By: Brian Williams, Anchor; Anne Thompson, Reporter

May 10, 2005, NBC Nightly News

BRIAN WILLIAMS, anchor:

Back in this county, an overflow crowd today in Chicago as United Airlines told a judge the only way it can get out of bankruptcy is to dump its pension plan, which is currently underfunded by almost $10 billion. And there are fears that now that the judge has said yes to United's plan, which he did just a short time ago, other companies may do the same thing. Here is NBC News chief financial correspondent Anne Thompson.

ANNE THOMPSON reporting:

It would be the largest pension default ever. United Airlines is asking the bankruptcy court to let the government's insurer take over the pension plans for some 121,000 union members, current and retired pilots, flight attendants, ground crews and ticket agents, a move that would save the bankrupt carrier $645 million a year and make its balance sheet more attractive to investors.

Mr. RAY NEIDL (Calyon Securities Airline Analyst): The problem is they need to attract outside financing to exit bankruptcy, and they're not going to be able to do that unless they can s--further cut their costs.

THOMPSON: But cutting pension costs will cut benefits. United estimates pension checks will shrink by 25 percent if the Pension Benefit Guarantee Corporation takes over.

Ms. CAROL BERNINGHAUSEN: We're figuring 25 to be, quote, "safe."

THOMPSON: Retirees Carol and Bob Berninghausen say they'll lose $10,000 a year.

Ms. BERNINGHAUSEN: It's just what you call tightening the belt all the way around, cutting back on your utilities, cutting back on your grocery budget, and just making careful decisions on a day-to-day basis.

THOMPSON: Following a trail forged by steel companies, some fear if United prevails, it will create a domino effect, with other businesses trying to escape their promises by declaring bankruptcy and making their pensions the government's problem.

Professor MITCHELL PETERSEN (Northwestern University Kellogg School): So you know that these other auto, textiles, airlines that are borderline bankruptcies, they are clearly watching what happens for United. And they're kind of taking notes, saying, `If it works for United, it may be a strategy we're going to try.

THOMPSON: Late tonight, the judge ruled in United's favor. The flight attendants promise to strike, and tomorrow, if the judge permits the overhaul of union contracts, the machinists and mechanics could join them.

Mr. NEIDL: A strike, a threat of a strike, a work slowdown, all these would be disastrous for United trying to reorganize itself and get out of bankruptcy.

THOMPSON: Making the friendly skies a most unfriendly place. Anne Thompson, NBC News New York.