British Airways Plc, Europe's third-largest airline, has reached an agreement with its four main trade unions to reduce its 2.1 billion pound (US$4.1 billion) pension-fund deficit, a step that should allow the company to upgrade its fleet and may make it a takeover target.

The carrier will make a one-time contribution of 800 million pounds into the fund, subject to the acceptance of benefit changes, London-based British Airways said on its Website on January 6. It then will make annual contributions of about 280 million pounds for the next 10 years.

"This brings the deficit and ongoing contributions to a level which is affordable by British Airways and effectively tackles one of the most fundamental issues we face," Chief Executive Officer Willie Walsh said in the statement.

The agreement, following 16 months of negotiations with unions, should end the threat of industrial action and clear the way for the carrier to retire 34 Boeing Co airliners and upgrade its fleet with more fuel-efficient planes.

The accord also might make the company more vulnerable to a takeover, the Financial Times reported. The company's share price has risen 64 percent in the past 12 months, giving British Airways a market value of 6.3 billion pounds.

United Kingdom stockbroker Collins Stewart last week said in a report that it "strongly" believes British Airways is "a primary takeover target," the Financial Times reported.

British Airways spokesman Richard Goodfellow declined to comment on takeover speculation when contacted by Bloomberg News.

Unions representing pilots, cabin crew, check-in staff and other employees will recommend acceptance of the pension changes to their members, British Airways said.

There are 33,500 members in the pension program.

In March 2006, British Airways proposed that employees retire later and offered to make a 500-million-pound payment into the fund. Pilots rejected that, saying the company should pay more.