LONDON (Reuters) - British Airways (BAY.L: Quote, Profile, Research), Europe's third-largest airline, said on Wednesday its March passenger traffic rose by 1.8 percent on the same month last year.

BA said its load factor, which measures how efficiently it filled its planes, slipped 0.5 point to 75.2 percent.

"The increase in traffic comprised a 15 percent increase in premium traffic and a 0.4 percent decrease in non-premium traffic," the airline said in a statement to the London Stock Exchange.

"The timing of Easter this year has benefited premium volumes ... Market conditions remain broadly unchanged as significant promotional activity is required to maintain seat factors," it said.

Shares in the airline rose 0.7 percent to 356-1/2 pence, in line with the FTSE 100 index.

BA head of investor relations George Stinnes declined to comment in detail on the progress of talks with the airline's unions regarding a company plan to reduce its pensions deficit.

"The consultation process with the unions is in train," he told reporters on a conference call.

The company has proposed a plan to clear a 1 billion pound deficit in its New Airways Pension Scheme (NAPS).

It is based on a final salary pension scheme with no changes to past benefits or staff contribution rates but with changes to members' future benefits.

BA would make a payment of 500 million pounds into NAPS once the changes are accepted.

The airline has announced a business plan to March 2008 which calls for reducing costs by 225 million pounds a year.