Air New Zealand chief executive Rob Fyfe is relatively coy when asked point-blank whether he thinks Michael Cullen should sell-down some of the Government's 76.75 per cent stake.

Fyfe says he urged Cullen that he should flick some Air NZ shares to help fund the proposal to build a stadium on Auckland's waterfront.

There was an element of jesting to the suggestion.

Cullen wasn't that on-song for Rugby World Cup Minister Trevor Mallard's pipedream. Fyfe was.

He thought it would have been a great addition to the waterfront, brought the tourists in and helped spark a move towards building some first-class hotels in Auckland.

But like so many Auckland projects, it bombed.

With Air NZ on track to post a first-half operating profit of close to $100 million on Tuesday, there is a now serious point to consider. The tax-paid profit - forecast to be $68 million by Forsyth Barr Rob Mercer - will be up 47 per cent on the previous year's figure. Mercer bumped his share-price forecast to $2.50 and made a buy recommendation.

The shares have doubled since last September as fuel prices have dropped and the business case improved. It's hard to think of a better time for Cullen to do a bit of profit-taking. But Fyfe - who believes a sell-down would help liquidity in the airline's shares - is not holding his breath.

Air NZ shares closed at $2.14 on Friday after a rocky few days caused by Qantas' decision to swap some convertible notes into shares, diluting the Government's holding from its previous level of 80.7 per cent.

The market took a while to adjust to the move. But shares firmed when it emerged that Air NZ does not expect Qantas to be a long-term holder. The conversion is basically just the first step into a sellout by the Australian carrier. Fyfe's view is that many airline investors currently see the sector as an "oil play" and are keen to exploit the cyclicality of aviation stocks.

When he joined Air NZ in 2003 - jet fuel was US$30 a barrel before peaking at US$90 a barrel three years later. It was an "uncomfortable" place to be. But a reversal of the "peak oil" scenario, which many doomsday-sayers believed would collapse the sector - has brought new confidence across the sector.

But the rising Kiwi dollar is causing issues. If it stays at current US70c levels, New Zealand begins to look a rather unattractive tourist destination.

But, if it falls, Air NZ's external costs will be pushed up as jet fuel, aircraft and parts are sold in US dollars. A US65 cent level is Air NZ's pain threshold, Fyfe suggests.