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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

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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.

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