LONDON, England (CNN) -- British Airways pilots are being urged to accept a deal under which they will receive shares in the struggling company in return for a pay cut, their union said Thursday.
British Airways employs more than 40,000 people in the United Kingdom.
The move will save the company £26 million ($42 million) annually and is the latest measure to help the airline through the economic downturn.
Under the deal, pilots will see their pay cut by 2.6 percent while extra flying time allowances are reduced by 20 percent.
Around 78 of the airline's 3,200 pilots will also lose their jobs as BA battles to cut annual losses of £400 million ($656 million).
In return BA pilots will be eligible to receive shares worth £13 million in June 2011 if company targets are achieved. The pilots must hold the shares for three years when they will be free to sell them or retain them.
''This is a unique agreement," said British Airline Pilots' Association (BALPA) General Secretary Jim McAuslan. "We have always said that as a union we would share the pain if our members shared in the gain."
McAuslan told CNN the union was helping to get the airline back on its feet. "The economy has turned so quickly and the people at front of aircraft just aren't travelling, the premium passengers have gone," he said.
"We have real finanancial challenge and our members are prepared to make that sacrifice. But we're not out of the woods yet and passenger numbers continue to fall."
Pilots in the union will vote next month on whether to accept the package.
Earlier this week BA asked thousands of its staff to work for free for up to four weeks.
In an e-mail to all its staff, the airline offered workers between one and four weeks of unpaid leave -- but with the option to work during this period. British Airways employs more than 40,000 people in the United Kingdom.
After announcing the record annual loss last month, BA's chief executive declared there were "absolutely no signs of recovery" in the industry.
"In 30 years in this business and I've never seen anything like this. This is by far the biggest crisis the industry has ever faced," said Willie Walsh, British Airways' chief executive. Watch more about BA's request »
Demand for the airline's passenger seats and cargo holds fell during the last financial year, while its fuel bill rocketed to almost £3 billion ($4.7 billion).
Walsh said BA's woes were inextricably linked to the downturn in the global economy and there had been no sign of any "green shoots" of recovery.
Like its premium-class competitors, British Airways is losing customers to cheaper rivals.
The airline's premium passenger numbers fell 13 percent in the second half of last year, in line with the industry average.
Total traffic fell 3.4 percent and while the airline carried 33.1 million passengers last year, it was a drop of 4.3 percent from the previous year.