Chinese firm HNA Aviation will buy a 13 per cent stake in Virgin Australia, after a deal was struck overnight.

HNA's best-known brand is Hainan Airlines, but it is also behind several budget carriers across China and some non-Chinese carriers too.

The Chinese company is buying its slice of Virgin Australia for $159 million or 30 cents per share, a 7.1 per cent premium on the last trading price of 28 cents a share.

The stock will be freshly issued to boost Virgin Australia’s capital and diluting existing shareholders.

Virgin said HNA has pledged to increase its stake to 19.99 per cent and has backed the Australian airline's capital structure review.

The announcement comes in the wake of decision by Virgin Australia’s current major shareholder - Air New Zealand – which says it will sell down, or exit completely, its Virgin stocks.

Insiders say the deal will help Virgin Australia set up direct flights to China, but Virgin chief John Borghetti is not saying much.

“There is a lot of attraction to operating into Beijing, for example, there is also a lot of attraction in operating to Hong Kong, but that's still being worked through,” he told reporters this week.

“There are also some secondary cities we're looking at ... wherever the operations are to it will be a significant schedule, it won't be just one or two flights a week.”