British Airways said on Wednesday it had formally agreed a plan to reduce its pension fund deficit with its unions in return for changes to benefits for employees, sending its shares higher.

The deal finalizes one agreed late last year and follows a stand-off last month with its largest union in which a series of three 72 hour walkouts was narrowly averted.

"British Airways and the trustees of the New Airways Pension Scheme (NAPS) have formally agreed the funding plan including benefit changes to tackle the GBP2.1 billion pound (USD$4.14 billion) deficit in the scheme," the company said in a statement to the London Stock Exchange.

"This brings to a close our lengthy consultation process on pensions. It provides greater stability and certainty for all 70,000 NAPS members and frees the company to move forward into an exciting phase of investment and growth," Chief Financial Officer Keith Williams said in the company's statement.

The purchase of new planes is among the plans now expected to go ahead.

BA said the plan, which was agreed in principle with the trustees last year, included annual BA contributions of about GBP280 million (USD$551.5 million) for the next 10 years and a one-off cash injection of GBP800 million (USD$1.58 billion).

BA said the agreement also meant benefit changes that would take effect from April 1 and an additional GBP150 million (USD$295.4 million) in cash over the next three years, subject to BA's financial performance.

"The benefit changes will deliver an immediate deficit reduction of some GBP400 million (USD$787.8 million) and a saving of some GBP80 million (USD$157.5 million) a year," BA said.

The changes include lifting the cap on total pension contributions to 30 from 15 percent, new tax-efficient ways of making pension contributions and capping future pensionable pay rises to inflation.

Flight and cabin crew now have a retirement age of 65, up from 55, in line with other BA employees.