Sir Richard Branson has announced he will sell a 31% stake in Virgin Atlantic to Air France-KLM in a move that could bring an era of British aviation to an end.

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 US giant Delta airline with a 20% and 49% stake respectively.

The latter bought its stake in Virgin Atlantic in 2013, a year after Branson announced a tie-up between the two airlines in response to British Airways' dominance in the market of US-bound flights from London Heathrow Airport.

At the time, Willie Walsh, the chief executive of British Airways owner IAG, predicted the move would see Branson relinquish control of Virgin Atlantic within five years.

Walsh has been proven right, as Branson confirmed he will step aside as he described the deal as "a fantastic opportunity to extend our network and create a stronger customer champion, as well as being extremely beneficial to our people and the Virgin Atlantic brand."

The tycoon described the deal as an exciting day for the airline, adding all the partners had agreed the Virgin Atlantic brand should be retained and that the carrier is widely expected to retain its independence as a British airline.

"As I get a little older, I want to be certain that all the necessary building blocks are in place for Virgin Atlantic to continue to prosper and grow for the next 50 years," he wrote in a letter to the airline's staff.

"The airline industry has consolidated over Virgin Atlantic's lifetime and it's now our turn to put ourselves at the heart of an important alliance [...] With these three partners in place and with me – and one day, the wider Branson family – still very much involved, we have the foundations to make sure this is so."

The Virgin Atlantic deal is a part of a bigger, three-way deal, which also involved China Eastern Airlines and Delta. The pair will each buy a 10% share in Air France-KLM, in what will be China Eastern's first investment in a Western airline.

Delta, which also owns a 3.2% stake in China Eastern, will pay €375m (£335m) for its stake in the Franco-Dutch giant.