Flames were seen coming out the back of a Boeing 737 that departed from Queenstown on Monday evening, before landing safely in Invercargill.
Virgin Australia flight VA148 departed Queenstown Airport at 5.59pm, bound for Melbourne with 67 passengers and six crew on board, before turning around and heading south.
"It experienced an issue just after take-off and has been diverted to Invercargill Airport," Queenstown Airport said in a statement earlier.
The plane - a 737-800 registered VH-YIV - landed safely in Invercargill shortly before 7pm.
The airline later said it was a "possible bird strike on take-off".
"The aircraft has been met by emergency services at Invercargill Airport," Virgin Australia chief operations officer Stuart Aggs said. "The safety of our guests and crew is our highest priority."
The airline later on Monday night said it was not aware of any injuries.
"Our efforts are now focused on providing support for our guests and crew, as well as transporting and accommodating guests in Invercargill this evening and arranging for their earliest onward travel to Australia…
"We wish to express our appreciation for the support of Invercargill Airport, emergency services, local Air New Zealand team members and our crew onboard in helping to support tonight's response effort."
'Boom, boom, boom, boom'
Members of the public were on the streets filming the incident as the plane flew overhead. Video posted to social media appeared to show flames coming from an engine as it flew over the Shotover Delta.
A Queenstown man described hearing what he thought was a car back-firing before seeing the plane, flames shooting from the back as it passed overhead.
Brayden told RNZ most of his street in Shotover Country was out filming the plane as it passed by.
"You don't really know what to do in that situation. Feel a little bit helpless and sorry for everyone who was on board. Sort of brought the whole street out, basically. Everyone was pretty scared and worried about what was going on."
Hamish Walker said his heart sank when he saw flashes of flames coming from the aircraft.
"It sounded like there was a car backfiring right outside my kitchen window, which is quite bizarre because the road's at least 100m away.
"And it was just 'boom, boom, boom, boom'. And then I went outside and realised it was the plane, and I could see flames coming from the engine every few seconds."
Mike Legge said his heart was in his mouth as he watched the plane turning back southwards.
"It sounded like someone was revving a jet boat in our garden," he said. "The noise was coming from this jet, which was climbing with flames coming out of one engine and it was making a backfiring kind of noise. Just couldn't believe it."
Photo: SUPPLIED