China Southern, Hainan talk to bankers about Virgin stake sale

A new entrant onto the crowded Virgin register could only buy an initial 19.9 per cent, but it could enter into a financial arrangement that allows it to "creep" up over time.

UBS-advised Virgin has not set up a data room to assist Credit Suisse-advised Air NZ with the sale of its stake, but there are suggestions Virgin has reached out to alliance partner Delta Air Lines to see if it wants to join the register.

Singapore Airlines, which is a major shareholder in Virgin alongside Air NZ, Etihad Airways and Virgin Group, is believed to be monitoring the situation very closely.

Singapore is the only party likely to make a full takeover bid for Virgin on its own (teaming with Etihad is another option), but whether it does so could depend on the buyer of the Air NZ stake.

The Foreign Investment Review Board, which Singapore has yet to approach, will also be a factor. The chances of any deal being cut before the July 2 election would appear slim in any case.

Singapore is likely to be far more relaxed about Delta or United Airlines buying the shares and keeping the status quo intact than it is about a Chinese rival that threatens its Changi hub joining the register.

Many in the aviation industry have questioned if Delta is interested enough in the Australian market to buy a stake in Virgin given the US carrier only has a single daily flight between Sydney and Los Angeles. But others say Delta could make a move if it meant blocking rival United, which would likely tear up the Virgin-Delta trans-Pacific alliance.