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Etihad Airways backs Virgin Australia

AAP logoAAP 27/07/2016 Lilly Vitorovich

Etihad Airways has thrown its support behind Australia's second biggest airline, agreeing to buy new shares in Virgin Australia to retain its 21.8 per cent stake and a board seat.

Etihad's board has endorsed a proposal to take up its pro-rata entitlement in the non-renounceable entitlement offer for new shares in Virgin, which closes at 1700 AEST on Wednesday, a Etihad spokesperson said .

"Etihad Airways is a long-term strategic investor and commercial partner to Virgin Australia, and remains fully committed to the partnership as a shareholder," the spokesperson said.

Gulf-based Etihad's 10-year commercial agreement with Virgin, which runs until 2020, was further evidence of its confidence in and support for the Australian airline. It also showed Etihad's commitment to Virgin and Australia, the spokesperson said.

On June 15, Virgin announced plans to raise $852 million via a non-renounceable entitlement offer to shareholders at 21 cents a share, and a major operational revamp.

Brisbane-based Virgin plans to use the proceeds to pay down debt and improve its business after an extensive review of its finances.

Etihad's commitment on Wednesday comes just over a month after Air New Zealand agreed to sell most of its Virgin stake to Chinese giant Nanshan Group in a deal worth $301.4 million.

The Air NZ deal came hot on the heels of China's biggest private airline operator, HNA, buying a 13 per stake in Virgin, with a pledge to increase its holding to 19.99 per cent over time.

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