Air New Zealand has increased its ownership in Virgin Australia.
The airline has lifted its holding in the budget airline from 15% to almost 20%.
Air NZ, which is 76% owned by the New Zealand Government, denies that it will make a full takeover bid.
The airline paid $32.8 million for the stake, or 29.7 cents per share.
The increased interest is held through an equity derivative agreement with Deutsche Bank which gives Air New Zealand an economic interest, though the airline wants to convert that into physical shares as soon as possible.
That is dependent on Air New Zealand's interest not exceeding the foreign ownership cap of 49%.
Air New Zealand and Virgin Australia have formed an alliance on the trans-Tasman route, allowing them to code-share on flights and co-ordinate schedules.
AFP reports Virgin Australia announced a full year net loss of $A67.8 million on 25 August, blaming a series of natural disasters and a rise in fuel prices.
