Virgin Australia plans daily flights to Beijing, Hong Kong

All they need to do is choose cities in China with a catchment area of 15 million+ and fly to SYD or MEL. Done. 

Well Hainan Airlines has a Sydney-Xi'an flight and HNA is also a major shareholder (45% I think) of Hongkong Airlines, which has Gold Coast - HK (via Cairns). One of HNA's other airlines is Capital Airlines, which is going to launch Qing'dao-Melbourne flight in August. Many of HNA Group airlines' bases are secondary cities in China so I suspect there might be more direct flights from those ports to SYD/MEL/BNE (or even OOL/PER/ADL).

Well CX has used all the capacity for HK-based carriers to fly to SYD/MEL/BNE/PER.

HNA could try using VA to fly to HKG instead, as AU-based carriers have plenty of capacity. HX has slots that it could share..

Well said re CX's dominance of the available route authority fm HKG side.

Also, HNA leveraing VA as the main vehicle to grow AU-China/HKG traffic due to VA's relatively unimpeded route authority is exactly what I see as the main justification for HNA to buy into VA.

"HX has slots that it could share.."

This 1 I'm not so certain about....@ best may be a few key HKG slots critical for VA's timing.  HX itself has been in rapid growth mode since transition to become a pure LCC 2.5yrs ago and is planned to accelerate even faster fm this yr onward(e.g. adding 321 by the end of this yr......vs JQ took 5yrs to upgauge fm 320 to 321)....so it doesn't even hv enough HKG slots for itself.  Most importantly, it's projected to achieve profitability quickly(If not already profitable) and being famously independent fm HNA(Well, @ least for local HK folks....U won't find another HNA brand that is managed+marketed so dramatically different than HX).  Given the surprising success of  HX, HNA will hv a hard time to convince/justify HX to surrender slots for VA @ HKG(assuming they're even transferrable per HKG slot award regime).

Sorry I meant UO, not HX which is a diff(but kind of related....) HK based carrier with a separate AOC.

Yes, UO is expanding rapidly and seems to be doing quite well.

HX on the other hand doesn't really know what it is (like AB). It tends to carry mainlanders to leisure destinations, and could probably spare a daily frequency for VA. Their Chinese network ex-HKG should help a VA HKG flight be viable.

To Sanya and Haikou even Shenzhen, Hainan's home bases, then onwards to the others.

For HNA Group or Hainan, SYX, HAK and SZX are indeed large bases for them.  Geographically, all 3 are great as gateways to connect AU flights with domestic flights or even intercon flights.

For purely domestic or domestic-intercon connection to/fm other continents however, their locations are terrible to build true hubs.  This is why unlike elsewhere in China, all 3 hv remained and will remain relying on OD and AU connecting traffic only.....difficult to generate significantly more connecting traffic across China to support growth like other true hubs.

It's just some harmless ramping in my opinion. VA don't have the spare aircraft to make any serious mark on a China route in the short term. I believe the most benefit for VA and HNA is through the catchment in China and distribution through VA's domestic network. It's a way of creating a huge network on direct or one stop flights from anywehere in China to anywhere in Asutralia (almost.)

Longterm, should HNA take a greater stake, it might put Shanghai on the map as a european transit hub for Australian's.

"Virgin could do well with flights to China, mostly with Australians wanting to fly on an Australian airline..."

If the published traveler statistics on routes between China and AU in recent yrs are correct, I believe the opposite will be true in terms of the expected travel direction for the bulk of the traffic:  VA will do well with flights to China, MOSTLY filled by outbound Chinese pax wanting to visit Australia.

With nearly zero brand awareness/recognition in the local mainland China mkt, I'm willing to bet VA can't possibly pull off any econ sustainable China route launch in 5-10yrs(let alone 1H2017 now planned by Borghetti) without the massive+powerful sales & mkting network of HNA(And of course, access to tasty corp contracts with enormous Chinese firms......look no further, just glance @ how many pricey assets in AU hv been bought by Chinese entities these days among all foreign investors).

Agree, and HNA group is doing very well in tourist market in China. Codesharing with HNA will attract a lot of Chinese customer who has to endure AirChina's terrible service only because CA crew can speak Mandarin.

As VA gold member who was born in PEK and going back there every Chrismas, this is a really good news.

CA is always the last option on my list, CX and SG are so much better but they don't offer direct service.

+1 Patricka340 and Angus.  As the artcle here is carefully worded..VA 'could' fly blah blah blah...but social media being social media...some readers choose to jump to conclusions...ahhhh the media and the power of suggestion LOL.  oh well. websites get what they want, regardless of the 'outcome' :)

"The route would have to be flown by an a330 and they barely have enough now for the MEL/SYD....-PER runs."

I don't think many folks here realize the potential implication fm a VA+HNA(Officially HNA Aviation Group) equity/ownership tie-up in terms of access to additional widebody fleet capacity for VA.  I'm guessing this is mainly due to a lack of full understanding by foreigners re HNA widebody fleet size & deployment practice:

1. How many 330 ordered by HNA?

42 with almost all already in service spreading across 4brands(i.e. Hainan, Beijing Capital, Tianjin Air, HongKong Air) @ least partially owned+controlled+financied(e.g. inter-company fleet leases) by HNA.

2. Are these 330s being deployed optimally on suitable routes(i.e. @ least medium-range) per their payload/range performance?

Mostly not yet.  Many are flown on shorter-hauls today with some deployed on domestic trunk sectors under 3-4hrs.  HongKong Air is an excellent example illustrating the extent of this kinda waste of longhaul hardwares on sub-optimal routes:  Except 3 totally leisure routes(i.e. 2x wkly token service HKG-CNS/OOL, HKG-DPS and HKG-CTS), no route exceeds 4.5hrs duration and yet, there're 330 x19 in its fleet alone complete with flat beds in J cabin.

It's not that HNA doesn't want to put more longhaul widebodies on longer sectors....it has been very hungry to fulfill its longhaul ambitions.  HNA has been unable to do it because its brands lack route authorities to serve many commercially viable longhaul routes fm their main hubs in China+HKG.

3.  How many 787 ordered /committed by HNA?

At least 40 with 10 already in service.  Easy to imagine not all will be for pure growth(i.e. route authority issue will continue)  and some will be used to displace current 330s especially on longer sectors.  What to do with these displaced but still young(Oldest frame is only 9yrs old) 330 frames?

4.  How many 359 ordered by HNA?

15 with delivery starting in 2018.  All tentatively for HongKong Air.  However, HKG slot issue won't be resolved until well after 2020 so these frames will likely end up displacing 330s there.  If not, they surely will go to another HNA brand but still replacing 330s @ that brand.

In a nutshell, HNA acquiring a significant stake in VA will swing the door wide open for VA to easily lease more young 330s @ favorable intercompany rates fm HNA.

"...materialize from this deal is the JV and we will see a VA code on the Hainan and HK Airlines flights to Australia as well as..."

1st of all, codeshaing can occur with or without JV.  2ndly, limited medium-term opportunity for Hainan or HongKong Air brand to expand on commercially attractive AU routes due to route authority constraints as explained earlier.   In contrast, VA does not face such constraints on those routes.

Hainan has a hub at Shenzhen, which is in the range of VA's A332 or B772 from MEL/SYD. The next leg will certainly be carried by Hainan.

Sorry, B77W

virgins long haul aircraft are occupied on other important routes thats why i was saying that 

Or just lease cheaply fm HNA where there'll be plenty of displaced /surplus 330s soon after the delivery of many more 787+359 across HNA brands....

DBPZ, sorry to ruin your enthusiasm - please find me a decent lounge in China (sorry, HK not included) that I can get excited about. Most of them are horrendous, with furniture so old they remind me of visiting my Nan at the oldies home. Oh and don't get me started on the amenities........ that's right - there aren't any!

Agree.  I used to fly extensively within mainland China and sometimes in J and yet, I hv not seen a half-decent lounge operated by any Chinese carrier even in top hubs like PEK or PVG.

"...with furniture so old.."

Technically and to be fair, they are actually not that old and tend to be replaced relatively quickly @ these lounges.  The real problem is that they LOOK old(Or hv the traditional/classical   Chinese /communist styling if we're being diplomatic....) and tend to worn out quickly with poor up-keeping mainly due to how a typical local lounge visitor use them.....

"...don't get me started on the amenities...there aren't any.."

Actually, there are some.  They are just not really catered for non-mainland Chinese lounge guests.  E.g., U can easily find an ashtray /smoking area /Chinese newspaper than U can find functional wifi connection /laptop workstation area /CNN live  within any domestic lounge in China.  In terms of F&B, U won't find any decent bread /cookies but U'll certainly find a dozen diff flavors of instand cup noodles.

That's assuming the connection timing work out for VA @ slot limited HKG these days and VS only has 1 daily HKG-LHR.

VS won't hv a lot of 789 to play around with fleet rotation @ LHR base(Even if it has, it'll be more inclined to support the deployment desire of its master DL @ LHR than the very very distant step-cousin VA @ HKG.........aside fm similar branding, op partnership between VA and VS is a myth in practice) so I don't think VS will change its timing @ HKG only to help VA out re connection to/fm AU....

And as per current Chinese aviation regime(CAAC) re route award policy, 1 Chinese carrier per 1 int'l route.

Naturally re MEL-SZX authority, state-owned CA and CZ will both hv the political upperhands against private HU......hence the imperative for HNA to buy into VA if they want to play in any significant way in the China-AU mkt.

"...holding out for a knight in shining armour...to rescue them from their balance sheet issues."

And after reg approval is secured, HNA Group, loaded with capital & surplus 330 fleet capacity, will be that knight(Or @ least 1 of those knights) for VA.

"...looking to raise 1b of capital....deal with HNA represents 15% of that."

I think U meant 15.9% of that 1b.  As reported by this article, current HNA proposal is to buy 13% of VA @ A$159m.

"..wouldnt be surprised if they attempt to surpass the 19.99% desired investment."

Even @ 19.99% stake per HNA's ultimate target, that's nearly A$245m or about a quarter of all shining armour VA is seeking. 

It should be noted that over the past 1-2yrs and unlike its Chinese peers, HNA has been busy shopping around worldwide for foreign airline investment opportunities and has already completed a few large deals in Africa, Turkey and Brazil(Recent failed bid in the U.S. against Alaska for Virgin Am).  The current VA deal is just part of that global drive.

"...this deal will be designated for the benefit of the Chinese Airlines in the HNA Group."

Not sure what exactly do U mean by "designated" but certainly & logically(Otherwise, why invest in VA?), this JV will help all current HNA brands AND partner VA to generate traffic directly or indirectly(e.g. thru connections) in the China/HKG-AU mkt regardless of whether the brand is based in mainland China, HKG or AU.

A fundamental principle of this kinda JV is that it'll be 'metal-neutral'....meaning doesn't matter exactly which partner carrier  operates on a route or sell the tickets(BTW, all fares will be aligned across partners too), all Rev$+cost are shared per the pre-agreed distribution/calculation method.  And VA already hv tons of such experiences running JVs with EY and DL.

"..we will see more of the HNA group entering Australian airspace rather then the otherwise.."

1st of all, after HNA acquire such significant stake in VA, VA will effectively become a partially owned subsidary brand under HNA group anyway.....so a HNA brand will not only "enter" AU airspace often but also actually based WITHIN that airspace.  2ndly for a JV operating in a non-OpenSkies regime, it's gonna be much much more about which partner has the bilateral authority/slot to serve a route rather than the preferred(Or may be "designated" as U said?) nationality of a partner.  E.g. in the VA+HNA JV, I bet U routes like HKG-SYD or PVG-BNE won't be served by HX or HU but will be served by VA.

I can see a possibility that Hainan/Hong Kong will pass on a few A330s for these routes. Hong Kong is due an order of A350s by 2018, orginally May 2017.

Agree as I hv explained earlier re 330 fleet situation across HNA brands.  Many 330s there now are being utilized heavily on sub-optimal routes along with inappropriate cabin configs.

I got a glimpse of the situation when I flew with HX on HKG-OKA 2yrs ago.  That sector is not only well under 2.5hrs but also ultra-low yield dominated 99% by leisure traffic.  Yet HX deploys 330 2x daily on that route with @ least 1 frequency offering flat bed with direct aisle access in every J seat for under US$400 R/T(Lowest J fare for BNE-CNS easily more than double that amount)......there's no way HX can be anywhere near break-even for its 330 op on HKG-OKA.  I believe HX still does it(HX also hv 320 fleet but does not use it for HKG-OKA) only to help pay for lease of 330 that otherwise will be sitting idle on the HKG tarmac.

Most importanly, if VA is willing to give-up cabin product styling consistency, 330 sourced/leased fm HNA can theoretically be deployed by VA almost immediately as many of them are already in longhaul cabin std and equipped with flat bed in J.

I think we'll still be seeing a consistant Virgin cabin config, as the application from the HK and BJ routes is for A330-200 with 275 seats. I imagine considering HNA's excess of A330s, reconfiguration will not be too difficult an effort, and definitely achievable in time for the route launch halfway through next year

U may be right.

Even if VA decides to launch SYD-HKG/SZX/PVG/PEK all @ once(Highly unlikely IMHO...typically more spread out across a yr or more) fm 1Q2017, that will only require 4 frames.

Upto 9mths fm now till end of 1Q2017 to reconfig only 4 frames...plenty of time.

So they operate the A330 for what reason? filling out the capacity on that sector to prevent rival players coming in?

I would doubt very highly that VA would launch a new international service and not carry their flagship "The Business." Same goes for the lucrative coast to coast, it would serve up customers for Qantas.

That said, we've seen VA can turnaround an A330 in the space of <6 weeks. Given sufficient planning.

"So they operate the A330 for what reason...prevent rival players coming in?"

I think your question might actually contained 2 separate but related questions.  My best interpretations:

1.  Why HX deploy 330 on HKG-OKA route?

As explained earlier, HX network for yrs has been lacking suitable routes/frequencies to support deployment of most(let alone all) of their 330s.  End result: Either a) Fly them on sub-optimal routes e.g. HKG-OKA to earn some $Rev or b) Park them but endure low avg utilization.  No diff between a) and b) in terms of mthly lease/capital cost to HX.  It has nothing to do with pre-empting rivals...if HX has other better routes to use 330, it would hv done it in a heart beat and glady transfer all demand to UO which is very profitable in flying this kinda leisure shorthauls.

2.  Why HX committed to such a large 330 fleet(14units or more than double VA's 330 fleet) in the 1st place?

In a nutshell, a combo of a) bad luck, b) inexperience in developing longhaul and c) bilateral+slot constraint @ hub.

For details, we've to visit the recent history of HX and its widebody ops since 2006:

2006=HU(And later HNA Group) bought 45% of the predecessor entities of HX+UO(But effectively control them).  Main motive was to develop HX+UO into an all-around rival to CX+KA @ HKG to support the overall HNA ambition to become a true long+short haul large network carrier group in the G.China region.

2007=HX confirmed 330 order upto 20units to be financed/leased mostly by HNA....1st ever widebody order for HX.

2008=HX announced longhaul plan including AU mkt.....despite zero mkt planning experience+brand awareness+sales network outside E.Asia and no real help in these areas fm HNA/HU(Itself wasn't much better than HX).  GFC(Global Fin Crisis) just started to hit the world outside the U.S.  HKG slot availability still not too bad.  CX had not exhausted all bilateral quotas to AU(e.g. CX had only around 2x or 3x daily HKG-SYD).

2010=1st 332 joined HX.  HX launched HKG-SVO as its 1st longhaul route which was also CX's weakest.  GFC full effect worldwide starting to depress global longhaul traffic particularly premium segment.  CX starting to up HKG-AU frequencies on quota-limited routes.

2012=HX launched all-preimum HKG-LGW but pulled out within 6mths due to poor load...similar story re HKG-SVO and halted all longhaul expansion plan despite nearly half of all 330 committed hv already arrived.  Global longhaul premium traffic hit historic low.  CX reached 5x daily HKG-SYD and effectively exhausted all quotas for HK carriers.

2013=No HX sector exceeded 5hrs confining its 330 largely to the same geog mkt as UO.  To avoid duplication and with no more longhaul to feed, HNA transformed UO into a LCC.

Today=HX 330 fleet trying to break outside of 5hr sectors with CNS/COO and soon AKL but these mkts are @ infancy for HX....many 330 capacity will remain stuck inside that 5hrs circle for yrs to come.  UO became a LCC success beyond HNA's  wildest expectation.  Slot shortage becomes critical @ HKG.

Riley: There's a link to the application within the article – you'll find what you're looking for there.

True. The very low price between Shenzhen or HKG and Europe or LAX may bring the intercontinental customers away from EK and SQ and DL and NZ.

Actually, I saw a lot of VA cardholders flying between MEL/SYD and PEK/SHA/HKG through SIN because SQ is the only one in the small league that provide feasible routes between Australia and China Mainland and HKG. If Hainan joins the small league , SQ will lose most of these customers.

"VA cardholders flying between MEL/SYD  and PEK/SHA/HKG through SIN....SQ will lose most of these customers."

And many of those VA cardholders will gain nearly 4hrs saving(Or 30%) per way in total travel time by flying VA instead of SQ between MEL/SYD/BNE and HKG/PVG/PEK.....not bad being able to spend 8 more hrs with family @ home rather than on the road for a biz trip to China.

"...bring the intercontinental customers away from EK...and NZ."

I agree the VA+HNA JV will impact SQ.  But seriously, DL and NZ?  For travel between AU and Europe, U really hv to be nearly insane/fanatical to fly with DL or NZ.  For travel between AU and N.America, realistically how many pax will choose this JV over DL or NZ routing?  EK is an even bigger mystery to me as I don't know what vested interest EK has in VA at all.  Sure, EK may fear a stronger VA but it has almost nothing to do with VA+HNA JV and has far more to do with VA+EY JV. 

Oh btw, no carrier serves SIN-SHA.  For Shanghai mkt, SQ only has authority for SIN-PVG.

Before Hainan joins the small league, VA has no point to fly to HKG -- no one in the league runs a hub at HKG (only Virgin Atlantic runs a LHR route from HKG), so that HKG has to be the final destination (or SZX, but it costs ~$50 for the shuttle between HKG and the city of Shenzhen).

Now Hainan group has Hong Kong Airlines (inc. HK Express) hubbed at HKG, which covers most large airports in China and also Japan, Korea, Taiwan, etc, making HKG a perfect transit airport for the NE Asia countries/regions.

"Hainan group has Hong Kong Airlines (inc HK Express)...hubbed at HKG..making HKG a perfect transit point..."

Plus HNA brand Beijing Capital Air on HKG-Wenzhou(A world renowned manufacturing sourcing hub).

"..covers most large airports in China.."

And a whole bunch of smaller /lesser known ones too.  Totally 22 points in mainland China(More than CX+KA combined) already covered by HNA group nonstop yr-round fm HKG.  That's possibly meeting 75% of all P.R.China cities any AU pax can dream of visiting for leisure or work....

"..also Japan.."

By nex mth, 13 destinations(Vs 9 by CX+KA combined) will be served nonstop yr-round fm HKG by HX+UO.

This is why CX has been trying hard to crush HX longhaul(Successful so far) and UO shorthaul(Unsuccessful) @ HKG.   At HKG, the potential HNA+VA JV will be a far larger threat to CX Group than QF Group could ever dreamed of with JetStar HK....

"...If Arunabh is right about China's 'One route/One airline' policy..."

It's not about right or wrong.  It's a policy fact re int'l route authority for over 2 decades ever since CAAC splitted into 3 mega carriers and continued to these days.

Of course, there are a few exceptions such as if a route is not served daily by carrier A , carrier B can receive authority for flying the remaining days of the wk.

"..CA already flies from China to MEL/SYD.."

CA has monopolistic authority only on PEK-MEL/SYD.  It doesn't preclude other Chinese carriers to receive int'l route authority not yet taken to fly fm elsewhere in China to MEL/SYD...and there're plenty of those un-utilized authorizes even in larger Chinese airports(I'm talking about the top20 with @ least 14m annual pax traffic which is already higher than PER's annual total) to/fm MEL/SYD.  The 1 route/1 carrier policy refers to city pairs, not country pairs.

A little known fact for foreigners is that CA got the authority to serve PVG-MEL/SYD only because it pitched PVG as a domestic stopover point for thru service(Yes, same aircraft) PEK-MEL/SYD.....a curious reg loop hole/relic fm DengXiaPeng era common for Chinese carriers to sustain traffic load on int'l routes.  That's why we see both MU AND CA on the PVG-MEL/SYD route.

"HU will fly fm its Chinese hubs to BNE and use VA...."

Or even better for HU or another HNA brand to fly fm HNA hub @ TIJ(Tianjin) directly into MEL/SYD.  No carrier is flying that route today and fm TIJ, downtown Beijing is only about 1hr away via subway+hi-speed rail....a similar ground transit duration between BNE and Surfers Paradise.  Best of all, no risk of the ridiculously long delay @ the notorious PEK.

I agree with the fact that Etihad Airways and Singapore Airlines may want to protect status quo by not bringing dramatic changes to Virgin Australia's shareholding. But Air New Zealand seems to be adamant that it wants to divest its stock, especially as it wants to use the cash to finance international growth. It is also important to note that ANZ and Virgin will remain important partners through their Australia-New Zealand Joint Venture. Other than that, Virgin may no longer hold strategic incentive for continued investment from ANZ.

By the way Chris, the 'one route, one airline' policy only applies to Chinese airlines, not foreign carriers operating into China regardless of whether they are part owned by Chinese airlines. This is the reason why Hainan can't fly to Melbourne and Sydney from the biggest Chinese hubs (like Beijing, Shanghai, etc.). One Chinese airline or the other has already secured those valuable routes. Therefore, Hainan plans to use Virgin metal to fly on these routes.