AUCKLAND, May 7 (Reuters) - Air New Zealand
chief executive Gary Toomey said on Monday he doubted low-cost airline Virgin Blue [VA.UL] would fly in New Zealand.

"I would be very surprised if they would want to come into a market that would see Air New Zealand, (Air NZ unit) Freedom and probably Qantas in the market place, with Freedom already as a low-cost provider," Toomey told reporters.

"I would suggest that Freedom, as a low cost provider, particularly with a New Zealand dollar cost base, will be a significantly at, or below, the Virgin cost base," Toomey said after an Air NZ briefing.

Air NZ's major domestic rival, privately owned Qantas NZ, collapsed last month into receivership and its main city routes have been taken up by Australian national carrier Qantas Airways.

Air NZ launched Freedom, which previously operated mostly on trans Tasman routes, on the domestic market last week.

British-owned Virgin Blue has also expressed interest in flying in New Zealand. It currently operates in Australia and can fly within New Zealand but needs Australian and New Zealand government permission to operate between the two countries.

The New Zealand government said on April 30 that it would take at least three months to decide on Virgin Blue's request to operate between the two countries.

Air NZ earlier announced a range of service improvements, which included a new direct flight between Auckland and Dunedin, in the South Island.

It is also to bring in a further Boeing 767 aircraft as it expands services to Japan, Hong Kong and Taipei.

Air NZ's residents only A shares last traded at NZ$1.09, down one cent, while Air NZ B last traded at NZ$1.53, down two cents.

Air NZ, which owns Australian airline Ansett Holdings, carries more than 19 million customers a year with a fleet of nearly 200 aircraft and in excess of 1,000 flights a day.

Air NZ is 30 percent owned by Brierley Investments , with Singapore Airlines (Singapore: SIAL.SI - news) Ltd holding a 25 percent stake.