Virgin-HNA deal tipped to spur tourism

The expansion of HNA group is tipped to bolster inbound tourism among China’s 1.37 billion residents.

Once in Australia, the average Chinese tourist will take an estimated two or three domestic flights. Picture: Luke Marsden.

The Australian airline and tourism markets are likely to get a boost from the expansion of China’s biggest private airline operator.

HNA Group and Virgin Australia will start direct flights on the increasingly busy China-Australia route from next year as part of a new strategic commercial alliance.

The Chinese giant will also buy a 13 per cent stake in Australia’s second largest airline, which is believed to be HNA’s first direct investment in the country.

Macquarie Equities analyst Sam Dobson believes the alliance will stimulate demand and inbound tourism from China - which boasts a population of 1.37 billion and a growing middle class.

“It’s a large market; there’s expected to be significant demand for many years to come,” Mr Dobson said.

“Its almost like we’re starting to scratch the surface, but it is an untapped market.” The alliance will give Virgin a presence in China, where it is playing catch up to staunch rival Qantas.

The main players flying between Australia and China are China Southern, China Eastern, Air China, Qantas and its budget carrier Jetstar.

Once in Australia, the average Chinese tourist will take about two or three domestic flights, according to Blake Moore, industry analyst at the CAPA Centre for Aviation.

Then there’s spending money on food, drinks, clothing and other services, John O’Sullivan, managing director of Tourism Australia, said.

International visitors to Australia spent a record $37.9 billion in the 12 months to the end of March, up 17 per cent from a year earlier, according to Tourism Research Australia.

The biggest contribution came from Chinese tourists, whose spending jumped 38 per cent to $8.9 billion, according to TRA. By 2020, almost 1.5 million Chinese travellers are expected to visit Australia each year.

HNA’s vast operations across real estate, financial services, tourism, logistics and aviation are primarily in China.

The group has a fleet of more than 820 aircrafts that fly to more than 200 cities around the world, and serve 77.4 million passengers annually, according to its website.

HNA operates Hainan Airlines, Tianjin Airlines, Deer Jet, Lucky Air, Capital Airlines, West Air, Fuzhou Airlines, Urumqi Air, Beibu Gulf Airlines, Yangtze River Airlines, Guilin Airlines, My CARGO, Africa World Airlines and Aigle Azur.

The alliance and investment deals are subject to regulatory approval in Australia and China.

AAP