tourism and business travel. Virgin may also lease aircraft from HNA to fly to China.

Virgin and HNA have also applied to Australia’s competition regulator to establish a commercial partnership and alliance, which will include Virgin operating flights to Beijing and Hong Kong from June 1 next year.

But a Virgin spokeswoman said: “A nomination for a ­Nanshan Group representative on the board of the Virgin ­Australia Group will be considered in ­accordance with our ­corporate governance procedures and ­policies.”

Mr Song said there were no plans for Nanshan — which has interests in aluminium and property, as well as its own Qingdao Airlines — to explore any strategic tie-ups with Virgin just yet.

“Nanshan is a long-term investor by nature,” he said.

“Nanshan does not believe it has any more or less influence than other shareholders.

“It will always act in the best interests of Virgin and all its ­shareholders.”

“There is plenty of room for us to work together at a time in the future, when the conditions are right. We believe that there is ample room for co-operation in a given area, and we will discuss any relevant co-operation opportunities in the future when the conditions are right.”

He also said there were no plans to work with Nanshan’s Chinese compatriot, HNA, on aligning their strategic interests.

“We have not had any contact with HNA to date, and we have not contemplated this yet.”

Mr Song said Nanshan was attracted to Virgin as it was bullish on the growth of Chinese tourism into Australia.

“The opportunity to acquire a strategic stake in Australia’s second major carrier appealed to Nanshan’s philosophy of vertical integration and expanding its value chain,” he said.

“Nanshan already owns a domestic airline, Qingdao Airlines, (and) an aviation school, as well as a fleet of corporate jets for charter ... tourist attractions and hotels, golf course and resorts, and we are building a value chain that encompasses aviation and tourism.”

The golf-loving Mr Song knows Australia well, with Nan­shan being a long-term player in the market through links to major companies dating back to the early 2000s.

The company imports about 5000 tonnes of fine wool and has a joint venture with Australian Wool Innovation to develop new hi-tech woollen materials. It also imports four million tonnes of bauxite from Rio Tinto each year.

“Nanshan believes in a bright Australian future and the benefits reaped by both countries as major trading partners,” Mr Song said.

His father, Song Zuowen, founded the company in the village of Qiansong in China’s coastal Shandong province in 1978, just as China was starting to open up to the world.

It is now ranked as one of the 500 top companies in China, but in recent years it has run into ­controversy over claims it was involved in corruption scandals with Chinese officials.