Europe's third-largest airline said on Monday it would increase the number of business class seats by 8 percent, improve in-flight entertainment and introduce a new interior design under the revamp taking place over the next 18 months.

The new type of seat comes amid intense rivalry between airlines globally to increase their shares of the business class market by promising to outdo each other on comfort, gadgets and gimmicks.

"This investment will have a handsome return. It will still take a long time for competitors to come up to the BA standard. It is a fiercely competitive environment," BA Chief Executive Willie Walsh told reporters at the launch of the new cabin.

BA was the first to introduce lie-flat seats in 2000 for long-haul travellers. Virgin later introduced a new Upper Class cabin with flat beds and a new herringbone layout, which it says has enabled it to steal market share from BA.

"They (BA) are only trying to catch up, and they are a whole generation away of where we were three years ago when we launched the Upper Class suite," a Virgin spokesman said, saying its existing business-class offering was under review.

BA will reposition its flat bed and make it 25 percent wider and change the cabin interior to offer more privacy between seats. Like rivals, it also employed celebrity designers to give its cabin a more modern feel.

The new seats will be introduced on 57 of its Boeing 747 aircraft and 43 Boeing 777s over the next 18 months. Walsh said BA would decide whether to introduce it on its Boeing 767s when it makes a decision on upgrading its fleet.

BA said it was also introducing new in-flight entertainment in all cabin classes with larger screens, noise-reducing headsets and audio and video on demand.

BA earns the largest share of its profits from premium passengers. Its first and business class traffic has increased over the past year but took a hit following a security scare in August, which resulted in restrictions on hand luggage.

Walsh also said he remained confident the airline would reach a deal this year with unions on tackling its GBP2.1 billion (USD$4 billion) pension deficit, although talks could drag on into December.

"I'm not sure whether it will be the end of this month," Walsh told reporters. "The time scale of mid-November was one that the trustees indicated, and we have said we are happy to work to that time scale."

BA needs to resolve the pensions issue ahead of plans to replace its ageing fleet of Boeing aircraft.