Branson says talks under way for Air NZ's Virgin Australia stake

[SYDNEY] Air New Zealand Ltd's stake in Virgin Australia Holdings Ltd has attracted several potential buyers and talks are under way about a possible deal, said Richard Branson, the billionaire founder of Virgin Group Ltd.

It's not yet clear whether Virgin Group itself, which owns about 10 per cent of Virgin Australia, will increase its stake in Australia's second-largest airline, Mr Branson said in an interview with Bloomberg Television from Sydney on Thursday.

"There are discussions going on with them and a number of different parties and we will watch with interest what happens," Mr Branson said.

"Whether or not we will end up buying it we will have to see. I am a great believer in Virgin Australia."

Virgin Australia sharesfell 0.9 per cent to at 27.25 Australian cents at 12:13 pm in Sydney, valuing the Brisbane- based company at A$961 million (S$954 million).

Air New Zealand, the biggest investor in Virgin Australia, in March said it may sell its 26 per cent stake as Virgin Australia carries out a capital review. Morgan Stanley estimated last month that the Australian airline needs a further A$700 million of funds.

Other than Virgin Group, Virgin Australia is almost equally owned by Air New Zealand, Etihad Airways PJSC and Singapore Airlines Ltd. The potential exit by Air New Zealand has stoked speculation that Singapore Air will snap up the stake to stop an unwelcome foreign airline muscling in, or buy the stake jointly with Etihad.

"There have been approaches from airlines that are considerable and I think that add a lot to Virgin Australia, but again those discussions are going on so I cannot, I am afraid, go into details," Mr Branson said.

BLOOMBERG