Minister says the time is ripe because the stock is trading at a five-year high.

Opposition parties are warning of damage to the national interest, higher fares and even a second taxpayer bailout after the Government put another slice of Air New Zealand on the block.

The Government will sell 20 per cent of its stake in the airline today and tomorrow, days before a $9 million public referendum begins on whether New Zealand's power companies and airline should be sold.

State-Owned Enterprises Minister Tony Ryall said the time was right for the Government to reduce its 73 per cent ownership because the company was trading at a five-year high. He dismissed suggestions the timing was cynical, saying it had been signalled at the election two years ago.

Labour leader David Cunliffe described the sale as "desperate, arrogant stuff" which gave a "two-fingered salute" to New Zealanders because it was being done immediately before a referendum on the issue.


He cited the previous sale of Air New Zealand in 1989, which resulted in a $880 million government bailout in 2001 after a failed venture with Ansett Australia.

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"Last time Air New Zealand was privatised it was a disaster ... Now, history is repeating."

On this occasion, the Government will retain a 53 per cent stake in the company. Mr Ryall said no more would be sold, and a 2 per cent buffer was needed for Air New Zealand employee share schemes.

He said he would not speculate about the Government's liability if Air New Zealand failed again.

"The shares are at a five-year high, which indicates there's a lot of market interest and market sentiment in the performance of Air New Zealand."

Labour and the Greens also warned of damage to New Zealand Inc, saying the airline was tied up with New Zealand's national identity and tourism brand and the sale would make the company prioritise private profits more than national interest.

Green co-leader Russel Norman said it could lead to reduced regional services or higher fares.

Unlike the power company offers, the Air NZ shares will be sold to investment banks which will work with brokers to sell them to investors over two days.

Mr Ryall promised "hand on heart" that 85 per cent of the shares would go to local investors, though he said the Government could not stop New Zealanders selling them.

Prime Minister John Key, in Sri Lanka, said the size of the domestic population and competition were a greater influence on fare price than a change in an airline's ownership structure.

What is the Government selling?

20 per cent of Air New Zealand. This will reduce its stake in the company from 73 per cent to 53 per cent.

How is the sale taking place?

The shares will be sold over two days in a competitive bookbuild, beginning this morning. This meant the shares would be sold to Craigs Investment Partners, Deutsche Bank and Goldman Sachs, who will then work with brokers to sell them on to retail investors. Air NZ will cease trading while the partial sale takes place.

How much are the shares?

Air New Zealand was trading at $1.65 at close on Friday, though some traders have predicted they will be discounted to $1.60.

Are the shares only available to New Zealanders?

The Government has told brokers that 85 per cent of shares must be sold to local investors.