WELLINGTON • Virgin Australia's largest shareholder yesterday said it may exit the airline, days after the carrier tapped its biggest investors for fresh funds.

Air New Zealand, which owns a 25.89 per cent stake in Virgin Australia worth about A$343 million (S$355 million) as of Tuesday's closing price, said it will sell some or all of its shares, according to a statement to the stock exchange.

Air New Zealand and three other major shareholders this month agreed to loan A$425 million to Virgin Australia as the Brisbane-based airline reviewed its balance sheet.

A possible fracture in the ownership structure follows a 23 per cent slide in Virgin Australia shares this year. The stock fetched more than six times as much in 2007.

"Eventually, there's a point when investors start to question if you're throwing too much money at an airline," said Mr Oliver Lamb, Sydney- based managing director at Ailevon Pacific Aviation Consulting.

Several other carriers might be interested in acquiring Air New Zealand's stake, including a Chinese airline, Mr Lamb said, without naming potential buyers.

Virgin Australia shares dropped 6 per cent to 35 Ausitralian cents in Sydney yesterday afternoon. The stock was worth A$2.32 in February 2007.

Air New Zealand climbed 0.7 per cent to NZ$2.87 in Wellington.

Air New Zealand will assess other uses for the capital tied up in Virgin Australia, the Auckland-based carrier said. Its chief executive officer Christopher Luxon resigned from Virgin Australia's board with immediate effect.

"Air New Zealand does not want a large minority equity position in Virgin Australia as it focuses on its own growth opportunities," it said in the statement.

A spokesman for the airline declined to comment beyond the statement.

After three consecutive annual losses, Virgin Australia is expected to post a profit in the 12 months ending this June, following a slump in fuel prices, according to analyst estimates compiled by Bloomberg.

Virgin Australia's foreign backers have rankled Qantas CEO Alan Joyce, who has said his main domestic rival was able to run at a loss with the help of its foreign- sourced capital.

The two airlines waged a fare and capacity war that led to ballooning losses at Qantas two years ago.

Etihad Airways owns around 24 per cent of Virgin Australia and Singapore Airlines (SIA) has almost 23 per cent, according to data compiled by Bloomberg. Virgin Group owns a stake of about 10 per cent.

SIA said in a statement that it is committed to providing the shareholder loan to Virgin Australia.

Virgin America, the airline backed by British billionaire Richard Branson, is reaching out to potential buyers about a sale of part or all of the company, according to people familiar with the matter.

BLOOMBERG