Air New Zealand at ease with Virgin

Air New Zealand boss Christopher Luxon insists the airline is "very comfortable" keeping its stake in Virgin Australia at 26 per cent, despite Etihad gaining the all-clear to raise its holdings in the Australian airline.

As the largest investors jostle for position, Mr Luxon said he preferred the shareholders allowed Virgin boss John Borghetti to focus on running

the airline than pushing for board seats.

Air New Zealand became the largest shareholder last month when it raised its stake from 20 per cent to 23 per cent. It still needs approval from the Foreign Investment Review Board to increase it by a further 3 per cent to 26 per cent. Singapore

Airlines is the second-largest at 20 per cent.

Mr Luxon also reiterated that he did not intend to push for board representation.

"We would look at that down

the road but at the moment we have no intention to pursue a board seat and we have no intention to go higher than where we are," he said.

Etihad has gained foreign investment approval to lift its stake in Virgin from 10 per cent to 19.9 per cent, but its dilemma will be sourcing a large block of shares on a tightly held register.

Mr Luxon said the rationale for Air New Zealand's investment in Virgin was an exposure to a larger and growing domestic market in Australia. "The move from 20 to 26 per cent ultimately is purely for just us looking at a portfolio weighting," he said.

In the short term, the bigger concern for Air New Zealand and Virgin will be stronger competition on trans-Tasman routes from Qantas and its new bedfellow Emirates.

"You have got some very formidable competition there. I don't see it getting it easier," Mr Luxon said.

But he believed there was still room to grow on trans-Tasman routes due to its alliance with Virgin, which gave valuable access to a large sales and distribution network.