British Airways (BA) intends to raise the retirement age of staff and make a payment of £500 million (€722 million) to tackle its pension deficit.
BA said in a statement it would clear its £1 billion actuarial deficit through a combination of higher retirement ages, a slower accrual rate and a cap on pension increases.
The retirement age for cabin crew would rise to 65 from 55 and for pilots to 60 from 55, under changes to the way it calculates retirement benefits.
BA shares rose 4.5 per cent in early trade to 377p, the top gainer in London's benchmark FTSE 100 Index, which was up 0.3 per cent.
The proposal, which follows three months of talks with its 34,500 pension scheme members, must now go before unions and BA's pension trustees.
"After the changes are accepted, the airline will make a payment of £500 million into the fund. This is on top of the £350 million the company will have paid towards the past deficit by December 2006," chief executive Willie Walsh said in a statement.
Mr Walsh said tackling the airline's massive pension deficit was a priority, but unions have threatened to strike if they do not like the proposals.
Actuaries put BA's pension deficit at £928 million following the airline's last three-year review in 2003. The carrier expects this figure to rise when the company's actuary completes a three-year valuation of the pension plan this spring.