Here’s why Virgin Australia Holdings Ltd and AIR N.Z. FPO NZ shares are flying higher

What: Shares of AIR N.Z. FPO NZ (ASX: AIZ) and Virgin Australia Holdings Ltd (ASX: VAH) are flying higher today despite the broader S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) trading 0.5% lower.

So what: This morning, Air New Zealand announced it would divest 19.98% of its 26% stake in Virgin Australia to China’s Nanshan Group for $0.33 per share.

The deal was foreshadowed by Air New Zealand in late March 2016 when the leading airline announced it was reviewing its shareholding to focus on its own growth opportunities.

The privately-owned Nanshan Group is one of China’s top 500 companies, according to Air New Zealand’s media release, with stakes in other aviation businesses such as Qingdao Airlines.

“We believe Nanshan Group will be a very strong, positive and complimentary shareholder for Virgin Australia,” Air New Zealand Chairman, Tony Carter, said. “The sale will allow Air New Zealand to focus on its own growth opportunities, while still continuing its long-standing alliance with Virgin Australia on the trans-Tasman network.”

Now what: Proceeds from the sale will net Air New Zealand around $231 million, and it says options regarding the remaining 6% (worth around $63 million at current market prices) will be considered in due course.

At 16 September 2015, Air New Zealand held 26% of Virgin Australia while Singapore Airlines and Etihad Airways held 23% and 24%, respectively.

Although the sale has been well received by the market, Foolish investors are reminded airline shares can be extremely fickle and are at the mercy of both commodity prices and competition. 

Historically, the airline industry has been a wealth-destroyer for investors’ hard-earned capital, and investors will likely find much better investment alternatives elsewhere in the market

Forget airlines! This "dirt cheap" company is growing like gangbusters, and trading on a fat dividend yield, FULLY FRANKED. With interest rates set to stay at these low levels for years to come, for income-hungry investors, including SMSFs, this ASX company could be the "Holy Grail" of dividend plays for 2016. Click here to gain access to this comprehensive FREE investment report, including the name of this fast growing ASX dividend share. No credit card required.

Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned in this article. You can follow Owen on Twitter @ASXinvest.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

HOT OFF THE PRESSES: My #1 Dividend Pick for 2017!

With its shares up 155% in just the last five years, this ‘under the radar’ consumer favourite is both a hot growth stock AND our expert’s #1 dividend pick for 2017. Now we’re pulling back the curtain for you... And all you have to do to discover the name, code and a full analysis is enter your email below!

Simply enter your email now to receive your copy of our brand-new FREE report, “The Motley Fool’s Top Dividend Stock for 2017.”

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.