China Southern and Hainan Airlines are reported to be evaluating buying Air New Zealand’s stake in Virgin Australia, reports the Australian Financial Review. The move would make fiscal sense for either airline, since Chinese traffic is continuing to increase on Australian routes. China Southern would be able to claw back some of the traffic it lost after Qantas is previous partner former a joint venture with China Eastern. Hainan serves Australia seasonally, however, so its acquisition of a stake in Virgin Australia would be more risky.
Virgin Australia has recently forecasted a weakening second half of this financial year and plans to cut capacity by more than 5% as a result. The airline reported an underlying loss before tax of $18.6 million in the March quarter, which was a slight improvement over the prior-year period with a loss of $22 million. Virgin now expects to report a total underlying profit before tax of $30 million to $60 million this financial year, having reported an underlying profit before tax of $81.5 million in the first half.
Virgin statutory loss more than doubled to $58.8 million from $28.3 million in the year-earlier period because of restructuring charges including the removal of surplus ATR72 turboprop capacity due to the resources downturn.
Virgin is selling all eight of its Fokker 50 aircraft and five of its 18 E190s, as well as three of its 14 ATR72s.