A full pension plan default by bankrupt American Airlines would be the largest in U.S. history if it occurred today with those accounts running $10 billion short of what the carrier owes its workers over many years, government pension insurers estimated on Tuesday.

The Pension Benefit Guaranty Corp said that American's four traditional pension plans covering 130,000 workers and retirees collectively report $8.3 billion in assets to cover roughly $18.5 billion in benefit obligations.

Employees and retirees of No. 3 American, which sought court protection from creditors earlier in the day, could lose $1 billion in benefits if those plans are assumed by the agency.

Government insurance payouts can be less in some cases, depending on the assets assumed, the total amount owed, and individual retiree balances. In a potential termination case as large as American, the government would not assume the full amount of the company's pension underfunding.

When this happens employees and retirees worry -- and they should. In past bankruptcies, workers and retirees have lost their healthcare and seen their pensions cut, said PBGC director Josh Gotbaum.

The agency also said termination of the American plans would weaken the financial condition of the agency, which reported a $26 billion deficit earlier this month.

The airline is free to use court protection to try to end plans covering pilots, mechanics, flight attendants and other workers -- an expensive cost overhang that other airlines ditched years ago during their own bankruptcies.

American, a unit of AMR Corp, did not mention in court papers whether it would seek to cut some or all of its pensions that pay fixed benefits at regular intervals.

Laura Glading, president of the flight attendants union at American and a 33-year employee of the company, said pensions are funded well enough currently and the group has a good argument for why they should be maintained.

But realistically, the company will come after everything it can get, Glading said. I will do everything I can to protect those pensions.

Gotbaum said the PBGC would encourage the carrier to fix its financial problems and still keep its pension plans. But Wall Street analysts and restructuring experts expect American to reduce pension bills to lower costs.

The hard thing for them will be trying to maintain labor peace if indeed they put eliminating pensions on the table, said Joe House of Palisades Capital Advisors LLC in Washington.

You can count on the pilots losing. That's guaranteed. The pilots pensions are so rich they would definitely take a setback if that pension goes to the PBGC, House said.

Airlines and the auto industry have upended the pension insurance program over the past decade.

United and US Airways terminated their traditional plans in bankruptcy, shedding more than $9 billion combined in total liabilities covering 180,000 workers and retirees.

Delta defaulted on its pensions covering unionized pilots but maintained them for other workers although the carrier no longer makes contributions.

General Motors and Chrysler were required to maintain their pensions during their government-directed bankruptcies in 2009. But parts supplier Delphi terminated its six plans that same year.

American cannot use pension assets to pay debts in Chapter 11, and is legally required to maintain contributions while it restructures. Any pension plan termination must be approved by the bankruptcy court.

While the long-term deficit would be substantial if its pension accounts were terminated today, American has kept pace with its immediate funding commitments as required by federal law.

AMR met its estimated 2011 minimum required contribution of $520 million in September, and estimates payments of $560 million in 2012.

(Additional reporting by Tom Hals; editing by Gunna Dickson)

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