Air New Zealand stands to increase its stake in Virgin Australia as the Australian airline raises an extra $350 million to continue its fight against Qantas.

Virgin's call for cash will come in the form of an additional issue of almost 925 million shares at 38 cents a piece. Virgin says that its three major airline partners support the move, which would also allow them to pocket additional shareholdings on top of their current stakes.

Air New Zealand will pony up "between A$81 million and A$116 million", according to a statement from the Kiwi carrier, which now holds 22.9% of Virgin Australia shares but has regulatory approval to increase this to 25.99%.

"In the event that additional shares are available from the underwriting, Air New Zealand’s shareholding could increase to as much as 25.5%" the airline said.

Etihad Airways now holds almost one-fifth of the airline at 19.9% – the maximum currently allowed under Australia's Foreign Investment Review Board – while in April this year Singapore Airlines purchased a tranche of shares from Richard Branson's Virgin Group to boosts its own stake to 19.9%.

Two-thirds of Virgin in foreign hands?

Between them Air New Zealand, Etihad and Singapore Airlines now hold 62.7% of Virgin Australia Holdings. The additional share issue will likely see around two-thirds of Virgin Australia being in the hands of the three foreign carriers.

However, despite their increasingly large stakes, none of the airlines are expected to push for seats on Virgin Australia's board.

Etihad Airways President and CEO James Hogan has always been supportive of Virgin Australia and John Borghetti's strategy, commenting that his most recent share boost "reflects our strong support for the business strategy and management team of Virgin Australia and our enduring commitment to the Australian market."

Air NZ: "No push to privatise Virgin"

Air New Zealand CEO Christopher Luxon echoed those sympathies this morning, saying that “Air New Zealand welcomes and supports this initiative by the Virgin Australia board and executive."

"We have been impressed by the ability of Virgin and its executive team to quickly and successfully undertake a major strategy shift to become a much more effective competitor.  We have endorsed that strategy from the time of our initial investment in 2011.”

Earlier this week Luxon moved to quash market speculation that the Kiwi carrier might combine forces with Singapore Airlines and push for a private takeover of Virgin Australia.

"Virgin Australia has an excellent strategy being delivered by a top chief executive officer, who intimately knows his market place and the opportunities to seize," Luxon told The Australian.

"We have not been surprised that Etihad and Singapore Airlines have seen the same potential in Virgin Australia and have been progressively lifting their interest in the airline. All shareholding airlines are strong and logical partners."

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