The New Zealand government will sell a 20 per cent stake in Air New Zealand over the next two days, raising speculation about whether foreign airlines will eventually be tempted to buy a slice.
Twelve years after it was forced to bail the airline out after its disastrous foray into Australia, the government will begin selling about 220 million shares to investors via a book-build on Monday. The sale will cut the government's stake to about 53 per cent, almost doubling the airline's free float.
The government is eager to tap a growing appetite among investors for equities, and follows a raising of $NZ3.6 billion ($3.2 billion) from partial sales of Meridian Energy and Mighty River Power.
Air New Zealand has become the best-performing airline in Australasia, outpacing Qantas and Virgin Australia. Its shares hit a five-year high last week despite high fuel prices and stiff competition on routes.
Nevertheless, it operates in a notoriously volatile and capital-intensive industry that institutional investors have tended to shy away from. This has left airlines as the most likely buyers of stakes in fellow carriers in recent years, in an attempt to strengthen the feed of passengers onto their networks.
However, Virgin Australia has indicated it does not have an interest in buying a stake in Air New Zealand given its hands are full after gaining control of Tigerair Australia and regional airline Skywest earlier this year.
"We are happy with our current position," Virgin chief executive John Borghetti said on Thursday.
Air New Zealand is Virgin's largest shareholder, and the pair have an alliance on trans-Tasman routes.
Singapore Airlines, which has a 20 per cent stake in Virgin, declined to comment on whether it had an interest in the Kiwi flag carrier. "At this point, we have nothing to announce," a spokesman said on Sunday.
Etihad has pursued a strategy of buying minority stakes in a raft of airlines including Virgin in recent years but it also declined to comment on Sunday.
A foreign airline would face hurdles in gaining a meaningful stake in Air New Zealand, including the need to gain approval from the country's transport minister.
The government is also committed to New Zealand investors, including the Crown, holding 85 per cent of the airline's register when the sale is completed on Wednesday.
That means that any foreign airline interested in gaining a large slice would have to do so on-market at a later date, or indirectly via a merchant bank.
Genesis Energy will be the next asset to be put on the block across the Tasman, a process which is slated to occur in the first half of next year.
The asset sales were one of the key pledges of the National-led government in the run-up to the country's election in 2011.
The dual-listed Air New Zealand will be placed in a trading halt until Wednesday.