Virgin has agreed to give HNA a board seat and, on Friday, the Australian carrier said it understood Nanshan would put forward a nomination for a board representative, which it would consider in line with its policies and procedures. "We look forward to meeting with Nanshan Group over the coming weeks to discuss the proposed acquisition," Virgin said in a statement. Sydney businessman Albert Wong, the chief adviser to Nanshan in Australia, said the Chinese group had been examining tourism opportunities in the local market for months and had begun discussions with Air New Zealand after it placed its stake on the market. Mr Wong said Nanshan, also advised by Gresham Partners, had not yet held formal talks with Virgin about a board seat. Air New Zealand placed its 25.9 per cent stake in Virgin up for sale in March after its chief executive, Christopher Luxon, pushed unsuccessfully for other board members to join him in an effort to oust Virgin boss John Borghetti. Mr Luxon stepped down from the Virgin board and appointed First NZ Capital and Credit Suisse to help market the stake to potential buyers, which also included HNA, China Southern, Cathay Pacific and Singapore Airlines. Air New Zealand had participated alongside Singapore Airlines, Etihad and Virgin Group in extending a $425 million loan to Virgin in March at a time when the Australian carrier needed to fix its balance sheet. Virgin, advised by UBS, is expected to proceed with a capital raising of up to $800 million as early as this month and Nanshan has agreed to participate.

Air New Zealand is expected to use the proceeds from the sale to pay a special dividend to its shareholders, which include the New Zealand government with a 53 per cent stake. "We believe Nanshan Group will be a very strong, positive and complimentary shareholder for Virgin Australia," Air New Zealand chairman Tony Carter said. "The sale will allow Air New Zealand to focus on its own growth opportunities, while still continuing its long-standing alliance with Virgin Australia on the trans-Tasman network". CAPA Centre for Aviation executive director Peter Harbison said having two separate Chinese owners on the Virgin board would create an "odd set of bedfellows" and was undoubtedly bad news for Singapore Airlines, who would have liked to take the opportunity to gain control of the Virgin domestic operation. "But for Virgin it may well make life considerably easier, with no aggressive New Zealand shareholder and perhaps a more passive set of shareholders neutralising each other," he said. "It also potentially offers a wider range of access within China, assuming Nanshan intends to exploit the aviation opportunities." Nanshan is a large privately owned Chinese conglomerate that owns a small airline in China, Qingdao Airlines, and a private jet business along with interests in sectors spanning aluminium, agriculture, education and property.

Air New Zealand had purchased its stake in Virgin for around $NZ480 million ($459 million) according to calculations by Deutsche Bank, meaning it will be selling at a loss. But Deustche Bank analyst Matt Peek said Air New Zealand's sale of the Virgin stake at a premium to the current market price was a "good outcome" as it avoided the Kiwi carrier being diluted in an upcoming equity raising. "We assume Air New Zealand tested the prospects of dealing its stake to speculated potential takeover buyers, which could have resulted in a control premium," he said. "The outcome achieved indicates a takeover for Virgin may not be forthcoming, especially now with so many airlines holding cornerstone/ blocking shareholdings." Loading Air New Zealand will receive around NZ25¢ per share in net proceeds and repayment of its $131 million share of the $425 million loan.

"After both events we believe Air New Zealand will most likely return net proceeds from the Virgin shareholding sale to its shareholders via special dividend," UBS said. "While exact timing is difficult to judge, we expect this to occur before the end of August."