The deal will boost Virgin's cash balance by $336 million at a time when the airline is poised to take full control of loss-making budget carrier Tigerair Australia.

Virgin will maintain a 65 per cent stake in Velocity and majority representation and the rights to name the chairman of the frequent flyer program's board. The directors have yet to be appointed.

Velocity Frequent Flyer chief executive Neil Thompson said the deal would give Velocity access to additional capital and resources to accelerate its strategy of becoming a world-class loyalty business.

Velocity has a target of signing up 7 million members by 2017, up from 4.5 million at present. Qantas has 10.2 million members of its popular loyalty program. Qantas this year examined the possible sale of a minority stake in its frequent flyer program, but in August decided it was better to keep full control.

Both programs earn revenue from outside partners like credit card companies and retailers which buy the points to reward their own customers.

As an example, Velocity this month signed a three-year partnership with gym chain Jetts to allow gym members to earn points on their membership payments and bonus points for attending five or more times a month.

Virgin has indicated that most of the proceeds from the Velocity deal will be put toward strengthening the airline's balance sheet.

CBA analyst Matt Crowe said the Velocity deal was a "great outcome" for the airline but the proceeds would be needed to fund additional operating losses now that Virgin will own 100 per cent of Tigerair.

He expects Virgin will report a loss before tax of $188 million this financial year, including losses from Tigerair.