Branson, who will remain chairman of the airline he founded in 1984, is in line to pocket £220m from the deal, which will leave him and U.S. giant Delta airline with a 20% and 49% stake respectively. Branson will remain chairman of the airline and the airline is expected to continue to fly under the Virgin brand.
Air France-KLM has formed new joint ventures with Delta and Virgin Atlantic and is strengthening its ties to China Eastern in moves seen as a bid to cement its position as the European leg in a global network. Societe Generale set a €12.00 ($13.95) price target on Air France KLM SA and gave the company a "buy" rating in a research note on Thursday, June 1st.
Atlanta-based Delta will buy the stake, worth about $437 million, in Air France-KLM, and it will gain a seat on the board.
Virgin is the only airline in the group that isn't a member of SkyTeam, and in the past Branson has expressed disdain for such pacts.
"Today, I'm delighted to say that we've agreed with Air France-KLM and Delta our collective intention to form an enhanced joint venture, including Alitalia, which will be extremely beneficial to our airline, our customers and the brand we all love so dearly".
The deal will make the airline Virgin Atlantic's second biggest shareholder after Delta Airlines, which holds 49 percent.
A new transatlantic pact between Air France-KLM, Delta and Virgin Atlantic is positive for the industry because it drives much needed consolidation, the CEO of British Airways owner IAG said on Friday. "With Delta and Virgin Atlantic we are reinforcing our transatlantic alliance, making us the number one alliance between Europe and the United States in terms of traffic".
Ed Bastian, Delta chief executive, commented: "By working even more closely with our great partners at Air France-KLM and Virgin Atlantic, together we will develop a path to increase competition across the Atlantic that will spur additional benefits for customers, employees and shareholders".