Air New Zealand is shaping up as the pick of the Government-owned companies on sale after Meridian Energy's low offer price and Mighty River Power's languishing shares.

Even though airline stocks are notoriously volatile and avoided by some of the most seasoned investors, analysts say Air New Zealand's strong financial performance and the increased appetite for risk make it an attractive investment right now.

During the past year the airline's share price has risen from $1.24 to a 12-month high of $1.64 yesterday.

Head of private wealth research at Craigs Investment Partners, Mark Lister, said the sale of the Government's 73 per cent to 51 per cent could be done in a day. "We see these deals executed all the time. You can put that together in 24 hours as long as you've got a willing group of buyers and I think you would for Air New Zealand because it's going really well. The airline sector is tough to invest in because it's got so many moving parts and its so cyclical but Air New Zealand is as well positioned as any around the world."


The stake would be worth just under $396 million at the current share price.

Lister said with the momentum Air New Zealand had there would be demand for shares from a wide range of potential buyers.

"It probably does suit the large institutions and KiwiSaver fund managers [more] than your average retail investor but there would be some retail interest - it's a brand we all understand from a customer perspective." Increasingly attractive dividends made the airline more appealing to "retail investors at the more sophisticated end of the scale".

The Government has a goal of 85 per cent of sold-down companies remaining in New Zealand hands but this would be more complicated given the existing ownership of shares already on the market and the likely strong interest from foreign buyers.

"The Government is in a good spot to bide their time and take their opportunity whenever they see fit. All you have to do is appoint one of the investment banks to shop it around the institutions and the retail market and move a line of stock at a price that's right for everyone and off you go," Lister said.

Salt Funds Management managing director Paul Harrison said Air NZ looked relatively cheap.

"The trick with airlines is that you can see a couple of good years of earnings before you buy them," he said.

He said the recent share price rally had been partly fuelled by investors who had seen heavy scaling in recent offers and share placements.


Craigs analyst Chris Byrne said the high kiwi dollar helped Air NZ and the airline's outlook was good over the next two years.

"I think from a macro point of view the currency is strong and GDP growth is meant to be strong over the next couple of years ... our central bank is looking more hawkish than around the world which has propped our currency up. That's great for [reducing] fuel prices and Kiwis will continue to travel," Byrne said.

Fuel accounts for about 25 per cent of Air NZ's total costs and more on long-haul flights.

Defensive stocks such as utility companies were the staple for retail investors but were not so popular now.

"The likes of Air New Zealand are far more in vogue now there's a risk-on mentality. If you're looking for a play on global growth, Air New Zealand ... is a good exposure."